The past few years have seen the incredible growth of companies like Uber and Lyft. The foundation of these companies are gig workers. The gig economy is essentially made up of companies whose “employees” are technically classified as independent contractors, meaning they are not entitled to the same rights and privileges as that of a full time worker.
In 2020, a political battle in the state of California ensued between those that support “contractor” status and those that wanted to force these companies to classify their workers as full time employees. As noted in the paragraph above, the argument against independent contractor classification is that it doesn’t give workers typical employee benefits. The counter to this that companies, like Uber and Lyft, have come up with is that if they are forced to classify their workers as employees it will be a negative in the long run.
An independent study found that if the reclassification was enforced, the cost would then be on the consumers. In the case of Uber and Lyft, that would mean that, depending on the market, ride costs could increase anywhere from 25.9% to 100%. Uber also projected that the reclassification would increase their labor costs in order to account for paid benefits, which would lead the company to potentially cut more than half of its workforce.
The battle culminated in a vote on Proposition 22 in the state of California. The proposition passed with a vote of 59% allowing app-based delivery and transportation companies to continue to classify their workers as independent contractors.
Although the battle may be over for the time being in the state of California, it looks like the struggle over the gig economy will continue to take place in other states. Some different areas that business journalists should look at when covering this area:
Proposition 22 was one of the most expensive campaign initiatives in the state of California, but most of that spending came on one side. The app-based companies that supported the proposition spent upwards of $180 million, which was in stark contrast to the around $5 million for the “No on Prop 22” campaign. That large difference most likely had a huge impact on the outcome of the vote because of where it focused voter awareness. Examining the advertising spending for each potential campaign could provide business journalists an idea of which side would win in a particular state.
Explaining the Initiative
One cause of concern during the campaigns over California’s Proposition 22 was that voters didn’t really understand what they were choosing with a yes or no vote. Journalists could provide their readers with valuable information by breaking down the ballot initiative and explaining what a yes or no vote entails.
Another thing to research is how valuable a state’s business is to these companies’ business. California is very valuable to app-based companies in the economy because of Silicon Valley and because the amount of consumers in the state leads to a large amount of revenue. In states that aren’t as valuable as California, will these businesses go to the same lengths in support of similar ballot initiatives in other states?