Sep 21, 2022 12:00 PM
California Voted for Cheaper Uber Rides. It May Have Hurt Drivers
In 2020, California voters approved Proposition 22, a law that app-based companies including Uber, Lyft, and DoorDash said would improve worker conditions while keeping rides and deliveries cheap and abundant for consumers. But a report published today suggests that rideshare drivers in the state have instead seen their effective hourly wage decline compared to what it would have been before the law took force.
The study by PolicyLink, a progressive research and advocacy organization, and Rideshare Drivers United, a California driver advocacy group, found that after rideshare drivers in the state pay for costs associated with doing business—including gas and vehicle wear and tear—they make a hourly wage of $6.20, well below California’s minimum wage of $15 an hour. The researchers calculate that if drivers were made employees rather than independent contractors, they could make an additional $11 per hour.
“Driving has only gotten more difficult since Proposition 22 passed,” says Vitali Konstantinov, who started driving for rideshare companies in the San Diego area in 2018 and is a member of Rideshare Drivers United. “Although we are called independent contractors, we have no ability to negotiate our contracts, and the companies can change our terms at any time. We need labor rights extended to app-deployed workers.”
Uber spokesperson Zahid Arab wrote in a statement that the study was “deeply flawed,” saying the company’s own data shows that tens of thousands of California drivers earned $30 per hour on the dates studied by the research team, although Uber’s figure does not account for driver expenses. Lyft spokesperson Shadawn Reddick-Smith said the report was “untethered to the experience of drivers in California.”
In 2020, Uber, Lyft, and other app-based delivery companies promoted Proposition 22 as a way for California consumers and workers to have their cake and eat it, too. At the time, a new state law targeted at the gig economy, AB5, sought to transform app-based workers from independent contractors into employees, with all the workers’ rights attached to that status—health care, workers’ compensation, unemployment insurance. The law was premised on the idea that the companies had too much control over workers, their wages, and their relationships with customers for them to be considered independent contractors.
But for the Big Gig companies, that change would have come at the cost of hundreds of millions dollars annually, per one estimate. The companies argued they would struggle to keep operating if forced to treat drivers as employees, that drivers would lose the ability to set their own schedules, and that rides would become scarce and expensive. The companies, including Uber, Lyft, Instacart, and DoorDash, launched Prop 22 in an attempt to carve out an exemption for workers driving and delivering on app-based platforms.
Under Proposition 22, which took force in 2021, rideshare drivers continue to be independent contractors. They receive a guaranteed rate of 30 cents per mile, and at least 120 percent of the local minimum wage, not including time and miles driven between rides as drivers wait for their next fares, which Uber has said account for 30 percent of drivers’ miles while on the app. Drivers receive some accident insurance and workers’ compensation, and they can also qualify for a health care subsidy, although previous research by PolicyLink suggests just 10 percent of California drivers have used the subsidy, in some cases because they don’t work enough hours to qualify.
Gig companies poured $200 million into promoting the ballot measure, making it the most expensive in the state’s history. Prop 22 passed overwhelmingly in November 2020. Since then, a California judge has struck down the law, though the gig companies say they still follow it while the legal process continues. More than 1.3 million Californians work for app-based platforms, according to the Protect App Based Drivers and Services Coalition, which is funded by gig companies.
“Labor law is ambiguous in a lot of ways, and allows platforms to do what they want until someone pushes back,” says Brian Justie, a researcher with the UCLA Labor Center who has studied app-based workers. “Prop 22 was an attempt to codify drivers’ working conditions in a way that was favorable to the companies.”
The report published Wednesday suggests California rideshare drivers are worse off now than they were before the law passed, under the state's previous gig economy law, though the pandemic and high gas prices have contributed to their distress. It appears to be the first study to use data collected without cooperation of rideshare companies to evaluate driver wages since Proposition 22 went into effect last year.
Historically, Uber and Lyft have shared data with only a select few researchers and have mostly kept data on trip locations and driver pay and expenses to themselves, saying it is proprietary. (Documents leaked earlier this year by a former Uber executive suggest that the company gave some data to academics who were financially rewarded for producing reports that painted a favorable image of Uber.)
“We had a lot of challenges in collecting good data,” says Eliza McCullough, an associate with PolicyLink and a coauthor of the report. To collect it, researchers asked 55 drivers to use another app called Driver’s Seat Cooperative to collect data on all their rideshare trips between November and mid-December 2021. The sample was trimmed down to 21 drivers for the pay analysis, because of challenges related to data collection. The result was a relatively small dataset of 3,020 trips in total. Drivers made a median of $26.30 per hour in earnings, tips, and bonuses, the researchers found. But driving looked less well compensated when they subtracted some of the costs associated with being self-employed that might otherwise be covered by an employer, such as the cost of owning or leasing and operating a vehicle, taxes, unemployment insurance, paid sick time, and paid rest time. The result was an effective hourly wage less than half of California’s minimum wage.
Protect App Based Drivers and Services Coalition spokesperson Molly Weedn called the report “absurd, based on inaccurate methodology and clearly biased.” She said that California workers “choose to work with app-based platforms as independent contractors because it provides strong earnings and benefits.”
Although comprehensive data on the effects of Proposition 22 is lacking, the law seems to have functioned as the gig companies designed it, says Ken Jacobs, the chair of the UC Berkeley Center for Labor Research and Education—in their favor. Jacobs advised on the methodology of the PolicyLink report, but says he didn’t participate in its writing; he and others at Berkeley are working on their own research examining how the California law has affected drivers.
After their success with Prop 22, gig economy companies have pursued similar laws in other places, with mixed success. This summer, a Massachusetts court threw out a similar ballot measure, preventing it from appearing on the state ballot in November. A New York bill that would have given drivers collective bargaining rights and cemented their independent contractor status failed last year. But Jacobs does not think the gig companies’ labor efforts have lost momentum. “The companies are still trying to pass laws that carve themselves out of the responsibilities that other employers in the United States follow,” Jacobs says.
This year, Washington state passed a law promoted by both the gig companies and a local labor union that codifies drivers’ independent status in exchange for a minimum wage guarantee. It also provides funding that could be used to establish a driver resolution center to help drivers who have been kicked off or penalized by rideshare apps’ ratings systems appeal the decision. Gig work companies have reportedly stepped up their lobbying efforts in Washington, DC, where they hope a federal law or policy might lock in Prop 22-style rules nationwide. Some gig workers have criticized the putatively pro-labor Biden Administration for its lack of action on app-based worker protections.
Dominique Michael Smith has been driving for Uber and Lyft in the Bay Area since 2017, and has seen drivers’ wages creep down and costs creep up. In 2019, they became involved in organizing with Rideshare Drivers United, the California-based drivers’ group. Smith says gig companies’ talking points haven’t proved true. “Under Prop 22, I do not have any kind of flexibility. No, this does not give me the ability to choose when and where to work,” they say. “I can take a day off without being fired. But that’s such a low bar.”
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