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Californians Vote to Keep Uber

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Californians Vote to Keep Uber

Proposition 22 marks a big win for the gig economy in the Golden State. November 5, 2020
California
Economy, finance, and budgets
Politics and law

On Tuesday, 58 percent of Californian voters approved Proposition 22, which lets ride-hailing and food-delivery companies classify their drivers as independent contractors. The ballot initiative was a response to last year’s Assembly Bill 5, which turned most of California’s contract workers into employees and thus eligible for more benefits and protections.

For companies like Uber, the stakes were high. Uber had threatened to stop operating in California if AB5 was allowed to stand, and the tech companies spent $200 million on the campaign, making it the most expensive ballot question in California history. AB5 would have destroyed the business model of ridesharing companies, which depend on a cheap, flexible labor force.

Californians made the right decision. AB5 was an attempt to force a return to an outdated labor model, in which stability and benefits are offered in exchange for regular work hours and loyalty to a single employer. That model doesn’t fit reality anymore. With Covid-19 keeping many children out of school, workers need flexibility more than ever. Even before the pandemic, the economy was shifting toward more adaptable arrangements with multiple employers rather than traditional, long-term employment relationships. Many so-called gig workers do their jobs as a supplement to their regular employment and thus rely on companies in need of part-time contract work.

Turning ride-hailing and food-delivery drivers into employees was also unwise because it would have raised the cost of employment in California—a bad move for a state with an 11 percent unemployment rate. Contingent work keeps people in the labor force, preventing skill erosion and long-term unemployment.

AB5 was ill-considered, but there may still be a way to preserve flexibility while giving contract workers added benefits and protections. Prop. 22 is a good start, mandating health-care subsidies for drivers who meet certain thresholds for hours worked per week. Other options could include sick leave and unemployment protections.

Prop. 22, however, applies only to contractors for ridesharing companies; other workers who fall under AB5, including freelance writers and musicians, are not so lucky. They don’t have large, wealthy firms on their side fighting for an exemption.

Photo by Mario Tama/Getty Images

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