Punching the Clock on a Smartphone App? : The Changing Nature of Work in America and Regulatory Barriers to Success

Common Law Definition of Employment:What is the difference between an employee and an independent contractor? Both do work for pay; I do a job, and you pay me for it. It's not complicated — until government gets involved. Formal employees require paperwork, legal and regulatory compliance, and other red tape. Independent contractors have their own thickets to work through, though, and more may be on the way. The technical definition of “employee” is far more complicated than it should be. This makes it more difficult for people to find jobs than it should be.Why do corporations exist in the first place? Why don't all business transactions simply go from one individual to another? On the other end of the spectrum, why isn't society organized as one giant firm? Why is the real world somewhere in the between? The answer is transaction costs. It is easier to write a check or settle legal disputes with a single entity like McDonald's or Walmart than it is to write separate checks and make individual legal deals with each of their hundreds of thousands of employees. But when a corporation becomes too big and bureaucratic, their own internal transaction costs can become more trouble than they're worth. Time spent on paperwork between departments means time not spent on innovation or customer service; corporatization has opportunity costs as well as transaction costs. Transaction costs and opportunity costs put a natural limit on the size of corporations, even when it can't be put into dollar terms. Employment contracts are an attempt to reduce transaction and opportunity costs, and governments should not get in their way