Here are my thoughts on Prop 22, the measure that will clarify the employment status of app-based transportation drivers. If you are looking for a deeper analysis of all the measures on the November 2020 California ballot, you can find them here.
Let me start by saying that in my day job, I work for Lyft, which is one of the sponsors of Prop 22. That said, I believe every word that I’ve written here, and since I have worked in app-based transportation platforms for more than 6 years, I see how it improves people’s lives every day – for both the drivers and the consumers. The views I express here are my own, and NOT that of my employer. Without further ado….
Proposition 22 – Employment status of gig economy drivers – YES!
This is the big momma of all the measures on the California ballot. It’s the one everyone is talking about, because the election result will have major consequences for millions of Californians, including every single person who uses Uber, Lyft and the delivery services. This probably includes you.
Let’s go back eight or nine years when Uber and Lyft were founded in San Francisco. Taxi services were a joke; you called a dispatch number and the cab never came, or it was 30 minutes late, and this made it impossible to plan your evening. People drove intoxicated more often than they do now; getting to and from the airport was a pain; people went out to bars and restaurants less often; and life was just a lot less convenient.
Enter the rideshare platform companies, who enabled you to call a car at the touch of a button. A neighbor with a car and some free time would pick you up and take you where you wanted to go within minutes. You didn’t need to fumble for cash; the apps made payment seamless. It was life changing, for both the drivers and the riders. City dwellers starting getting rid of their cars; streets became safer from drunk drivers; and bars and restaurants thrived.
And – this is just as important – the average Joe or Jill was given the ability to make some money on the side by driving whenever it was convenient for them. Stay-at-home moms, full time students, free spirits and retirees could drive as much or as little as they wanted, with total flexibility to work for multiple gig companies, often simultaneously.
These companies completely upended both the taxi industry and the traditional employment model. Consumers gained the convenience of a ride whenever they wanted, and drivers gained the flexibility that a traditional job would never allow.
As the gig economy has matured, the companies have each wrestled with how to afford the drivers maximum freedom while also giving them traditional employment benefits like a guaranteed wage, health care and worker’s comp insurance. It’s not as easy as it sounds. Giving drivers employment benefits would risk their independent contractor status under state law. It also doesn’t make sense to give full benefits to a driver who doesn’t want to commit to driving a minimum number of hours per week.
Keep in mind that neither Lyft nor Uber is profitable yet, and the companies are locked in a death grip of competition. A majority of drivers work for both companies, and most consumers use both apps. This means that if Lyft raised its prices in order to pay drivers more, consumers would flock to Uber, and more drivers would switch over to Lyft, leading to an imbalance of supply and demand. Neither company can increase driver pay without losing market share, and the companies can’t collude to raise prices without breaking the law. A legislative solution is the only way to make sure that drivers get paid the same wage at both companies.
Over the last decade, the gig economy has flourished. Hundreds of gig companies have sprung up to provide consumers with countless different services (I’ll assemble your IKEA furniture! I’ll help you buy groceries! I’ll give your dog a bath!), some with great success, and some have failed (see: Sidecar, my former employer, R.I.P.). But the workers haven’t been able to share in the bounty of the gig economy because their wages have been primarily market driven.
Taxi companies are also failing because they have been unable or unwilling to catch up to the technology. And unfortunately, the rise of the gig economy has also meant the decline of union membership. Unions haven’t been able to figure out how to organize the drivers, in part because traditional membership requires an “employer” who will collect union dues through a regular paycheck. The unions are also fighting among themselves as to which one gets to (has to?) bring gig workers into the fold.
Let’s talk about unions for a second. In my voter guides, I almost always take the side of labor in my endorsements, and that’s because labor has played a central role in protecting workers and in bringing about the most critical reforms to the workplace. When I worked for the City of Oakland, I was a proud member of IFPTE Local 21, and when I ran for office, unions supported my campaigns, and I proudly displayed the union bug on all my campaign materials.
All that said, I disagree with their position on the classification of gig economy workers. This is an issue where the unions are on the wrong side of history; they are clinging to an outdated version of the employment relationship. They are working very hard to cripple the tech companies that have provided the opportunity for gig work to millions of Californians, hurting the very workers they seek to protect. Instead, I think they should adapt to the modern workplace and organize the millions of gig workers, giving them even more power to influence worker protections.
In 2019, taxis and unions looked to the state legislature to strike a blow at the gig companies’ business model. The taxi lobby and the unions are powerful players in Sacramento, and they were able to work closely with Democratic legislators to pass Assembly Bill 5 (AB5), which changed the classification of millions of independent contractors around the state to grant them employee status. AB5 was a blunt instrument that had many unintended consequences, which is why the Assembly member who authored the bill immediately granted carve-outs to hundreds of businesses that she favored more than the app-based companies.
In response to AB5, Uber, Lyft and other gig transportation companies placed Prop 22 on the ballot. Prop 22 proposes a compromise between the independent contractor model and the traditional employment model. It would guarantee drivers the flexibility that they want, while granting them many of the benefits of employment. These include a minimum earnings guarantee of 120% of minimum wage, health care benefits that drivers would earn with every hour that they drive, and accident insurance that is similar to worker’s comp insurance. The measure also codifies certain safety measures, many of which the companies already provide: annual background checks, safety training, sexual harassment policies, and the criminalization of impersonating a driver.
The proponents of Prop 22 believe that this gives drivers the best of both worlds: the flexibility they want, and the benefits they deserve, without tying them down to a traditional job. The opponents of Prop 22 say that the app-based companies are just trying to escape having to treat their drivers with the dignity of having employee status.
The app-based transportation companies have poured more than $184 million dollars into the Yes on 22 campaign. Why? Because this measure isn’t just about benefits for drivers, it’s about changing the entire business model of these companies, and possibly ending app-based transportation as we know it in California.
As a voter, you are deciding between two very different outcomes. If Prop 22 passes, consumers will notice very little difference in the services they receive. Prices will go up a bit, because drivers will be paid more in earnings and benefits, and the companies’ overhead will go up a little. The companies will be able to serve all the areas they do today. Drivers will get paid more, and they will continue to drive for multiple platforms at once, as they do today.
If Prop 22 fails, things will be very different. All drivers in California will be forced to sign up as employees if they want to keep driving. For most drivers, it will be infeasible to work for multiple companies. Along with the full benefits of employment, they will receive overtime, vacation, and a fixed rate of pay. They will be assigned to shifts, and they will be required to work a minimum number of hours, agreeing in advance to when and where they drive. They will have a supervisor and performance targets, like any other private sector job.
There is no doubt that some gig drivers would benefit from having employee status, because they drive full time and they want the security of a regular paycheck. However, an independent survey of gig drivers released on October 5 revealed that 69% of California respondents want to remain independent contractors compared to only 11.5% who want to be employees. This makes sense, as Lyft reports that 86% of its drivers drive less than 20 hours per week, and many of them already have full time jobs. They are also caregivers for sick family members, or students who drive to cover their tuition, or seniors who enjoy the social connections they make through gig work.
Since only a small minority of drivers (11.5%!!) will choose to be employees, the app-based transportation businesses will shrink dramatically in California if Prop 22 fails. For consumers, this means that wait times will become much longer, because there will be fewer drivers on the road. The companies will limit their services to denser urban areas, because that’s where the drivers will be concentrated, and where the consumers will be willing to pay more. And of course prices will go up, because drivers will be paid more and the companies’ overhead will go up considerably more than it would if Prop 22 passes.
It’s disappointing to see so many Democratic elected officials line up in the “No” camp, including Kamala Harris and Joe Biden. I suspect it’s because they are aligned ideologically with unions, and perhaps they haven’t been briefed on the nuance. (Note: Kamala’s brother-in-law Tony West is the General Counsel at Uber – I would love to be a fly on the wall for their dinner table conversations!) And despite the positive changes that some tech companies have brought into our world, there is a significant backlash against Big Tech in the zeitgeist.
Despite what you may hear from the “No” campaign, this is not a partisan issue. In addition to the usual pro-business advocates, many progressive groups and civil rights organizations support Prop 22, including the California NAACP, California Hispanic Chambers of Commerce, senior rights advocates, and crime survivors groups. Mothers Against Drunk Driving also supports Prop 22 because of the positive impact ridesharing has had on drunk driving in California.
Above all, this argument should not be about what is good for the companies versus what is good for labor unions. It should always be about what is good for the drivers. Prop 22 isn’t perfect, but it will make the drivers’ lives much better. Go ask them yourself! They will tell you to vote yes.
If you want learn more, I encourage you to read two competing newspaper endorsements: the San Francisco Chronicle which went ”yes” on 22, and the Los Angeles Times which went “no.” The two opinions do an excellent job of examining the nuance of gig work and in particular, the frailties of AB5.