Yves here. The headline might be read by some as implying that Uber and Lyft are redeemable. Their untenable economics say otherwise. And remember, the author, as the proponent of a way to reduce the precarity of gig work, has to give Uber and others the benefit of the doubt, regardless of what he may believe privately. Treating the local ride companies as bad faith actors, even though accurate, would work against his efforts to sell his “portable safety net” scheme.
Needless to say, I’m not keen about the notion, which author Steven Hill takes, that worker rights should be thrown under the bus “because technology”. As Hubert Horan covered in exhaustive detail in his series on Uber, there is absolutely nothing “innovative” about Uber. Uber and other local ride new entrants have higher cost than traditional taxi operators. There is nothing special about the apps, as witnessed by the fact that local cab companies also have them. The only distinctive feature about Uber and Lyft are their massive investor subsidies, which allow them to undercut cab companies as well as have an uneconomical number of drivers cruising about.
In other word, Hill simply concedes that Uber and Lyft should not have to treat their drivers as employees, when they exercise so much control over their pricing and other work conditions as to clearly indicate otherwise. I see no reason for taking this position.
By Steven Hill, (www.Steven-Hill.com) 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. Produced by Economy for All, a project of the Independent Media Institute
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.
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Don’t you mean Porta-Potti safety net? Where the hole you try and sit on is three times the size of your ass?
So far, Uber all by itself has sunk the equivalent of half the fleet of Nimitz class aircraft carriers, at a pace of roughly half a Nimitz unit per year. One would think the money went glug glug too, but with carry forward losses useable till eternity, eternity is when Uber will finally pay a dollar of income tax.
Profits and taxes are for chumps.
I thought the election stunt was going to be this one, but it wasn’t mentioned at all:
https://www.houstonchronicle.com/politics/article/Fake-progressive-mailers-urge-yes-on-Uber-Lyft-15635173.php
I saved the California mailer from “Mothers Against Drunk Driving” in which Helen Witty, national president of MADD, is quoted “YES on Prop 22 will save lives”.
Her argument is that having cheap rides home will encourage drinkers to use Uber/Lyft rather than drive.
Ok, if this is indeed true, Uber/Lyft lose money with the current labor model, so passing prop 22 will simply allow Uber/Lyft to book lower losses for a while, then their rates, but not labor rates, will have to rise to approach profitability, decreasing the “cheap ride home” that MADD likes..
From https://www.lamag.com/citythinkblog/prop-22-madd/
“Uber and MADD have been partners for a number of years, arguing that access to ridesharing significantly reduces drunk driving accidents. One study in 2017 found that alcohol-related accidents dropped as much as 30 percent in sections of New York City were Uber was widely used, but other researchers are less confident of the link.”
““We started thinking about this question when we came across several papers examining the effect of ride-sharing on drunk driving, and saw that they found relatively small (and sometimes statistically insignificant) effects,” Keith Teltser, a George State University professor told Slate.”
We’ve always had taxi-cabs to use to get home from a bar, and there is the problem when someone drives to a bar, gets drunk, but doesn’t want to leave their car at the bar to take a taxi home.
In my mind, MADD damaged their reputation with this endorsement.
It’s a cheap ride home until someone tosses their cookies in the car.
Who pays for the cleanup? If you’re taking a cab, the cab company will charge you a hundred or two bucks for a biohazard fee.
What happens if you’re in an Uber and your dinner and drinks come back up again? I dunno. Perhaps some other queasy NC-er can enlighten us.
Political humorist P. J. O’Rourke once suggested forming a group to be called DAMM.
Drunks Against Mad Mothers.
Proof that the business model is not sound is that Uber and Cabify (sort of Spanish Uber) have been disproportionately affected by the epidemic in Spain, compared with cabs, and many operators are reducing their fleets that remain idle in Company parking sites. In Spain there are operators that own hundreds of Uber/Cabify cars (both of them). I provide not link because it would be in Spanish.
I voraciously read everything I can about Uber/Lyft, the rideshare industry and the gig economy. Please provide the link for those of us who speak Spanish.
Steven Hill has been a fine writer over the years; his books on European worker protections are very valuable.
I am not from California, but based on my reading the movie industry has provided health and retirement benefits for years, despite having a ‘gig economy’ from day one. The key to this was strong unions, who demanded meaningful contributions to welfare funds. (Ronald Reagan was a head of this union, and not a bad one in his younger days.)
In this case the state government is trying to substitute for having a union that could declare a strike and extract some real benefits. Usually in these cases the state blinks first.
Excellent point
I have been involved with a few others on the Nextdoor app, extended and detailed threads, bringing out many of the negative issues wrt Prop 22. Most of the pro Prop 22 comments are as compelling as “vote
YES, hell yeah” to the typical diatribe you see on the ads “drivers want to be independent, flexibility, think
of the new benefits, etc.” You go thru and counter this with facts, figures, other implications such as
cited in this article, and inevitably, the next post is:
So, vote YES then right?
That’s Nextdoor for you. Here in Tucson, that site is regarded as an online looney bin.
In short, it’s where critical thinking goes to die.
OTOH, if it’s possible to get the Nextdoor folks to at least lurk here, then time on Nextdoor isn’t wasted.
“drivers want to be independent, flexible….”
The freedom to fail is only for the little people, the big corporations are tbtf. ;)
Let’s stop with this silly idea that Uber & Lyft are “high tech” companies. They are taxi and food delivery services masquerading as high tech companies.
And they are social dumpers to boot.
Completely agree. You can take anything and add an app to it and suddenly it becomes ‘high tech’.
But…but…technology!
Yes, they are high tech companies, if we consider data. Data is gold these days. And these companies collect a lot of it and arbitrage it for their own benefit.
Are they making money on their data or their fees?
Taxi services aren’t considered big tech and yet there’s more tech in their cabs: the cab driver has the phone, taxi app plus traditional meters and signs. They also have a wealth of data and experience from being in business longer.
I’d say it’s the company’s proximity to Silicon Valley, rather than its operation, that gives it the moniker of Big Tech. Also, millennial marketing tactics.
Portable safety net and a bunch of requirements and stipulations with not everyone getting the same benefit?!? How about M4A instead?
And I’m still at a loss as to how these companies find anyone willing to work for them in the first place. Buddy of mine drove for Lyft a few years ago and figured out that it was a scam pretty fast. I get that people are desperate, but there are other jobs out there. Why not flip burgers or pour coffee rather than working for less than either of those jobs and ruining your car to boot?
That fact that Uber even exists proves that there is no such thing as this mythical ‘rational economic actor’ the neoclassical cranks like to base their theories on.
I was always surprised the “be your own boss, address envelopes at home, make big money” and other piecework outfits found workers.
“Why not flip burgers or pour coffee”? Try applying for a job like that when you’re a thirty-something or older who lost your previous job and have been unemployed for months or more. I tried to retrain myself a few times starting in my early thirties – unsuccessfully. I’ve ended up starting a small home business after years of not getting any responses at all from my attempts to find employment in various minimum wage jobs. I did this for years as well as trying to find any employment in the two fields I trained in (aircraft maintenance and later accounting). Fortunately my personal situation meant that I was never in danger of going hungry or homeless and ultimately was able to start something of my own but most people aren’t that lucky. This was in the 2000-present era in the Vancouver BC area where we are supposed to be doing relatively well economically too.
Uber and their ilk are absolutely reprehensible companies and would be terrible to work for but I can see how it can pull people in. Just not having to repeatedly go through the application experience feeling like Oliver Twist asking for more gruel gives it some appeal.
Thank you for this article. I am a financial planner in CA and did a deep dive into this proposition. It is vile.
It can only be amended with 7/8 majorities from both houses of the state legislature.
These workers are forever barred from organizing.
The proposition overrides any local laws that that apply to these workers.
In return, the workers get “benefits” that look reasonable at first glance such as the 120% of minimum wage.
The devil is in the details.
In addition to the “engaged time” that is being talked about (finally), the worker will first have to pay him/herself from hours where he made more than the minimum to compensate for hours when he/she made less before the companies step in. This is counted per pay period, weekly or bi-weekly etc. Only when the entire pay period averages below minimum that the companies step in.
The other benefits promised also don’t stand up to scrutiny in similar ways.
Heck “NO” on this.
The 2017 book “Private Government” by Elizabeth Anderson details the many ways corporations act as a private government with extreme control over employees rights and lives.
From the Amazon description:
One in four American workers says their workplace is a “dictatorship.” Yet that number probably would be even higher if we recognized most employers for what they are―private governments with sweeping authoritarian power over our lives, on duty and off. We normally think of government as something only the state does, yet many of us are governed far more―and far more obtrusively―by the private government of the workplace. In this provocative and compelling book, Elizabeth Anderson argues that the failure to see this stems from long-standing confusions. These confusions explain why, despite all evidence to the contrary, we still talk as if free markets make workers free―and why so many employers advocate less government even while they act as dictators in their businesses.
In many workplaces, employers minutely regulate workers’ speech, clothing, and manners, leaving them with little privacy and few other rights. And employers often extend their authority to workers’ off-duty lives. Workers can be fired for their political speech, recreational activities, diet, and almost anything else employers care to govern. Yet we continue to talk as if early advocates of market society―from John Locke and Adam Smith to Thomas Paine and Abraham Lincoln―were right when they argued that it would free workers from oppressive authorities. That dream was shattered by the Industrial Revolution, but the myth endures.
When Locke, Smith, and Paine were arguing for free markets they were talking about a way to free businesses and workers from oppressive state run monopolies and mercantilism. It was then a left wing position. The irony is the free marketers now are supporting new systems of private monopoly and oppressive working conditions. The original idea has been turned on its head.
and yet in an earlier comment, you wonder aloud why people sign on for envelope stuffing at home? your two comments do not correspond by my logic.
there are many people who do not want or are not able to engage in a workplace dictatorship. you can be “hired” for a zero-hours guaranteed contract to show up, fully outfitted (at own cost for both, so dictated clothing and a car) on short notice to a large retailer or other outfit to engage in this workplace dictatorship, with no control over your hours (“take them or leave them, and if leave then LEAVE, permanently”). not to mention drug tests and firing, for positions where you are not operating any equipment that endangers anyone’s life.
you have to also subject yourself to searches, have clear plastic handbags and engage in other idiocy to prove that you haven’t stolen anything. you are also subject to a huge binder full of rules that include what you do around, outside and even at home in your life.
the end result is no control over hours, behavior, dress, speech, pay, benefits, and also therefore where you can live (how far away can you live and respond to on-call or short notice hours and actually get there on time, etc) and what kind of things you can engage in during your off-time, plus your mandated “mode of transport” (sometimes specified). and, sometimes required to have a cell phone and be on-call at all hours, or other tech equipment to sign in to perform the things that an on-site HR or business office used to do, but is now behind closed doors and never answers the phone.
considering the time and other obligations many people are under for their LIVES, it is not odd that some people seek out these jobs that claim (but are usually lying) that you can do them whenever you have a few spare moments.
Well, I agree. Especially with “…these jobs that claim (but are usually lying)…” Task Rabbit and Mechanical Turk come to mind. See Prop 22 as exhibit A. ;)
American Prospect has a good article on the high stakes of Prop. 22……
“If Prop 22 passes, it would reach far beyond a couple hundred thousand drivers in California working in food delivery and ride-hailing. It would send shock waves all over the country, becoming the basis for a formalized tier of substandard labor that would certainly be exported, across numerous industries and millions of workers, and internationally as well.
It would also set a troubling precedent for venture capital money in politics, as there would be obvious proof of their ability to buy their way out of regulation via ballot measure, and override the will of multiple chambers of a democratically elected legislature. “If it becomes clear you can buy any law with $180 million, then a lot more industries will head down this route, turning good jobs to bad jobs, full-time teaching to all substitutes, unionized nursing to precarious contract nursing gigs,” says Veena Dubal, an associate professor of law at the University of California, Hastings. “The way they’ve worded it is such that it will spread beyond the delivery industry, literally formalizing all the exploitation that happens in the informal economy … it’s the biggest threat since the 1930s that America has seen to the social safety net, minimum wage, and access to secure pay.”
Veena Dubal was subjected to intense social media harassment from the prop 22 campaign after publishing her research, including personal, hateful attacks from an army of paid trolls on Twitter, who also doxed her. Business as usual for Uber and their ilk.
Strangely enough Lyft is spending big in local races as well – here in Oakland we got a glossy mailer for a candidate for the city council at-large seat which featured large photographs of Kamala Harris and was entirely paid for by Lyft. I guess the rideshare firms are looking for some local level regulatory capture as well.
Needless to say I stopped considering that candidate right away – judge them by the company they keep!
Berkeley-ite here. Anyone I would know? (Already marked no on 22. Researching the rest of the state props. Really confused about how to vote on the dialysis one).
I’m voting no on the dialysis one. I just can’t see how it make sense to use the state proposition process (which becomes California constitutional law) to regulate medical facilities.
These drivers will also find themselves short changed on social security and Medicare. You need work quarters where you paid into the system. People never seem to bring up how these people will manage without either program I their senior years. We also need ALL of these people paying into the system for those already drawing these benefits. I have always maintained I would walk before calling one of these companies for a ride. They are a bad business model; harmful in so many aspects as to our society. I also will not order food through any of the grub hub and insta cart companies, I refuse to help them exploit workers.
All of them are for rich people to use which translates to slavery every time.
It’s a bit more troublesome than that. As independent contractors rideshare drivers are obligated to file and pay federal income tax. It’s true that if they neglect to do so they will be shortchanging medicare, the ss system and themselves further on down the road. They’ll also be commiting the misdemeanor crime of failing to file. If they attempt to evade payment it becomes a felony. The issue of criminality aside, if and when the IRS catches up with them and demands payment, they’ll be subjected to penalties and interest, liens and similar punishments.
Aloha from Hawaii. I will share some news on the ground from where I live as it relates to these companies. I am in legal transportation. I say this because U/L have been here for 4-ish years and are not legal. They are not legal according to county ordinances. Our county law states in general, to operate a for-hire vehicle you must meet several criteria. They meet none, zero. From insurance, inspections, licensing, everything. Still, no one does anything to them.
So, Hawaii on Thursday October 15 opened back up for outside travel without a 14 day quarantine. This has not happened since March. The state receives 25,000-35,000 visitors per day roughly. It’s way too many, but that’s a different story.
My island averaged about 5,000-8,000 per day. Once Covid lockdowns we’re initiated that number went down to about 300 people per day. Most of these travelers were inter-island workers, construction or medical workers. Basically, all taxis and shuttles were on pause. There was no business. One taxi driver stayed the whole time as he couldn’t collect unemployment. From 8am-5pm he had about 4 fares per day. Short trips mostly and the occasional longer trip. $75-$100 daily average before expenses. Basically no U/L drivers. He saw a few pickup but mostly, if a customer was waiting by the Uber/Lyft sign, he would approach them, offer them a discount because Uber charges about 40% less than taxi on Maui and they would agree and he’d take them.
Now, October 15 we had almost 3,000 people land in Maui. Again, some were inter-island, returning locals from the mainland, workers and the like. But several hundred were straight up TOURISTS. Now, 10 taxis showed up to see what would happen. I was one of them. I was number 5 in the curbside taxi line. Directly where customers get bags is where we park. We are there all the time. Very small airport. Not like LAX OR JFK. No need for an app. Uber/Lyft drivers are only as close as 3 miles. Most farther. Wait times are at least 10 minutes but because of Covid, it’s about 20-30 minutes. Taxis at any airport account for usually the smallest amount of passengers. If 100 people land on a plane we might get 5 fares at most. That’s normal. While I was number 5 at the stand and 4 mainland flights landed at once, I watched 10 groups wait for U/L. 5 feet away from the taxi line. 10 minutes, 20 minutes, 30 minutes. First Uber that showed up, no mask. All taxis are masked and Covid tested. U/L is not.
I informed the waiting customers that only taxis and shuttles are Covid tested.
First question out of their mouth,
well how much is a taxi to here(destination on island)?
Oh it’s $55.
Well Uber is $35 and Lyft is $32.
But they might have unreported Covid.
Ok thanks.
Then they would just sit and wait. There was probably 55 taxi fares on October 15. The taxis got 15. People eventually were waiting an hour for an Uber. To save $10. On vacation in Hawaii. The most expensive place in the US for vacation. People really don’t understand money and worth and value, but that’s a different topic.
I have also explained to customers in the past since U/L was allowed to pickup at the airport here how they are not protected by insurance, the drivers have no drug tests, etc. etc. I will get people to cancel and come with me SOMETIMES. But I can’t be there all the time and most of the other drivers aren’t as vocal as me. They just watch all the business go away. It looks like Covid isn’t changing people’s mind about U/L. I hope prop 22 doesn’t pass and they raise prices. It’s truly from my experience, the only reason people go with them. Also, the PR people at Uber/Lyft should be hired by every major awful company to sell whatever BS they are trying to sell. Why? Because they were able to convince people(Customers) that Uber and Lyft are not taxis. People look at us like we are a different form of business. It’s awful.
Remember, or at least be aware of the fact that part of Uber’s original pr narrative consisted of denigrating and portraying taxi drivers and the industry in the most negative manner. Like drug cartels. Every horrible untrue and unfair stereotype. The same narrative was directed towards any type of transportation for hire rules and regulations. The lobbyist and political strategist who ran Obama’s successful campaign for president, David Plouffe, was hired by Uber in 2014 as Senior Vice President of Policy and Strategy. After her consulting firm received an $85,000 payment from Uber/Lyft et al, the president of the NAACP in California, Alice Huffman, is now publishing shameless propaganda in support of prop 22, framing it as an issue of racial justice, portraying it as an attack on the labor rights of minorities. This shows that Uber didn’t ever go it alone, depending just on an inexhaustible supply of venture capital and dirty, underhanded business tactics. They had and continue to have plenty of high level government support along the way. The Koch brothers are smiling, wherever they may be.
So, the president of the Cal NAACP chooses capital over labor.
I doubt she sees it that way. It was a business decision she made on behalf of her consulting firm, AC Public Affairs. She did the same when it came to California’s Proposition 10, a rent control measure, getting paid close to $800 thousand dollars for the “No on Proposition 10” campaign that was financially backed by millions of dollars from entities such as Blackstone Group. When questioned on her involvement her response was, “I don’t apologize for it…I don’t see it as a conflict of interest”.
But Uber and Lyft are still losing money with no profitability in sight especially considering EBITA. I believe passage or failure of Proposition # 22 will not stop Uber’s eventual financial collapse and profits will never result in returns to redeem or satisfy investors such as Japan’s Softbank. Taxi transportation has some 85% in fixed costs and thin margins ( vehicles, maintenance, depreciation, insurance). Compare that to Big Pharma with pills costing hundreds after R &D have been accounted for. Great profits in Big Pharma. As my dear Mom would have said, ” You cannot get blood from a turnip “. I believe all this was soon apparent to Uber and Lyft founders and supporters and the plan at this point is to keep the game going and salvage what money they can. I’m reminded of Bernie Madoff
Hello Yves and others, thanks for your comments and the exchange of viewpoints. I am the author of this article on Uber/Lyft business model and Prop 22. Just to be clear, I am opposed to Proposition 22. In fact, I just spoke yesterday at a “No on 22” campaign rally in San Francisco held by drivers. I’m opposed to Prop 22 not just because Uber/Lyft are offering peanuts for a portable safety net, but because it is better for the drivers to be classified as employees rather than independent contractors. So to me, there is a hierarchy that goes something like this: 1) if you can, classify independent contractors as employees; 2) or if you can’t, or for a particular occupation perhaps it doesn’t make sense for one reason or another, then those workers should be covered by a portable safety net.
In other words, a portable safety net should be part of a comprehensive coverage in which all workers have access to the welfare security they need. The big challenge here is that, as more individuals work for multiple employers/businesses, we have to figure out a way that these businesses are not able to “free ride” on the safety net system by not contributing their fair, prorated share for those workers. Particularly with the rise of online labor platforms like Upwork, in which I can go online and hire someone in Thailand (or India, Philippines, etc.) to do a job for me, not only is it a race to the bottom in terms of developed world vs. developing world wages, it’s also not clear that either the US or Thai governments know anything about that transaction. Neither I as the employer, or the person I hire, is necessarily paying taxes into the welfare system for that worker. As more people work this way, it will start to undermine the tax base of the welfare systems in various countries, undermining funding for education, health care, transportation, the environment, and more.
So not only do we need a portable safety net for these types of workers, but we also need to have the data from the companies to track these international transactions. But of course these companies resist turning over this data, citing ironically the worker’s “right to privacy,” even though the status quo is hurting that worker.
So in this bigger picture beyond simply Uber and Lyft drivers, a lot of work needs to be done to prevent the triaging of labor that leads to an international race to the bottom. Thanks for your thoughts, all the best.
Thanks for weighing in and I appreciate your opposition to Prop 22. However, you sidestep the point I made in the introduction. I see no reason to capitulate with respect to current employee rights, which is what your “portable safety net” amounts to. “Because technology” is not a justification for enabling the creation of second class gig workers. In addition, the “portability” feature would create the need for financial institutions to play a major role, further reducing the net amount workers would receive.
(Yves — I posted this late last night but it didn’t seem to “stick”. So I am trying again. Also made some edits in the fresh light of morning to clarify what my bleary-eyed brain wrote. Thanks)
Hi Yves, thanks for your response. Even if, in an ideal world, all workers were able to be classified as “employees,” a portable safety net would still be extremely helpful. And this is unrelated to “because technology”, there are a number of non-technology occupations in the services sector that would benefit from a portable safety net. Many workers today, even regular employees, work part-time for multiple businesses; some are technology-related, most are not. But the safety net was never set up for this type of worker.
By law (though it can vary some from state to state), regularly employed part-time workers are entitled to employer contributions for Social Security, Medicare, injured worker and unemployment compensation (and the worker pays her half as well). But that’s it, part-time employees are not entitled to health care, retirement pension (beyond Social Security), paid sick leave, paid vacations or other benefits. A few states like California have added other components of the safety net, such as a small amount of paid sick leave. But these workers with multiple employers live in kind of a gray zone in which they are treated as second class, even though they are legally classified as “employees.”
In a situation in which a part-time employee is working for three or four such businesses, it gets pretty complicated for that worker to try and aggregate her safety net benefits from different employers. For example, different employers contract with different insurance companies for their injured worker compensation or unemployment compensation needs.. Or if the employee has any kind of pension with more than one business, it’s not likely that the employee will be able to pay into one pension fund for all of their employers. It would be a lot better – more efficient and provide more economic security for the worker – if each business could pay into an Individual Security Account for that worker, who then can use those funds to pay for her safety net needs. Those funds then would get directed toward existing social insurance funds, such as Social Security, Medicare, unemployment, injured worker, health care, etc. The portable safety net does NOT replace these, it is a pipeline to deliver it, and an aggregator since this employee is getting their safety net contributions from multiple employers instead of one employer (as in the old days).
And in the example I cited in my previous comments, that of workers accessing paid work via online labor platforms, it can get quite complicated to apply existing labor law in that situation. So for example, if you or I were to hire someone to design a logo, or to design a website, or to write a legal brief, or any time-limited work project that has a short end date, it becomes more challenging to apply W-2 labor laws to so many different employers for one employee. In addition, if that worker is in another state, or even another country, which state or country’s laws get applied? Perhaps over time states and countries will be able to harmonize their labor laws, but we are very far from that ideal. In these sorts of situations, a portable safety net could at least allow this part-time worker to cumulate contributions from multiple businesses toward their safety net needs.
Suppose Donna is employed 20 hours a week by a hairdresser, contracts for 10 hours a week with TaskRabbit, and drives 10 shifts for Uber. And let’s imagine we could wave a magic wand so that all of these jobs have been converted into W-2 form of regular employee employment. Donna would earn 50 percent of her benefits from the hairdresser, 25 percent from TaskRabbit, and another percentage based on her wages driving for Uber. She would earn a percentage of her benefits from each company, prorated to the number of hours worked or a percentage of her wages (for those jobs that don’t pay hourly, like Uber). Contributions would be put into her Individual Security Account.
Incidentally, this kind of set up is the way many carpenters, plumbers and other types of trades receive their portable safety net. These are occupations in which the workers are employed throughout the year by multiple businesses. So they need a way to cumulate employer contributions for their safety net needs. But in these occupations, the workers’ security account is overseen by a labor union and a union contract. With the percentage of workers in a union down to 6.7%, what do we do for the many non-union workers? The Individual Security Account allows non-union employees working for multiple businesses to aggregate contributions for their safety net needs.
And because all businesses would be contributing their fair share, it would actually increase workers bargaining power because that worker would not be subject to “job lock” in which she is afraid to leave a particular job that she doesn’t like because that job provides her health care. By creating a universal portable safety net into which ALL businesses/employers must contribute, no exceptions, that worker now can leave a bad job and go to another one with the confidence that this new employer will also be contributing into her Individual Security Account.
Yes, as you say, the portable safety net would create the need for some kind of agent to play a fiduciary role, working with the employee to manage their safety net needs. But that agent need not be a financial institution. In fact, in my white paper that I wrote for New America, “New Economy, New Social Contract,” (see the link below) in which I go into these kinds of details, I show how the ISA could be overseen by the government (much as it does for Social Security and Medicare, tracked with a personalized number) or labor unions or other NGO’s (regulated by the government to ensure minimum coverage and standards). A number of unions such as IUOE, Teamsters, SEIU already do something like this, they oversee what are called “multiemployer plans” for many of the trades and service sector occupations (actors and directors, for example). This is also similar to what they do in Sweden, Denmark and Finland, where trade unions or union-affiliated organizations manage the unemployment funds based on the ‘Ghent system’.
So there are lots of options for administering and managing a portable safety net system. It could be a big win for workers, that not only provides more welfare security but also increases workers’ bargaining power, both with employers as well as with insurance providers. For example, these Individual Security Accounts could be collected into a larger insurance pool so that the individuals benefit from economies of scale and get lower insurance premiums than she could possibly get by negotiating for insurance as an individual. And it also could be a win for labor allied organizations, who would oversee these funds.
Sorry to be so long-winded, but I thought I would try to explain a bit more detail. Here is a link to my New America paper in which I go into some detail on this, including estimates for costs, administration and management, how this would take away the “race to the bottom” incentives that businesses have now to engage in “bogus self-employment” (as it’s called in Germany), how it is constructed around the “multiemployer plans” that labor unions already operate, and more.
“New Economy, New Social Contract”
https://static.newamerica.org/attachments/4395-new-economy-new-social-contract/New%20Economy,%20Social%20Contract_UpdatedFinal.34c973248e6946d0af17116fbd6bb79e.pdf
Yves, all the best
Steven
http://www.Steven-Hill.com
P.S. I emailed you an article that I thought you might find of interest at the email address blogger@nakedcapitalism.com. I emailed it from my shill@igc.org email address.
You considerably misrepresent the benefits employers are required to provide. No employer, zero, zip, nada, is required to provide retirement benefits beyond Social Security. No employer is required to provide paid vacation. Health care and unpaid job leave is required only for employers with more than 50 workers. Only some (a decided minority) of jurisdictions require sick leave.
And you prove my point. The “individual security account” would be run by a financial institution. The complexity of the arrangement guarantees it would be very high fee.
Hi Yves. Where did I write that any employer is required to provide retirement, paid vacation, etc? I only wrote about PART-time workers, not full time, and re: those I wrote: “By law (though it can vary some from state to state), regularly employed part-time workers are entitled to employer contributions for Social Security, Medicare, injured worker and unemployment compensation (and the worker pays her half as well). But that’s it, part-time employees are not entitled to health care, retirement pension (beyond Social Security), paid sick leave, paid vacations or other benefits.” So I believe I already stated exactly your point, I am not sure how you apparently have deduced the opposite. I don’t believe I wrote anything that “misrepresents” the benefits employers are required to provide. What in my text gave you that impression?
And if you consider labor unions such as SEIU, Teamsters, and unions in Sweden, Denmark etc to be “financial institutions” — since they all currently run multi-employer benefits funds or unemployment funds for their workers — then I don’t have a rebuttal. To me, there is a vast difference between Prudential, Metlife, Goldman Sachs, Citibank, JPMorganChase — insurance companies and financial institutions — and labor unions. Do you disagree with that? Or do you think the level of “business unionism” today makes unions lost causes and no different than “financial institutions”? I guess I don’t understand your perspective here. All the best, Steven
An overly complicated solution considering that none of the gig companies have a path to profitability in the first place.