On Wednesday, ride-hail driver and advocate groups from 6 major cities across the United States released a statement of solidarity reiterating their opposition to a California ballot initiative proposed by gig companies.
Proposition 22, as the initiative is known, is a ballot measure backed by app-based gig companies such as Uber, Lyft, and Instacart, and seeks to exempt the companies from reclassifying their drivers as employees.
“We stand in solidarity with mobile workers across the globe who are uniting to drive up standards in our industries and win our fair share from big app companies,” the letter says. “In the United States, we condemn actions in California by the giant global companies who are waging a campaign to misclassify drivers as a way to avoid paying minimum wage, healthcare, paid sick leave, workers compensation coverage and other benefits.”
Gig companies have spent the past decade protecting a business model that relies recruiting far too many workers and then misclassifying them. This allows gig companies to both minimize labor costs by denying workers benefits and protections, and keep wait times low by forcing most drivers to spend a significant amount of their time simply waiting for customers. These companies continue tweaking the independent contractor model to push as many costs as possible onto the driver and use venture capital subsidies to operate at unsustainable and unprofitable levels in pursuit of an eventual monopoly. Wanton disregard for regulatory law (“ask forgiveness not permission”) is also a key part of the strategy.
Uber, Lyft, DoorDash, Instacart, and Postmates have sunk nearly $200 million into their Yes on Prop 22 campaign, which has unleashed an unprecedented propaganda campaign in what is shaping up to be the most expensive ballot measure in U.S. history.
“All eyes are on California as we witness the lengths these companies will go in order to defeat an employment protection law passed by elected officials that were put in office by the people of California,” the letter reads. “It is not only an attack on workers but it is an attack on democracy.”
Victory for the gig companies would mean the past decade of law-breaking, regulatory capture, lobbying, and malfeasance would now be codified into a law that would require a seven-eights majority of the California state legislature to overturn. After California, it’s likely that Uber and its coalition would turn their sights on other states flirting with their own versions of AB5, such as Massachusetts.
The stakes for gig companies are high. Faced with the prospect of Prop 22 failing, Uber and Lyft threatened to exit California in August if they did not successfully delay a legal ruling demanding the immediate reclassification of ride-hail drivers to employees. Uber and Lyft have also threatened to leave almost every single time a city has demanded the companies follow basic regulations about safety or licensing requirements.
Those threats to leave California come despite the fact that the state is responsible for 9 percent of Uber’s global Rides and Eats gross bookings, along with 16 percent of Lyft’s rides. As commentators have long pointed out, Uber’s business model does not actually change the unit economics of ride-hailing—there is no taxi operator as large as Uber because it isn’t sustainable or profitable to be as large as Uber and offer what it does: taxi service with an app.
This has not deterred the ride-hailing giant from turning to threats. In an early October blog, Uber CEO Dara Khosrowshahi admitted that employment carried a “high cost” for the company—nationwide, Khosrowshahi claims that the company could only employ a quarter of a million drivers full time.
Defeat of Proposition 22 is unlikely to result in the outright exit of the ride-hailing companies, but a restructuring to a new business model is likely. At one point, Uber and Lyft were floating the franchise model as a possible alternative. All of this, however, distracts from the fact that we are in this position largely because of these companies and their desire to realize outsized returns regardless of whether the industry they were entering made any economic sense.