Business, Domestic Affairs, Haanbi Kim
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Proposition 22: A Peril in Disguise

Gig workers remain as independent contractors, big tech remains untouched. Now what?

By Haanbi Kim

In this past election, America hasn’t just voted a new president, but also new senate and house positions, and a handful of new laws. One of the most controversial laws passed was California Proposition 22, which would maintain the status of rideshare and delivery drivers as independent contractors, provide worker compensation, and overturn the opposition bill Assembly Bill 5, or AB5. This is a big relief for the app-based companies that house gig jobs like Uber and Lyft, who get to maintain their business model, along with freelancers who were negatively affected by AB5.

In the ballot campaign process, app-based corporations, including Uber, Lyft, and Postmates, made contributions upwards of $120 million, and a total of $204 million was spent on “Yes” campaign, making it the costliest ballot proposition in California’s history. The opposition campaign, mainly consisting of labor activist organizations, raised only $20 million. A significant portion of the $204 million went to political ad campaigns with Uber and Lyft persuading, rather forcefully, users and drivers to vote for Prop. 22. This makes it natural to assume that big business utilized their power to get their own way. The tech industry, already tainted with scandals, has essentially swapped lower costs for its reputation by leveraging its power over relatively powerless labor groups, which underscores the trust-like tendencies of big tech. 

Though passed into effect with 59% of the vote, Prop. 22 faces much backlash concerning its inability to guarantee safety, especially in protecting themselves from recessions similar to this past spring and summer. Although Prop. 22 makes promises of compensation and benefits to ensure gig workers more safety and security on the job, said compensations don’t even fulfill the bare minimum of what should be expected. Prop. 22’s ballot text outlines that “rideshare and delivery drivers deserve economic security,” mandating that big tech should provide a healthcare subsidy on-par with those under the Affordable Care Act, a wage guaranteed at 120% of minimum wage with no wage cap, and a gas subsidy of 30 cents per mile. However, the biggest caveat is that these benefits only apply to engaged time of work, which excludes search costs and downtime. A study from the UC Berkeley Labor Center found that search costs diminish the 20% premium mandated by Prop. 22 to a wage deficit with drivers making real earnings of $5.64 per hour. Furthermore, the health care stipend only applies for drivers who log at least 15 “engaged hours” per week each quarter and have a qualifying health insurance plan. Considering that many gig workers work part-time, this is a difficult standard to meet for many workers who are just as vulnerable to the volatility of the gig economy’s labor market. Furthermore, the 30 cents per mile subsidy fails to cover vehicle expenses, as the IRS states that the deductible rate for vehicles is 57.5 cents per mile. Disguised as a bill to provide the best of both worlds – flexible work hours with stable earnings – Proposition 22 presents many loopholes that can further put gig economy earnings in peril.

What is imperative is to consider the extent to which gig workers desire additional compensation benefits. According to the Gig Economy Data Hub, around one-tenth of the labor force consists of full-time gig workers and total gig economy participation is around one-quarter, meaning that a significant portion of work done by the gig economy is part-time. However, Prop. 22’s loopholes mean that many part-time gig workers cannot reap the health benefits and a premium wage. Those who opt to work a part-time gig on top of their full-time job may not need benefits packages as large and a wage as high as those of full-time employees from their part-time job. 

Yet, to limit the necessary safety benefits based on the amount of “engaged work” will not protect the majority of part-time workers, especially when the coronavirus has discouraged unnecessary travel. In order to establish truly beneficial gig labor legislation, the issue of defining what falls under “engaged time” needs to be addressed in order to enhance workers’ wellbeing regardless part-time or full-time to avoid wage depreciation. Another point of contention is how the economic impact of labor laws like Prop. 22 or AB5 will bleed into the gig economy, and how those players will respond to these changes. More compensation by Uber and Lyft means higher costs of input, in this case, gig workers. With these additional costs either funneling into higher prices for consumers or restricted recruitment of drivers, Prop. 22, like many major labor laws, doesn’t just pertain to the welfare of labor unions, but also to the welfare of consumers, big tech, and non-unionized, part-time gig workers. Those who opt to take on a part-time gig on top of their full-time role may not need benefits packages as large as those of full-time employees, and may not absolutely need a “living wage” from their part-time job. However, to bar the necessary safety benefits based on the amount of “engaged work” will not protect the majority of part-time workers, especially when the coronavirus has discouraged unnecessary travel.Although this ballot predominantly concerns Uber and Lyft in California, it is likely that the conflict between labor and the gig economy business model will spread across different sectors within the gig and freelance economies. New Jersey and New York have also attempted to pass AB5-like legislation months before. With how the pandemic has underscored the vulnerability of gig economy jobs during economic downturn, demands for more gig worker and freelancer benefits will definitely continue even with Prop. 22 in place. However, Prop. 22’s inherent flaw in classifying every gig worker under the same benefits packages has been a source of its backlash, aside from big tech’s morality (or lack thereof). Despite being one of the first pieces of legislation in reforming the modern workforce, Proposition 22 has early indications of masking the power of big tech while placing more gig workers in jeopardy. □


Work Cited

  1. Image source
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  7. Jacobs, K., & Reich, M. (2020, October 17). The Uber/Lyft Ballot Initiative Guarantees only $5.64 an Hour. Retrieved from https://laborcenter.berkeley.edu/the-uber-lyft-ballot-initiative-guarantees-only-5-64-an-hour-2/
  8. Kavin, K. (2020, November 06). California voters saved Uber and Lyft – and writers, artists and other independent workers. Retrieved from https://www.nbcnews.com/think/opinion/california-voters-saved-uber-lyft-gig-economy-backing-prop-22-ncna1246680
  9. Marr, C. (2020, January 13). New Jersey Gig Worker Bills Go to Governor, But Not ‘Big One’. Retrieved from https://news.bloomberglaw.com/daily-labor-report/new-jersey-gig-worker-bills-go-to-governor-but-not-big-one
  10. Menezes, R., Moore, M., Do, P. (2020, November 13). Billions have been spent on California’s ballot measure battles. But this year is unlike any other. Retrieved from https://www.latimes.com/projects/props-california-2020-election-money/
  11. Mishel, L. (2018, May 15). Uber and the labor market: Uber drivers’ compensation, wages, and the scale of Uber and the gig economy. Retrieved from https://www.epi.org/publication/uber-and-the-labor-market-uber-drivers-compensation-wages-and-the-scale-of-uber-and-the-gig-economy/
  12. Murphy, C. (2020, November 12). Uber bought itself a law. Here’s why that’s dangerous for struggling drivers like me | Cherri Murphy. Retrieved from https://www.theguardian.com/commentisfree/2020/nov/12/uber-prop-22-law-drivers-ab5-gig-workers
  13. Proposition 22: Official Voter Information Guide: California Secretary of State. (n.d.). Proposition 22 | Official Voter Information Guide | California Secretary of State, California Secretary of State, voterguide.sos.ca.gov/propositions/22/.

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