Employers experience a reduction in the cost of labor when shifting their production model from using employees to using independent contractors because of reduced tax and regulatory costs of hiring independent contractors relative to employees. This occurs because (a) the cost of payroll taxes shifts from the employer to the independent contractor, (b) social insurance program costs (unemployment insurance, workers compensation, etc.) decrease for every worker who is an independent contractor because independent contractors are ineligible for these programs, and (c) mandated employer-provided fringe benefits must be provided to employees, but they need not be provided to independent contractors.