The majority of ride-hailing service drivers work full-time but are ineligible for employer-provided benefits.
Experts say there's a growing need to restructure U.S. economic policy so workers in the gig economy, such as rideshare drivers who work for companies like Uber and Lyft, can receive worker protections and employee benefits — but this might only be possible through strong congressional action or executive order.
This is especially important during the pandemic, when more workers rely on gig-economy jobs, Marina Gorbis told the American Independent Foundation.
Gorbis, the executive director at the nonprofit research organization Institute for the Future, has accumulated an extensive body of research on on-demand employment and the gig economy. She said, "Our political climate is changing, and lack of worker protections is certainly becoming more of an issue. Particularly in this pandemic — during the pandemic, the number of people who were relying on these kinds of gigs have gone up. And it's not clear how many of them will be able to find more stable sort of employment."
Gorbis said there was nothing intrinsically wrong with the rideshare model, but whether it was "great" or "terrible" for workers hinged on the political economy and circumstances.
"The reason it is so deleterious in the U.S. is that basically we have a social safety net that was built for a very different environment," she said, noting, "The social safety net excludes a lot of kinds of workers" such as independent contractors.
Most rideshare drivers are essentially full-time employees, but are misclassified as independent contractors. A 2020 study conducted by the Institute for Social Transformation at the University of California, Santa Cruz, and a number of workers' rights advocacy groups found that for 53% of ride-hailing and on-demand food delivery service workers, who are disproportionately low-wage people of color and immigrants, driving is their sole source of monthly income.
For an additional 10% of those workers, money earned from their gig jobs makes up three-quarters or more of their income. Additionally, 40% of ride-hailing service drivers report working shifts of more than 12 hours at a time.
Employment attorney Tom Spiggle said in an op-ed published by Forbes in February that classifying such workers as independent contractors rather than employees is far cheaper for companies. Businesses such as Uber cut corners by not having to provide drivers with minimum wage, overtime pay, paid leave, or health insurance.
A Washington Post report published on March 16 notes that Uber and Lyft save big by not having to pay unemployment taxes for their workers, leaving drivers to fend for themselves, relying on the Small Business Administration's emergency grants and loans for financial assistance.
"From the companies' perspective, they really got the best of both worlds: paying drivers as independent contractors and the government covered all of their benefits," Harry Campbell, founder of a blog on gig economy work called The Rideshare Guy, told the Post.
In November, voters in California approved Proposition 22, a ballot initiative that exempted Uber, Lift, and other "app-based" workers from receiving the employee benefits that the state's Assembly Bill 5, passed and signed into law in 2019, offers gig-economy workers. Prop 22 codified the status of rideshare drivers as independent contractors without employee protections, giving Uber and Lyft a permanent exemption from paying taxes for Medicare, Social Security, and unemployment insurance.
Drivers say their income has dropped since the proposition was approved.
The effects of Prop 22 have become clear since the beginning of the coronavirus pandemic. A report published by the website Small Business Trends in Aug. 2020 found that at the beginning of lockdowns last spring, the majority of Uber and Lyft drivers lost up to 80% of their income and were ineligible for unemployment benefits — although some were later able to apply for forms of emergency unemployment relief.
Spiggle told Forbes that since California is generally more labor-friendly than the rest of the nation, the fact that an initiative like Prop 22 could pass there was a sign that the United States as a whole would be unlikely to pass more legislation to protect drivers.
Meanwhile, the Supreme Court of the United Kingdom upheld an employment tribunal's ruling that ride-hailing service drivers should be classified as workers, a third category beyond independent contractors and employees that entitles them to protections and benefits such as a minimum wage, contributions to a pension, and paid holidays.
"I don't think we can adopt the U.K. system," Gorbis told the American Independent Foundation. "But the reason it is happening in the U.K. is that obviously they have strong unions. And unfortunately here, we don't have a strong sort of union or labor voices advocating specifically for these kind of workers."
Some experts say the United States probably won't follow the U.K.'s example anytime soon.
"The question then becomes, can the U.S. replicate what happened in the U.K.? Probably not in the near future," Spiggle wrote: "First, passing such a monumental law at the federal level would be difficult, especially with the 50-50 split in the Senate and the filibuster still available. There are already disagreements among Democrats in the Senate regarding raising the minimum wage to $15 an hour."
Even if such a measure were to pass, it could be struck down by the Supreme Court, he noted.
Erin Johansson, research director of Jobs With Justice, disagreed, noting that with strong congressional or executive action, U.S. rideshare drivers and other gig-economy workers could absolutely gain worker protections.
"It could happen overnight," Johansson said. "It would take real, serious action by the administration and by Congress. There would need to be strong action in the way that the U.K. court really upended [the country's] whole business model. It's going to take a huge decision, congressional action, a big executive order."
She added that drivers deserve the right to unionize, to make a living wage, to be protected from discrimination, and to receive worker compensation.
"My feeling with Uber is they're not just going to voluntarily convert their drivers to employees in the U.S.," she said. "It's going to take courts or federal law to force them to do that."
Karla Walter, workplace policy director at the Center for American Progress, told the American Independent Foundation that misclassifying employees as independent contractors is a practice that must end. "American lawmakers must work to strengthen and modernize — not erode — employment tests and other protections for misclassified workers," she said.
But, she added, states and cities "are increasingly developing policies to raise standards for gig workers and other similarly situated workers."
"The most promising models ... help to provide benefits and protections for workers without requiring them to bargain away their rights," Walter said.
Published with permission of The American Independent Foundation.