Latest election stunt proves Uber and Lyft are their own worst enemies
by Steven Hill
Like so much about politics today, the debate around Uber and Lyft's Proposition 22 in California has quickly become polarized. Simplistic media narratives like "Silicon Valley versus labor unions," or Uber's self-serving argument that its drivers prefer flexibility over security, leave voters confused and torn.
But there is a more complex historical reality lurking beneath the headlines. Yes, the future of work is changing, and the labor laws must adapt, as the CEOs of Uber and Lyft asserted recently in a joint op-ed. Yet these companies have consistently missed numerous opportunities to act as good-faith partners for their drivers, and for society in general.
I have personally witnessed these companies' failings. After my book Raw Deal: How the Uber Economy and Runaway Capitalism Are Screwing American Workers was published, I was asked to a meeting with high-level Uber representatives. Previously, I had also been part of a meeting with Lyft leaders. A central part of these discussions was my proposal calling for a "portable safety net" for their drivers, and for other types of freelance workers.
With a portable safety net, each worker would have an Individual Security Account into which any business that hires that worker would contribute an amount pro-rated to the number of hours worked for that business. Those funds then would be used by that worker to pay for her or his safety net needs, such as health care, Social Security, sick leave, and injured worker or unemployment compensation. Instead of pitting flexibility against security, a portable safety net would allow not only flexible work, but also the economic security that workers and their families need.
A number of countries already do something like this, and former President Barack Obama endorsed my idea in his 2016 State of the Union address. A statement of principles was signed by about 40 business, government, labor and NGO leaders—including the president and CEO of Lyft, John Zimmer and Logan Green—calling for a portable safety net as a foundation for the future of work in the 21st-century economy. Uber CEO Dara Khosrowshahi has also called for enacting a portable safety net plan.
It seemed like this had the makings of a win-win solution. But when legislative bills were introduced for a portable safety net in the states of Washington, New York and New Jersey, Uber and Lyft came to the bargaining table offering pocket change. Rather than contributing 20 percent of a worker's wage that is necessary to fund an adequate safety net, Uber and Lyft offered to contribute 2.5 percent. And they wanted their contributions to be voluntary. In all three states, the legislation died because these billion-dollar companies frittered away real opportunities.
When California legislation was proposed, Uber and Lyft once again countered with a paltry portable benefits package. With no serious negotiating partner on the other side, the California legislature overwhelmingly passed Assembly Bill 5 to reclassify drivers as employees rather than independent contractors. Now it's the law, but Uber and Lyft have refused to implement it. This has resulted in multiple lawsuits and legal judgments against these renegade companies. One study found that if their drivers had been classified as employees in the last five years, Uber and Lyft would have paid more than $400 million into California's unemployment insurance fund. Instead, California taxpayers have footed the bill for the significant wage and benefit gaps created by these companies and their crummy gig jobs.
These bitter losses prompted Uber and Lyft to join with DoorDash and Instacart to spend more than $184 million—the highest amount for a ballot proposition in California history—to try to pass Proposition 22.
A Broken Business Model
One can't help but wonder why these multibillion-dollar companies, who can dig deep into their piggy banks to spend on this ruinous ballot measure but not on their drivers, consistently come to the bargaining table offering pocket change. Well, there's more to this story.
It turns out that, despite how badly they underpay and mistreat their drivers, Uber and Lyft are still in huge financial trouble. They have been losing billions of dollars every year, even as their stocks have collapsed. Profit margins are inherently low in the taxi business, and their predatory business model massively subsidizes more than half the cost of each and every ride in their bid to boost market share and undercut the competition. As a result, traditional taxi companies and livery drivers have been pushed to the desperate edge of bankruptcy, and airport shuttle companies have been driven out of business.
Public transportation has also been damaged. Even before the COVID-19 pandemic, public transit ridership in most major cities had declined, as commuters opted for half-priced Uber and Lyft rides over the mass ridership experience. One of the most ambitious studies of ridesharing impacts, conducted by researchers at the University of California, Davis Institute of Transportation Studies, found that ridesharing results in a dramatic rise in the number of trips made and miles driven in an automobile, as well as a pronounced reduction in the use of mass transit. All of that contributes greatly to increases in traffic congestion and carbon emissions.
Certainly, for the small minority of people who use Uber and Lyft's subsidized rides, most of them younger, college-educated, better-off Americans (their use is "double the rate of less-educated, lower-income" people), this transportation option has been helpful. But for the vast majority who do not use these companies' services, and who ride on the bus or drive personal vehicles, stuck in Uber-congested traffic, ride-hailing's legacy has been decidedly negative. In short, ride-hailing has been bad for most ride-hailing drivers, and bad for congestion and traffic flow, and bad for public transportation.
So what are these companies offering with Proposition 22? Yet another miserly version of a portable safety net. For example, the value of Proposition 22's offered health benefit is about $1.20 an hour—but that's well below the value of benefits mandated for employees under state and federal laws (which is more like $4 to $6 per hour, depending on the occupation). And many drivers would not be able to afford their share of the health care premiums, which would range from 20 to 60 percent.
Prop 22 also will not likely offer higher wages because of a complex formula that will be used to determine "minimum wage." A study by the University of California, Berkeley Labor Center found that if Proposition 22 passes, many drivers could earn as little as $5.64 an hour once their considerable driving expenses are subtracted, which is not even half of California's minimum wage of $12 per hour.
None of Prop 22's offerings come close to what drivers will receive if voters reject it and drivers remain regular employees instead of independent contractors. Even worse, Proposition 22 would lock in these serf-like conditions, since it will require an unprecedented 88 percent vote by the state legislature and the governor's signature to change it.
Uber and Lyft are their own worst enemies. They entered the taxi business 10 years ago, breaking every law in the books, motivated by the Silicon Valley philosophy of "move fast and break things." Well, they broke it, and now they can't figure out how to fix it.
As California Attorney General Xavier Becerra has said, "Any business model that relies on short-changing workers in order to make it probably shouldn't be anywhere, whether California or otherwise." Ride-hailing has been popular and seemingly has potential, but the public must insist that these companies not profit by shifting all the risk onto their workers and hurting the environment. The vote over Prop 22 is about making a stand for the type of jobs and businesses Californians want to see in their Golden State.
Steven Hill (www.Steven-Hill.com) is the author of Raw Deal: How the Uber Economy and Runaway Capitalism Are Screwing American Workers and Expand Social Security Now: How to Ensure Americans Get the Retirement They Deserve.
This article was produced by Economy for All, a project of the Independent Media Institute.