Prop 22 May Hurt Drivers, But Uber Wants it to Pass
There is another vital vote taking place on Nov. 3 in California that could decide whether the gig economy can continue in the same format to which we’re all addicted.
In July 2019, LaDonna Hamilton was driving four Uber passengers on a highway in Los Angeles when she was rear-ended. Her car was trapped between the truck that hit her and another one in front.
While Uber’s insurance covered the accident and her health insurance covered her hospital bills, Hamilton’s car was totaled. Her injuries required surgery, leaving her without any income for months while she recovered. “All that time I took off, I didn’t get compensation,” she said. “I had to borrow money from friends and family to live.”
Her first surgery happened in February, shortly before the coronavirus pandemic hit and California shut down. She’s been subsisting on unemployment payments ever since. She currently owes her landlord about $4,000.
Now, Hamilton is worried she could face yet another major upheaval after Election Day next week, when the gig economy faces an existential reckoning at the ballot box. California voters will determine whether the same type of low-paid side hustle — and fast, cheap service — to which Uber and Lyft have made us all addicted will continue to exist as we know it.
According to California law, gig workers should be treated as employees with the full benefits and protections that US labor law offers; but if Proposition 22 passes, they will remain independent contractors who must fend for themselves. Hamilton is conflicted about which outcome would better serve her. On the one hand, her accident and the pandemic have made her appreciative of the stability that a regular job might bring. But she also depends on being able to drive for Uber whenever she’s short on cash, and she’s afraid to lose those earnings if the company doesn’t get its way.
“I feel more dependent on them because I wouldn’t be able to go out and find another job right now,” she said. “If it wasn’t for Uber, I would be struggling really bad.”
While that law that made gig workers employees in California has been on the books for over a year, a coalition of companies, including Uber, Lyft, Postmates, and DoorDash, has chosen to focus its considerable energy and capital — spending over $200 million on Prop 22, more than any proposition campaign in state history — on finding a way to overturn it rather than comply.
If it wins, Proposition 22 would allow these companies to continue relying on independent contractor labor to deliver food and drive passengers on the cheap; if it fails, the companies will be required to hire the workers as employees, which puts them on the hook for payroll taxes, overtime pay, and a legal minimum wage. Either way, it could set a precedent for the rest of the country.
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For months now, the campaign for Prop 22 has been pushing the narrative that a win will save “hundreds of thousands of jobs,” while a loss could spell impending doom for gig workers.
Uber, in particular, has threatened that if the measure it paid for fails, it could be forced to upend its business model — raising prices, reducing the frequency of rides, and removing some drivers from the platform altogether.
Asked last week by the Wall Street Journal whether Uber would continue to operate in California — having retreated over unwanted regulations before — CEO Dara Khosrowshahi said, “We are looking at all of our options.”
That threat comes at a time when millions of Californians are out of work, with no sign of a renewed federal stimulus package in sight, and as state unemployment benefits, which became available earlier this year as the pandemic cratered the economy, are starting to dry up.
Meanwhile, with big events canceled, travel discouraged, and workplaces and businesses still shuttered, demand for ride-hailing services has remained relatively low — which means that as millions of Americans unable to find stable employment have flooded onto gig economy apps in search of work, the number of gigs to go around has shrunk.
The gig economy companies couldn’t have known that their big fight at the ballot box — which, according to current polls, is a relatively close race — would come at a time when a global pandemic and historic recession would leave their precarious workers even more vulnerable. But the influx of people desperate to earn quick cash could be playing to their advantage.
Gig work often acts as a substitute for the robust social safety net that the United States lacks. Many people who expect to be able to turn on an app and make deliveries when they need extra money are understandably nervous when they hear those gigs could be going away; that’s what makes Uber’s dire warnings about having to reduce its workforce so effective.
Using the threat of cutting jobs or lowering pay to score political points, said Robert Reich, former Clinton administration labor secretary and UC Berkeley public policy professor, is “completely inappropriate.”
“It exploits the fears that workers have during the pandemic,” he said. “Everybody is endangered right now, or they’ve lost their jobs already. This isn’t unique to Uber and Lyft drivers. But for Uber and Lyft to threaten that they will lose their jobs if this proposition doesn’t pass is particularly egregious.”
The campaign supporting Prop 22 said if it passes, drivers will gain new protections, like a minimum wage guarantee and partial compensation for benefits like healthcare. But if it fails, a spokesperson for the campaign warned, “80%–90% of app-based driver jobs would disappear, resulting in the loss of hundreds of thousands of jobs.”
An Uber spokesperson said in a statement, "We'd be doing riders and drivers a disservice if we weren't honest and upfront about the consequences of forced employment.”
One of those precarious workers who’s worried about the consequences is Jeffrey Grant, a 54-year-old veteran and resident of Daly City. Grant said he’s applied for over 200 full-time jobs in his field, security contracting, in the last four years, and has received only two interviews. To cover his share of the $3,500-a-month apartment he shares with his girlfriend, Grant started driving for Uber in fall 2016. At first, he said, he made decent money. But over the years, his take-home earnings started to fall off. When the pandemic hit California in March, he stopped driving altogether.
The few times Grant bothered to turn the app on this year, he said, he was online for hours and only did a few short trips. “2020 was the worst,” he said. “I've seen consumer use just completely plummet.”
Grant has been able to collect some unemployment benefits — which were made available to gig workers during the pandemic even though gig companies don’t contribute to the fund via payroll taxes — but those payments recently got cut in half. With no other way to earn money, he’s worried things could get even worse if gig companies are forced to hire their drivers as employees.
“[People] think these companies are rich and wealthy and they're going to hire everybody,” Grant said, “and they simply can’t.”
He believes that if Prop 22 fails, Uber and Lyft will only be able to afford to hire around 15% of their current contractor workforce, leaving the other 85% high and dry. He also suspects that the companies will find workarounds to actually providing benefits like healthcare by limiting drivers to part-time schedules.
“State law says you have to work 31 or more hours to be eligible for employment benefits,” he said. “That’s a dirty trick these companies can play if they want to, and they'd be in full compliance with the laws.”
Grant doesn’t think Uber and Lyft pay drivers enough as it is, but he doesn’t think the employee model is viable. “There’s a huge amount of costs that’s going to come with this if the proposition fails,” he said.
Though Uber brings in billions of dollars in revenue a year — $2.24 billion in the second quarter of 2020 — the company is still not profitable. Food delivery companies have fared better during the pandemic: Instacart raised $200 million in venture capital this month, its third multimillion-dollar raise of the year, and it’s currently valued at $17.7 billion. DoorDash is valued at $16 billion and is said to have plans to go public within the year. Uber paid $2.65 billion to acquire food delivery app Postmates in July.
Many people, including Reich, disagree that the gig economy companies can’t figure out a business model that would allow them to treat their workers fairly. “They have enough money to do quite well; they don’t need to take that money away from their drivers,” he said. “They are mounting one of the most expensive public relations campaigns on any proposition in history. They certainly have enough money.”
Edan Alva, a former Uber and Lyft driver in Alameda, California, said that, despite the big valuations, the Yes on 22 campaign has some gig workers worried. “This is a tactic that’s meant to scare passengers and drivers, and it works in the sense that an uninformed person can easily say, ‘Oh my god, I’m going to lose my only source of income,’” he said. “There are plenty of people who are in that situation.”
Alva started driving for Lyft in 2014 to offset the cost of an hourlong commute from Alameda to San Jose, but when he lost that job two years ago, driving for Lyft became his primary source of income. He quickly realized how difficult it was to earn a living with the cost of maintenance, fuel, and taxes, not to mention unexpected costs like falling ill or getting into an accident.
Uber and Lyft attract people who are desperate for money, but it’s easy to get in over your head, said Alva, who eventually became an organizer with local labor group Gig Workers Rising. In the same way a payday lender charges people who need quick cash a high interest rate, he said Uber’s model “depends on desperation and exploitation.”
Through a combination of unemployment checks, census work, and help from friends and family, Alva has been able to avoid driving for Uber during the pandemic, which he said has made the economics of gig work even starker. “The people who choose to work during the pandemic have, by definition, some significant degree of desperation,” he said.
Economists who’ve studied the gig economy say a significant percentage of participants turn to the apps when they’re experiencing a gap in their income. “They’re using it to make ends meet when they need extra money from week to week,” said Dmitri Koustas, an economist at the University of Chicago.
If the US had a stronger social safety net, the gig economy might not be as appealing. But in a time of economic crisis, when it’s unclear whether financial aid will continue to be available, what was once a side gig is now all some people have.
When people lost their jobs during the pandemic, “it was easy to start a delivery job if you wanted to earn money that way — but at the same time, it does highlight gaps in the safety net,” said Koustas. “If people were more inured against shocks and had stability in their main jobs, I don’t think there would be as much value for people to have these flexible jobs with low barriers to entry.”
If Prop 22 fails, Uber is likely to continue appealing labor regulation in the courts. A California judge came down against the company’s most recent appeal earlier this month, meaning if the ballot measure fails, gig companies would have 30 days from a final ruling to hire their workforce as employees. But that could take a few months while the companies continue their appeal at the California Supreme Court.
If the proposition t passes, it would be extraordinarily hard to undo. The language of the measure requires a supermajority — seven-eighths of the California legislature — to make any changes, making it “virtually permanent,” according to Bloomberg.
In other states, the companies would hope to use a win as a precedent to fight similar regulatory efforts that could crop up. In New York City, ride-hail companies were forced to cap the number of drivers on the platform and pay them a minimum rate per trip; while drivers there are still independent contractors, the industry is incentivized to avoid the creep of additional regulation in major markets.
Mike Wilson is a food delivery driver in Washington state who has kept a close eye on the fight over gig worker classification in California. Like a lot of people, he turned to gig work when the casino he worked at temporarily closed due to the pandemic and he lost his full-time job.
“There’s so much uncertainty — what’s going to happen with the election, or after? Are they going to have a stimulus package? Everybody’s really freaked out,” Wilson said. “I got into it for that same reason.”
He said anxiety over how far gig companies might go to avoid regulation has spread up the West Coast. “If they say something like, ‘We’re going to shut down in California,’ people freak out,” he said.
Wilson enjoys doing food deliveries, and at first said the bonuses and promotions made it relatively lucrative. But as the months passed and he earned less and less, he started to realize the shortcomings of the job.
“A lot of the time you spend out there is sitting and waiting for an order … and you don't get paid for that,” he said. “If you were an employee, you’d get paid for that time.”
He worries that those who prioritize earning quick cash over a stable job are being “shortsighted,” but as a dad of three daughters who’s scared to go back to the recently reopened casino and risk getting sick, he understands the pressure people are under.
“A lot of people don’t have any other way of making money,” he said. “This is their only way to make money, and those people are being exploited.”