The Proposition 22 Debate: The Global Impact on the Gig Economy
It’s gonna take a minute to declare a president, but one race has already been called: Proposition 22. California residents voted to pass Proposition 22 — a measure that exempts rideshare and food delivery-related tech companies from reclassifying gig workers as employees. Ok, so? Why should you care? What difference does it make?! A huge difference. Here’s how.
This historic vote that passed Proposition 22 overrides California’s previous ruling for the rideshare and food delivery tech companies to convert gig workers to employees by January 1st. Instead of flipping their business models overnight, Uber and others suspended operations while the decision was appealed.
For corporations like Uber and Lyft who operate globally, reclassifying independent contractors as employees because of Proposition 22 would cost a lot of money. Let’s be clear: employees are expensive and according to Uber’s CEO, converting gig workers would significantly raise costs and push the company to raise prices up to 120%. Consider employee costs like health insurance, paid leave, gas, meals, timekeeping, vehicle expenses, plus the indirect costs to manage an additional 50K employees. That adds up to a significant investment for these companies that are already struggling because of the COVID-19 pandemic.
The “tech” companies also argue that the reclassification would require them to create pre-scheduled shifts and that takes away the flexibility that drivers want.
Let’s talk about the drivers. This battle isn’t unique to California; drivers and even jurisdictions as far as Europe are opposed to current conditions arguing that gig workers should have access to employment benefits. The long hours, mileage, meals, and wear and tear on drivers’ vehicles are costs that gig workers must incur. Had Proposition 22 failed and they were reclassified as employees, many of these costs would have been absorbed by the company.
This debate speaks to many things. First, it speaks to the perpetuation of workers, both employees and independent contractors, feeling undervalued and demanding expanded access to paid leave and equal pay from larger corporations whose success is driven by those frontline workers making things happen.
It speaks to the “bottom line” vision that company executives take in prioritizing profits over people. Instead of investing in people, the tech companies found ways to reap profits like blasting ads and campaigns to gig workers who rely on these very companies for financial support. That clearly demonstrates their efforts to influence the gig workers’ voting decision. If your “employer” told you to vote a certain way, would you do it? If your financial well-being depended on the outcome of the decision, how would you vote? In whatever direction it takes to secure your financial health.
It speaks to the lack of business acumen many people have. Writing this post reminds me of the discussion about why Amazon didn’t pay taxes on record profits. Amazon didn’t do anything wrong — and I say that as someone who has skimmed their annual report. To consumers and nonaccountants, this is wrong and my Facebook friends tagged me in many posts asking for an explanation. Same scenario with Proposition 22.
We will feel the effects of Proposition 22 across the globe in every market where our rideshare and food delivery friends operate. In light of the pandemic, we’ve looked at Uber and Lyft, and Instacart differently. While ridesharing has declined significantly, food delivery has surged in pandemic profits — largely driven (pun intended) by the freelancing gig workers who are willing to risk exposure to COVID in exchange for more financial security given the uncertainty the pandemic has created. The outcome of pending lawsuits and gig worker protests will be
When you think of Uber and Lyft, what do you think of? A company you can tap for a ride, a transportation company, right? Wrong. Another reason why many of these companies are rejecting the idea of converting gig workers to employees. Because they are tech companies, not to be confused with your neighborhood taxi service, that simply connects a rider with a driver.
Remember all those added employee expenses that would make it difficult for tech companies to provide employee-type benefits? The companies managed to find enough money to push campaigns urging voters to pass it. To ensure that Proposition 22 votes were cast in the companies’ favor, Uber, Lyft, DoorDash, Postmates, and Instacart collectively spent over $200 million dollars on add to support it. Proposition 22 is the most expensive legislation California has seen since those live summer parties of 1999. What if that $200 million was invested in the gig workers instead?
Originally published at https://www.nikkwinstoncpa.com on November 4, 2020.