Tomorrow, voters in California will decide whether to exempt rideshare apps like Uber and Lyft, and food delivery apps such as Grubhub, from the draconian AB 5 that forces them to treat drivers as employees, not independent contractors. While the entire economic consequences of the passage or failure of Proposition 22 are impossible to predict, the early analysis suggest a rejection at the ballot box would inflict significant harm and financial risk to workers, as well reduce consumer welfare.
Economic impact studies routinely show why Proposition 22 is needed to not only ensure that rideshare and delivery app workers enjoy better working conditions, but also roll back the profoundly damaging effects of AB 5. While exempting rideshare and deliver app companies from AB 5, Proposition 22 would mandate rideshare and delivery app workers provide a net earnings floor of 120% of California’s minimum wage, compensation for expenses, a health care subsidy, and a worker’s compensation insurance program.
The UC-Riverside’s Center for Economic Forecasting and Development estimates that if California voters approve Proposition 22, it could provide rideshare and delivery app laborers a significant increase in hourly earnings. Studies have routinely shown rideshare app drivers are compensated at roughly $11.77 per hour, well below California’s $13.00 minimum wage for companies with more than 26 employees.
According to UC-Riverside, Proposition 22 would help California drivers working five hours per week to “earn the equivalent of $25.61 per hour after accounting for expenses and wait time.” Individuals working 15-30 hours would “earn the equivalent of $27.58 per hour, after accounting for expenses and wait times.”
This increase in hourly wage would provide additional financial and economic security for rideshare app drivers. A recent study showed, 76% of rideshare app drivers claim they would not be able to accrue savings, while 73% of drivers provide financial support their families and living expenses.
If Proposition 22 were to fail, the effects could be catastrophic for workers. Uber has estimated that if it was forced to comply with the onerous regulations established by AB 5, the number of Uber drivers would fall 76% from 209,000 to 51,000. While these numbers may seem abstract, they represent 158,000 Californian’s whose economic security has been compromised, making it harder for them to put food on the table, pay rent or save money.
These numbers do not just come from Uber but are shared by rideshare app drivers themselves. Edelman Intelligence estimated if rideshare app drivers were forced to comply with AB 5, almost 70% of drivers would stop working.
During the Coronavirus pandemic, rideshare and food delivery apps have provided an invaluable safety net for workers. Edelman Intelligence reported 25% of rideshare app drivers lost part- or full-time employment during COVID-19 pandemic, and 67% said rideshare apps had given “them an opportunity to earn money after losing a job or hours.” While opponents of Proposition 22 claim rideshare and delivery apps are exploiting workers, their opinions routinely ignore not only the enhanced protections the ballot initiative would provide, but also the importance of rideshare and delivery apps to workers. At a time when over two million Californians are unemployed, the potential ramifications for economic security and job opportunities should be at the forefront of voters’ minds.