Earlier this year, I wrote about AB5, a new California law that would classify gig economy workers (e.g., Uber and Lyft drivers) as employees instead of independent contractors. This is a pretty big deal because, unlike independent contractors, employees are legally entitled to important rights, like anti-discrimination protection, worker’s compensation for injury, minimum wage, overtime, access to paid sick leave, disability insurance, unemployment insurance, etc.,
Since the passage of AB5, gig economy companies have been fighting tooth-and-nail against its enforcement. In early August, a court mandated that Uber and Lyft comply with AB5 by August 20, and the companies threatened to temporarily shut down if the order wasn’t stayed. Luckily for them, an appeals court stayed the order on August 20, and the ride-sharing companies lived to see another day in California.
Now, Uber, Lyft, DoorDash, and other companies are pushing “Prop 22,” a ballot measure that would classify its drivers not as employees, but as independent contractors with certain guaranteed benefits, including:
An earnings floor of 120% of the minimum wage + $0.30 per mile
Healthcare subsidies depending on number of hours driven
Occupational accident insurance and accidental death insurance
I’d personally vote no on Prop 22 (i.e., against the interests of the gig companies), but this is an extremely hard decision for me. Below are some of my thoughts on it.
Drivers: Flexibility vs. employment
Let’s start with a bad argument for voting no on Prop 22.
Prop 22 supporters argue that drivers value the flexibility in being an independent contractor and don’t want to be tied down under an employment model. They point to surveys showing that a majority of drivers (as many as 85%!) would prefer not to be classified as employees for precisely this reason.
Prop 22 detractors, however, argue that nothing in AB5 requires employers to limit employee flexibility. In other words, drivers, if they are classified as employees, can have their cake and eat it, too. According to these arguments, flexibility vs. employment is a false dichotomy. Drivers can have flexibility in their hours and where they choose to drive, and they can also enjoy all of the employment benefits that come with being an employee.
I think this is a losing argument for Prop 22 detractors. Of course the law doesn’t require the gig companies to change anything with respect to worker flexibility, but if companies need to classify their drivers as employees, economics will essentially require them to limit their drivers’ flexibility. Right now, drivers have the option to work whenever they like, wherever they like, on their own schedule, time, whatever, and if a driver chooses to drive at “unpopular” times or “unpopular” locations, that’s no skin off Uber’s back. It doesn’t hurt Uber in any way. But if drivers are now classified as employees, Uber suddenly has much higher operational expenditure per employee. It now must underwrite driver productivity and driver earnings. If drivers aren’t productive enough or earning enough, then the operational cost simply may not justify hiring the employee. Uber, as a for-profit corporation, needs to maintain an arbitrage between how much it pays drivers and how productive employees are. As a result, Uber naturally will probably require employees to drive during rush hour, in city centers, for X hours a day, etc. If Uber doesn’t do this, it might have two other options, but neither are realistic. First, it could exorbitantly charge consumers (e.g., fully pass the operational cost downstream), but this would ruin liquidity in the marketplace. Way fewer riders would want to use Uber, leading to way fewer drivers, leading to way fewer riders, in a sort of reverse network effect. Second, Uber could raise more institutional money so it can continue offering low prices and driver flexibility while bleeding insane amounts of money. This is not sustainable.
I think that Prop 22 detractors arguing that flexibility can legally co-exist with employment are being dishonest. While they legally can co-exist, they realistically cannot. I think the real issue these detractors have is with capitalism, in which case they should just come out and say that instead.
I think the debate about Prop 22 should be up front and honest about the two possible outcomes for drivers here:
(1) If Prop 22 passes, then drivers, as independent contractors, will have some additional benefits but certainly not all of the benefits of employee status. However, they will be able to retain a large part of their existing flexibility.
(2) If Prop 22 does not pass, then drivers, as employees, will enjoy all the benefits of being an employee but will also be required to commit ~10 hours a day to driving in certain locations. All other drivers are, uh, no longer drivers (since they’d be fired off the platform).
Reasonable people can disagree on which of the two above is better.
Given the above, let me briefly articulate the tech angle for why Prop 22 should pass, as I’m very sympathetic to this view. Prop 22 should pass because, if it doesn’t, then gig companies like Uber will necessarily and artificially restrict the supply of drivers to those who are willing to forgo flexibility for employee status. However, this completely contravenes the fundamental nature of the Internet. Indeed, the Internet is predicated upon abundance and access to everyone and everything. The most transformational Internet companies are premised on this paradigm shift: On Facebook, anyone can create and share content to the world; On Amazon, anyone can create and sell products to the world; On Google, anyone can search for anything in the world. And, on Uber, anyone should be able to become a driver. But mandating employee status would be nostalgically trying to cram a part of the post-Internet world back into pre-Internet pandora’s box. In other words, that would be undoing innovation. Of course, the counterpoint to this, which is fair, is who cares about Internet economics when workers’ rights are on the line?
Ushering in the gig economy future
I think there’s a better reason to vote no on Prop 22, and it stems from my vision for the future of the gig economy and my desire to remove barriers to that vision.
In my utopian vision for the future of work, society will be free from the drudges of labor; humans will work only if they want to work; and humans will pursue any creative endeavor and risk they’d like. The Internet was one of the first dominos to fall in bringing us closer to this vision because, as I mentioned, the Internet has connected everyone everywhere, enabling us to find work on demand. However, we’re still many keys and locks away from unshackling us from the chains of work. For instance, we need way more advanced artificial intelligence to eliminate the need to work while boosting economic productivity. With this increased economic productivity, we need to create more social safety nets, like government-sponsored healthcare (or, healthcare untied to employment), to empower people to take creative risks in their work. Over the next fifty years, we’ll need to have the flexibility to tinker with a bunch of state and federal government programs to bring us closer to this future.
That’s a long-winded intro to my incredulousness at the following provision in Prop 22 (emphasis added):
[T]he Legislature may amend this chapter by a statute passed in each house of the Legislature by rollcall vote entered into the journal, seven-eighths of the membership concurring, provided that the statute is consistent with, and furthers the purpose of, this chapter.
…What? Prop 22 states that if any legislators wish to make changes to it, (1) the change must be “consistent” with what Prop. 22’s backers would want and (2) seven-eighths of lawmakers must agree on the amendment.
To be fair, in California, by default, a law enacted by ballot measure (like Prop 22) can only be changed by another law enacted by ballot measure. The exception to that default rule is if the original ballot initiative explicitly say otherwise (as Prop 22 does here). So, technically speaking, Prop 22 creates additional opportunities to change the law because it enables legislators to make changes without having to propose those changes on a ballot initiative for the millions of Californians to vote on. But this is sort of a false promise. Indeed, a 7/8 super-duper majority is nigh-impossible to come by, so this essentially boils down to requiring another ballot measure in order to change Prop 22. But ballot measures are incredibly tedious and inefficient. Californians vote on about fifteen statewide ballot measures every two years, and not all of them pass. Meanwhile, the California legislature passes thousands of bills every year. To be fair, I don’t want to mistake motion for progress, but if you think the law should be nimble in responding to technological change, you probably don’t want to be waiting for ballot measures every so often in order to get that change.
As it stands now, Prop 22 entrenches corporate interests and will lead to ossification of employment structure. Don’t forget that 10 years ago, it was Uber that was embracing change and battling the entrenched taxi medallions for the right to operate in cities. Now, Uber is the one legislatively entrenching itself. This is a classic case of either dying a hero or living long enough to see yourself become the villain.
Look, I acknowledge that government nowadays isn’t known for innovation like the private sector is, but at the same time, my sense is that there is (or will soon be) a wave of technologists eager to enter the government and act in the face of sweeping technological and societal changes. Maybe the charitable interpretation for the gig companies here is that they don’t trust the government to understand technological paradigm shifts and that they trust themselves more to write the law to usher in new eras of technology. But isn’t that just … ideologically misguided in a liberal democracy? If I were the author of Prop 22, I’d require a far smaller majority of the California legislature to amend the law. 7/8ths is laughable and stands in the way of progress at a time when everything around us is changing.
📚 What I’m reading
Uber ambivalence: Employee status, worker perspectives, and regulation in the gig economy. A law professor’s research shows that gig drivers prefer not to be classified as employees because (1) they are afraid of retaliation from “ruthless” employers; and (2) need for flexibility.
What happens when China leads the world. A China historian theorizes about what China will do with its power, from the lens of how China historically used its power over the last 1,000 years.
The problem of free speech in an era of disinformation. A long but thought-provoking read from the New York Times.
National Security Commission on Artificial Intelligence Q3 report.
Report from the Trump administration: National Strategy for Critical and Emerging Technologies.