With more than 100 cargo ships idle off the coast of California, concerns persist about the immediate impact on families and businesses and how AB 5 and other state-specific regulations have exacerbated the situation.
A business coalition has called on Gov. Gavin Newsom to suspend AB 5 and AB 701, and Florida Gov. Ron DeSantis has offered an alternative port, as have other states.
Newsom on Wednesday issued an executive order in an effort to get things moving, but industry leaders say it fails to adequately address the immediate need for moving critical goods to people who need them.
“There needs to be a short-term plan to get through the crisis that we're currently in,” Rachel Michelin, president/CEO of the California Retailers Association (CRA), told the Northern California Record.
“The governor should be convening a stakeholder group of associations and their leadership – and we're ready to do this – to sit down and talk about how we can solve the problem,” Michelin said. “Kicking the can until next year is not going to do anything for California consumers and American consumers.”
Long-term concerns continue about the lack of truck drivers if they are no longer exempt from AB 5, a case the California Trucking Association has petitioned the U.S. Supreme Court to hear.
“AB 5 applying to truck drivers in California will make it more difficult to address the driver shortage; carriers would no longer be able to contract with drivers who own and operate their own trucks unless those drivers become employees,” Denise Davis, CalChamber vice president, media relations and external affairs, told the Record by email. “Any new or existing regulation that impacts goods movement should be either delayed until this crunch is over or – at minimum – be very narrowly tailored so as to have no further detrimental impact to already-congested ports or the trucking industry generally.”
The high court has not yet said whether or not it will hear the case, California Trucking Association v. Bonta.
“If the 70,000 independent truckers in California are no longer exempt from the restrictions of AB 5, then who will contract with them if the contract is against the law?,” Kerry Jackson, a fellow with the Center for California Reform at the Pacific Research Institute (PRI), told the Record by email. “Not all those trucks are registered to operate within the Long Beach and Los Angeles ports, but at this point pulling any of them from the supply chain is likely to make matters much worse.”
California’s AB 5 law has been the subject of intense litigation since its passage in 2019.
“AB 5 needs to be fully repealed,” Jackson said. “There’s a reason it’s been the most-hated bill in California in recent history. It’s a job killer, a livelihood thief. AB 5 is not a piece of good-faith legislation that turned out to have some unintended consequences no one was expecting. It was a gift to the unions at the expense of many Californians who earn their livings as independent contractors.”
The ports backup is impacting economic recovery not only in California but across the nation, with supply chain disruptions threatening businesses' viability by withholding their needed supplies and products, Wayne Winegarden, senior fellow in business and economics at PRI, said in an email response to the Record.
“The weaker economic recovery is particularly ill-timed given the continued weakness in the labor markets,” Winegarden said. “Governor Newsom not only did not need to issue an executive order, the order is more political show than actual policy, demonstrating how the economy has become so wrapped up in a confusing array of conflicting and economically damaging regulations. Governors’ instincts are to issue new regulations when a problem like the supply chain bottlenecks arise because it gives the appearance they are doing something. More times than not, like with the port issue, that something is to add more burdens and confusions that make solving the problem harder not easier.”
CalChamber’s Davis noted that while driver shortages are not the only issue with port congestion, the shortage of drivers is exacerbating the existing problem.
“Businesses can take orders for items, but customers often can’t get the items for weeks or months,” Davis said. “The pandemic has already stretched small businesses and adding supply chain issues to the impact of the pandemic is making this tough for small business employers in California.”
As is the net effect of inflation.
“It's like a rubber band – the supply chain has been pulled and pulled,” CRA’s Michelin said. “If we don't have enough goods and the demand is still there, then the prices are going to go up, and we’re already seeing that happen.”