On November 3rd, Californians will vote on a ballot initiative, proposition 22, that will shape the future of ride-hailing firms and gig-economy platforms such as Uber. The issue at hand is whether or not Uber's freelance drivers, couriers and other gig workers should be considered employees. This means that those who are working for the company would be entitled to benefits such as unemployment insurance and sick leave. Proposition 22 is a stab at balancing workers protection with the gig industry's flexible working hours that ensure customers never wait long amounts of time for a ride or a meal.
Uber created the template for the gig economy by matching real time demand with real time supply. Initially, riders and drivers both benefited from this as Uber and its competitors such as Lyft subsidized rides in an effort to gain market share. However, in recent times companies like the ones mentioned have begun to cut cost, especially last year after they went public. Moreover, Uber's average"take rate", the % it keeps from ride fare, has gone up 6% from 2017. This means that drivers lose out on potential earnings.
How much these drivers earn per hour as been a hot topic. Nonetheless, they currently receive zero benefits from their work. This may not come as a concern to drivers who Uber on the side, however, critics of the company have stated that a majority of those who work for Uber do it full time. The state of California also shared these concerns, and consequently passed a law called AB5 which redefines independent contractors as those who are free from the control and direction of the hirer. Gig firms have argued that they can comply with AB5, but on October 22nd an appeals court ruled that they probably cannot, pending a full trial next year. It is important to note that compliance with AB5 would force these firms to entirely restructure their business models. Uber also stated that it would have to let go of 76% of its drivers, with the rest only working during peak hours. Ride fares for Uber are also estimated to rise anywhere from 25% - 111%. Uber's opponents disagree with their future forecast and have countered with the claim that AB5 would only raise the firm's cost per driver by a third while preserving flexibility and protecting vulnerable workers.
This is where proposition 22 enters the picture. It would essentially scrap AB5's narrow definition of independent contractors, while providing workers with some benefits, including net earnings of at least 120% of the hourly minimum wage and health-care stipends. This could pave the way for portable benefits, something that prominent economists, such as Alan Krueger have advocated for. Critics have said that prop 22 is lopsided, while backers have said that if it is not passed, it could be the end of gig-work as we know it.
Do you believe that prop 22 will get passed? If not do you think that the consequences to the gig-economy will be as severe as stated?
https://www.economist.com/business/2020/10/27/californians-vote-on-the-future-of-uber
5 comments:
First of all, Joe, this is a very informative and well said post. As far as the prop 22 is concerned, I would imagine that both sides may be exaggerating the extent to which the bill would affect their side. It may raise costs for companies like Uber, but not at the exponential rates they state. I also do not think that if it fails to pass that gig work will cease to exist. At the end of the day though I do think it will pass. With any young industry, there are pushes for increased workers rights and benefits. The bill will make it more expensive to add drivers, though it will also incentive more drivers to drive with Uber. If these drivers are providing income for the company, at increased rates, they deserve employee status and the protections that come with it. Otherwise, Uber is free to exploit these workers, taking larger and larger cuts as time goes on.
I personally don't think prop 22 will pass. This bill seems like it will deny people working full-time decent wages and good benefits that they deserve from their employers/jobs. Also, the bill will reduce flexibility for gig workers so I think Californinans would not want to vote on such a bill. But again, Uber, Lyft, DoorDash and similar companies paid nearly $200 million to put the bill on the ballot. Moreover, many californians have received deceptive mailers inviting them to vote Yes on the prop 22, that might have an impact on whether or not it gets passed.
I am in partial agreement with Marya. I think that this bill will have a hard time passing because of its denial and exploitation of workers, but the bill has an opportunity to pass based on the amount of money that has been invested in it. I think that these investments have an opportunity to coerce voters in to passing prop 22. However, depending on the awareness that is brought to the public about this bill, people may vote against it just because they were originally mislead. I could also see some people in support of the bill just because they support these businesses and want to see them remain a low-cost method of transportation and may vote yes because they are afraid of increased prices. Overall, I think it will be very interesting to see what happens with this bill because I think it will set somewhat of a precedent for other states and how they handle these new forms of transportation.
It is interesting to see how these ride-share platforms continue to be in legal and ethical battles with their workers and the general public, who generally side with the workers. It seems like these two parties are always at odds, which makes the sustainability of this business model somewhat questionable. If Uber does not want to offer full-time employment benefits to their workers, they should find ways to de-incentivize drivers from making this job their full-time position. Given that this prop will likely not pass, Uber needs to find a way to compensate drivers who are making this their full time position, otherwise they should only allow workers to work a limited set of hours. However, this is unlikely given that Uber is highly-focused on profit-maximization and often appears to throw ethics out the door. I wonder if ride-share workers will riot against companies like Uber and Lift again and if we will see a larger uproar from the general public.
I believe that prop 22 will not get passed because it will be putting a lot of people out of jobs, I also think that the consequences stated are a little embellished.
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