The Cradle Of The Gig Economy Gets Rocked … Hard

Posted on Jan 23 2020 - 6:33am by Editorial Staff

California has become a beacon for American innovation and a blazing symbol of progressivism. But California has a problem. Bradley Tusk, an early investor in Uber, says that the reality of Uber in 2020 is not aligned with the original vision for the company. This vision was not for drivers to “Uber everywhere,” but rather for driver partners to earn some side money while retaining a primary job. 

The issue is that about 4% of Uber drivers in America count on Uber for a majority of their income.

At the end of 2019, there were about half a million Uber drivers in the golden state. That means 20,000 angry professional drivers with no type of health coverage or workers’ rights.

84 percent of Uber drivers make between $100 – $500 a month. However, a defiant 2 percent minority of US Uber drivers make more than $1,500 a month. 

The California Gig Economy Bill

As the state senate implements the contentious “gig economy bill” starting January 1st 2020, the reactions have been a mixed bag. After all, business common sense tells us that you can’t raise a company’s by a massive amount without producing a trickle-down effect in pricing and policy. 

The “gig economy bill” is formally known as Assembly Bill 5. It calls for a mandatory test to determine if a company’s workers are formal employees or contractors with less legal rights. It makes it harder for companies to hire workers as contractors. According to a survey by Upwork, there are currently a reported 57 million American freelancers contributing more than $1 trillion to the economy annually.

In Support of The Bill

The New York senate is currently considering a similar bill to AB 5, which passed on Sept. 18 and took effect on January 1st. Minimum wage, worker’s compensation, and health benefits are at the crux of the complaints against gig companies like Uber and Postmates. Freelancers who constantly dwell on the stability and coverage of jobs in the 20th century may feel vulnerable in today’s wild world of public reviews and “career hopping.”

Minimum wage in California is currently $12/hour. This is congruent with the rate most Uber and Lyft drivers count on, which is between $9 – $16/hour, but there are many people who depend on Uber who feel that this variation is a result of capitalistic greed. AB 5 would push for Uber to recompense drivers with the official minimum of $12 in California, but what would the consequences of a bill like AB 5 be in a state like Florida, which has a minimum wage of $8.50?

Worker’s compensation is a social support system that has saved countless families from dealing with real hunger and economic ruin. In the past, Uber drivers who were involved in accidents often had to seek legal advice themselves from law firms like The Barnes Firm, a group of San Diego car accident lawyers who help Uber drivers as well as passengers. With AB 5 in effect, it the costs once incurred by the driver himself could shift onto Uber’s shoulders.

Opposed to The Bill

The problem with offering full coverage to everyone is that it implies a smaller “everyone.” This means less jobs to go around, speaking absolutely. It also means that Uber will be forced to implement policies to specify who they will employ. As it is, the only requirement to become an Uber driver is basically be a licensed driver with a registered four-door car in clean shape.

Another policy the tech company is instituting in California is a minimum amount of time on the road for their driver-employees. Again, AB 5 means a smaller “everybody.” In this case, that means the casual collegiate driver who picks up neighbors on his way to campus would probably no longer be eligible to drive for Uber.

Uber, Lyft, and Postmates are among a coalition of tech giants that are negotiating with lawmakers and labor unions to create an alternative sort of worker — no names yet, but it will basically be a contractor with added benefits.

AB 5 is a test of fire. Will the Uber of 2030 still be a tech company that connects drivers and riders? Or will it be a transportation company that uses technology as a key part of its business model?

About the Author
Editorial Staff

Editorial Staff at I2Mag is a team of subject experts.