Essentially what's happening is that now the club owners have to pay a bunch of taxes they managed to avoid paying before. The dancers themselves were likely not paying as much in taxes as they were supposed to, but now, with paycheck withholding, they're probably paying more in taxes than they used to.
The clubs, in order to compensate for all the "new" taxes, are only paying minimum wage, and are taking larger cuts of private dance fees from the dancers than they were before, and are in some cases tacking on new fees dancers have to pay, like "private room rental".
Dancers might be getting better benefits under the new rules (health insurance, sick days), but might not, since some of these benefits require minimum weekly hours worked that the dancers mostly don't meet. Dancers are also feeling pressure to be less choosy about what things they're willing to do for different customers, since "it's their job".
Really what it boils down to is that these are not sustainable businesses at the prices they currently charge customers, unless they also avoid paying a bunch of taxes. If they want to keep their dancers from quitting, they'll likely have to raise prices enough to get a similar amount of cash into the hands of their dancers, while also meeting their tax obligations. Not sure if that increase in cost will decrease demand to the point where it just won't work.
It sounds like the new rules will force a new market equilibrium. When you didn’t have to pay taxes and the money was fast, cheap and untraceable there was probably excess supply of labor. Now that you do have to pay taxes, supply may go down increasing prices to attract a smaller pool of labor. But what I suspect will happen is that supply will remain mostly constant, prices will stay about the same, and the dancers just won’t make as much money. Many of them may not have lots of other career options, so they will be stuck at a new lower rate of pay. While that is probably a bummer for them, I would also be a lot richer if I didn’t have to pay taxes either.
> If they want to keep their dancers from quitting, they'll likely have to raise prices enough to get a similar amount of cash into the hands of their dancers, while also meeting their tax obligations.
Like people always say, when corporate taxes are discussed (and now I'm guilty of it too): companies don't pay taxes; consumers do.
Not always true. It depends on the price demand elasticity curve and margins.
Imagine Acme Inc selling Widgets at $100.
If taxes go up, the company's first instinct would be to increase the price. This works for some markets and products. However, if the customers and market are sensitive to price, they will lower or stop their consumption from Acme Inc. or move to competitors or substitute products e.g cooking at home instead of restaurants. In that case, Acme Inc has to pay the taxes out of their profits, assuming their profit was high enough, which results in lower profits, or takes losses and go out of business eventually.
Oh, I get it, and I've argued that companies like Amazon should be taxed heavily, for these very reasons. It would slow them down, and put them on more equal footing with the other companies they're putting out of business. But every time I bring it up, I get that quip, so I figured I'd start there for a change. ;-)
Yes, but to make up those lower profits Acme Inc. could just reduce compensation for its employees. And I think that is what TheRealDunkirk was trying to say. That when corporate taxes are levied, eventually it is the employees who end up taking the burden.
Many companies use benefits like profit sharing, child care, tuition assistance, and gym memberships to both reduce their tax burden and attract top talent. I suspect the clubs will follow suit.
I doubt that most strip clubs will be unprofitable now. What I think is closer to the truth is that they were previously obscenely profitable, thanks in part to exploiting dancers and evading taxes, and will now be "merely" profitable along the same lines as any other service-based small business like a bar or restaurant.
The more interesting thing is how this is gonna play out for high end strip clubs. Its not uncommon for dancers at those clubs to make upwards of $150k a year, which sometimes includes prostitution at the end of the night with VIP clients.
I'm sure the prostitution portion of the work will still be best described as "independent contracting" and not part of the dancers' employment at the club.
Strip clubs might be exploiting dancers, but I don't see much evidence that they're exploiting them financially. Have you seen the cash they bring home?
> Really what it boils down to is that these are not sustainable businesses at the prices they currently charge customers
That’s not the most obvious take away imo. I’d say it’s obvious that the strippers were doing a fair bit of tax evasion, but having known a few strippers, a successful stripper would still be making good money even with meeting all their tax obligations. The issue the clubs now face is that they can’t properly cover the risks of paying salaries to employees who’s revenue is entirely tip based. It’s really just a completely predictable outcome of a government trying to protect people from their own decisions with regulation. As a contractor myself I dread the day the government finally gets around to saving me from the working arrangement that I have benefitted so greatly from adopting.
The issue of tax evasion is really seperate to the fact that the changes in the law have killed the business model for the contractors. Being a payrolled employee in this case is worse for everybody involved, the employees most of all.
Reading the article, it seems like the primary complaint is that, since the business has to pay things like social security, payroll taxes, worker's comp, etc. that they then have to withhold this money before they pay the workers, rather than have the workers withhold this themselves?
It sounds a lot more like the complaints are "I was making $X before because I was underreporting my income, but now that the business is on the hook for all this, I'm being forced to comply and am finding that the work isn't profitable enough anymore". Which translates to me as everyone else, who was paying into all these public tax pools, was essentially subsidizing the dancers.
I guess you could argue that some of the stuff, like workman's comp, some people might want to just pocket the money that otherwise would've gone to insuring the risk of being injured on the job. Which I think is maybe irresponsible, since otherwise the burden just ends up getting shifted, again, to the general public (worker injured without worker's comp then ends up on food stamps, or ends up getting their medical debt written off, etc). So we should probably require people to directly pay into these things, like we require people to maintain liability auto insurance.
And I suppose you could also say that maybe the businesses are taking the opportunity to pocket some extra profit, but hopefully the invisible hand of the free market would compete that back down as employees and customers move around based on new pricing/comp.
> “The BSC-managed clubs now have matching payroll taxes, unemployment compensation, workman’s compensation, Healthy San Francisco costs, Affordable Care Insurance costs, and SF sick leave pay for several hundred new employee entertainers in addition to the hourly wage,” he wrote.
Translation: "Our business was profitable only when we got to avoid following the same rules that all other employers have to follow." That goes for both the entertainers and the establishments.
Sounds like this is the expected result to me. In a free and fair market, price is a genuine signal of relative scarcity. CA has removed a particular factor that skewed prices in some labor markets. The result should be a correction in those markets.
The "traditional" standard here is for strippers to obviously be employees but get called contractors to evade paperwork, taxes, and required employee benefits, which is exactly the kind of situation these new standards are intended to prevent. I don't see anything "unexpected" about the result.
Yep, it's very common. "You're an independent contractor, but if you sleep with any of our customers for money[1], we'll 'fine' you $2000, and you can't work for anyone else"
> if you sleep with any of our customers for money[1], we'll 'fine' you $2000
This sounds like a refreshingly constrained non poaching clause. It is quite common for independent contractors to be forbidden from establishing a direct bussiness relationship with the customer's customers.
Law of unintended consequences, maybe? California did something pretty bold, and only time will tell if it was a good idea or not. Seems like there's a lot of fallout though, so far. Anecdotally, I know a few people whose small businesses were impacted by the change; neither knew it was even an issue until one was sued by a contractor they'd been working with for a few years. I wonder what kind of due diligence the State went through when making this broad-sweeping change.
> Some dancers also feared being classified as employees would mean not being able to pick and choose which customers to serve.
> “I think they should control their own sexuality, they should control their own bodies,” he said. “The difference there being, of course, if you’re an employee, you don’t have a choice who you perform for, as an independent contractor you get to choose how you perform, whom you perform for, and what level you’re comfortable at.”
Is a stripper allowed to discriminate on protected characteristics? Can she say that she doesn’t want to strip for Asians, for example? Or will she run afoul of the anti-discrimination laws?
I am not an expert but I think they officially offer very basic services and anything extra is at the dancer's discretion. but since nothing extra is officially offered, it's hard to make claims about it
I feel there is a strong argument to decouple social security and benefits from employment; the current legislation feels like a bad model design.
I am confident that when it was first conceived, people sought to do well for individuals. Now, a month doesn't go by without a similar dispute affecting a new industry. The argument is always between individuals that want to become employees, and individuals that want to stay as contractors.
It is a shame that among our political candidate options nobody is really rethinking the system with an engineering mindset. To even begin to grasp the current model and its implications feels like jumping into a legacy project without hope, and that isn't right. It should be simpler.
Health insurance is still hopelessly broken. A "gig economy" cannot work with such fundamentally broken services. I wrote about this a while back, having both worked in health insurance and having lived in other countries:
I do not like the private model at all, but at a minimum, I agree with you and I think the ACA would have only worked if it forced employers to give employees vouchers to then have everyone buy insurance from a common marketplace. Obama's promise that people could keep their existing insurance was a terrible idea.
It does keep people in America perpetually working. No one can afford to really take time off for themselves even if they have the savings, because if they're not working enough hours to get health care and get sick, that's it. You're fucked. You have to use that other American Healthcare site: Gofundme.
Look, i get the "sorry not sorry welcome to life like the rest of us" attitude. its true - but there is more truth.
certainly there are skeezy strip joints that take advantage of women without options and do more harm than good, but others could have been a way out. we just locked all the parachutes because some (probably most) people were joyriding with them, but this does greater than zero harm. _some_ people needed those parachutes and couldve changed their life.
im not saying this change is wrong. if you kill your enemy you would kill him again given the chance, but he was still someones son. something good was lost here.
edited a half dozen times before any replies because my brain is mush
I wonder if strippers could be classified as sales people. There are plenty of companies that pay sales people on 100% commission. If saying "hi honey, want a dance?" isn't sales, I don't know what is. It's been a long time since I worked in sales, so I'm not sure if this would work.
To my understanding strip clubs got looped into this because their business and employees were classified much differently than your typical business. They aren’t open 24x7 and overwhelming majority of girls work part-time - that’s it.
The problem you have is with companies like Uber and other who have for nearly decades have abused contract work but strippers were classified as the same.
It’s too bad they got lumped and really shouldn’t have been but we’ve had enough major corporations screwing the middle class evading taxes.
> The whole point about being a stripper is you go in, get fast cash, no one knows how you’re getting it, it’s not documented and it’s not taken from you
I can't imagine why a government might have a problem with that. Starting to think cash-in-hand workers were the target all along.
Where did all the money go? If the dancers made hundreds of dollars as independent contractors wouldn't it have been tips from customers? Wouldn't the dancers still get the same amount but now also $15/hour plus benefits?
I think the point of the article was that they used to get hundreds of dollars in CASH. they then had some fees they had to pay to the club, etc.. and they were contractors, so they got a 1099 for the transactions the club had on its record. Now that they need to pay a wage, ALL cash comes to the club, and then they get a percentage of it back as commissions. This means ALL of the cash is now accounted for, making their tax liability much, much higher, because its actually getting reported .
"This whole business will be completely ruined. The whole point about being a stripper is you go in, get fast cash, no one knows how you’re getting it, it’s not documented and it’s not taken from you."
Sorry not sorry that you have to actually start paying taxes on your income like the rest of us. Some of these quotes are really helping to make the case for the law.
... because funding more war is something to be celebrated?
Just because you're personally caught under a boot doesn't mean you should cheer when the net ensnares someone else. That's called the crab bucket mentality.
Nah, once that happens we get news pieces on 'labor shortages'.
I'm a capitalist. But I recognize that the difference between theory and reality is that in theory there is no difference.
The reality is the strippers have as much leverage as the other side doesn't (that's the hole concept of leverage). Club owners have the leverage of the cost of setting up a great club, and local regulations.
This then translates to: the more strip clubs in a city, the more they will have to compete. That is, if they aren't colluding * Which is a lot easier when the people controlling that side of the supply equation are likely less than a dozen sophisticated guys in a city (who tend to all know each other). While the supply of labor is likely in the 1000s or 10,000s (and mostly not-so-sophisticated and can't all know each other)
I’ve heard anecdotally (from strippers wanting tips) that their tip based comp has gone down. Like what they get to keep from dances and private rooms had been cut in conjunction with the reclassification
Didn't notice that. This is a perfect opportunity to see how it's worked out in practice. How's business going for this 10-of-12-strip-clubs-in-the-city company?
I think the businesses are ruined—they probably legitimately don’t make enough money to pay a living wage and the necessary benefits with their current business model. I don’t see this as a problem in the long term for the strippers—unauditable cash will still rule.
And frankly, let’s start with taxing other places, this really doesn’t strike me as a place of conspicuous tax avoidance compared to, say, the board room.
By "current bussiness model", do you mean current prices?
I do not see anything in the bussiness model that precludes raising prices. The issue seems to be that current prices are based on the assumption of tax evasion.
I have nothing against sex work, but it does not strike me as an industry worthy of tax breaks.
> I do not see anything in the bussiness model that precludes raising prices.
I was defining the business model by success with current regulations. I refuse to speculate about market effects beyond the possibility of any change aside from the regulatory change.
> I have nothing against sex work, but it does not strike me as an industry worthy of tax breaks.
Yea I never voted to fund defense contracts either. Yet, those fucks are getting paid. Not much to do about it but vote and revolt.
> Sorry not sorry that you have to actually start paying taxes on your income like the rest of us
I am. Paying taxes on income (that is then taxed again when spent) is a terrible disincentive. Some states agree with me; I would rather see the standard move toward a model free of income taxation than toward universal taxation. Doubly so when the tone of your comment seems to point to the motivation being largely spite.
> Paying taxes on income (that is then taxed again when spent) is a terrible disincentive.
While I can understand opposing income based taxation, I don't understand why opponents of income based taxation would support specific industries evading existing income based taxation laws rather than working to change the taxation laws for everyone.
We are coming to the same point from different angles. For a lot of people it's easier to adhere to eye-for-an-eye than to stop and advocate for an end to violence, as it were. I was only taking issue with what seems to be cheering a step backwards ("I would be richer without income tax too").
Technically, given the way you put it, I suppose I would advocate for more and more specific industries not being subject to income taxation until no industries were paying it. Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming have realized this situation by one means or another. But I agree that, in general, consistent tax laws for everyone is a preferred outcome.
I am not particularly opposed to income based taxation. While I think asset based taxes are usually better than income based taxes, income based taxes are better than sales taxes or state run lotteries.
I personally think that how we handle unemployment and food stamps do more to disincentivize work than our income taxation.
Taxation is complex and tricky to do well. Unfortunately it is treated as a wedge issue and this prevents productive discussion and effective policy making.
> "This whole business will be completely ruined. The whole point about being a stripper is you go in, get fast cash, no one knows how you’re getting it, it’s not documented and it’s not taken from you"
>“Not one of those girls had a check for two weeks over $300. There was a lot of upset. A lot of girls packed up to leave that night. I was one of those girls,” Darla said.
1. Pay your taxes like everyone else.
2. Form your own LLC to contract talent out, call it whatever you like and no one is going to look at your pay stub to know what you do
3. The reason the performers had poor pay was because the club owner was paying them poorly. Ask for more money, because clearly the clubs are losing it by not paying their employees appropriately.
Weirdly enough, this regulation seems like it should spur some classic market capitalism in the strip club business. It appears that the labor is in short supply and demand is rising, so you'd think they'd ask for more than minimum wage!
The clubs, in order to compensate for all the "new" taxes, are only paying minimum wage, and are taking larger cuts of private dance fees from the dancers than they were before, and are in some cases tacking on new fees dancers have to pay, like "private room rental".
Dancers might be getting better benefits under the new rules (health insurance, sick days), but might not, since some of these benefits require minimum weekly hours worked that the dancers mostly don't meet. Dancers are also feeling pressure to be less choosy about what things they're willing to do for different customers, since "it's their job".
Really what it boils down to is that these are not sustainable businesses at the prices they currently charge customers, unless they also avoid paying a bunch of taxes. If they want to keep their dancers from quitting, they'll likely have to raise prices enough to get a similar amount of cash into the hands of their dancers, while also meeting their tax obligations. Not sure if that increase in cost will decrease demand to the point where it just won't work.