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When you can buy labor at a fraction of the cost of your competitors you have an almost insurmountable advantage especially if your labor came work whenever and wherever they want. The gig economy exploded because of just this and the likes of Uber, Lyft, Doordash, etc hire most of their workers as independent contractors to achieve such advantages. Much issue has been taken with this classification, both from competitors of gig economy companies and the independent contractors themselves – no benefits, etc. The battle over what constitutes an independent contractor became an existential crisis for these companies earlier this week when AB 5 ( a California statute that puts stipulates most workers are in fact employees not independent contractors ) was upheld by San Francisco Judge Ethan Shulman said companies need to immediately comply. The response was swift and stern from the likes of Uber, Lyft, DoorDash, etc:
If this comes to fruition it could contribute to the exodus California has been experiencing for some quite time, but has accelerated due to Covid. While many think that it’s only the rich that are leaving, this just isn’t the case. More than 600k middle and low income residents have left in the last decade, and the numbers could surge.
Lyft President John Zimmer on investor call: If judge's order takes effect, Lyft will shut down in California since turning tens of thousands of drivers into employees amid the pandemic would be "nearly impossible."
Zimmer says California represents 16% of all company rides.
— Bobby Allyn (@BobbyAllyn) August 12, 2020
How does AB5 force employers to reclassify?
According to AB5, an independent contractor has to fulfill the following
- the worker is free from the control and direction of the hirer in connection with the performance of the work, both under the contract for the performance of such work and in fact
- the worker performs work that is outside the usual course of the hiring entity’s business
- the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed for the hiring entity
Kerry Jackson puts together an astute critique of AB5 and points out that the 2nd of these requirements is impossible for a Lyft driver to fulfill, and thus, it will force these companies to hire drivers, food deliverers, etc as employees of the company.
Uber and Lyft have no plans to reclassify workers and are using a strategy of eliminating the service when Americans need any possible means of income as a way to motivate legislators to act in their favor. The American gig economy is valued in excess of $1Trillion, more than 1 million Californians are a part of it, and Lyft said 17% of all rides they gave were in California.
Personally I’m conflicted over the whole matter, but LA has become a far better city to live in with the likes of Uber and Lyft. Obviously people need to be compensated fairly, but 75% of workers would rather be independent contractors than otherwise. Why? Simple, they have choice. If they were to become employees they would have to adhere to schedules and structure.
California may have some problems IMO
With Covid outbreaks continuing without much of an end in sight, I don’t see the trend of people leaving California ending anytime soon. Much of the lifestyle that people have paid a premium for in the past is currently prohibited, and/or take years to come back.
I’m a part of that trend. As an actor my life has been based in LA because it had to be. The high cost of living was worth it because my job depended on it, as did my fiancee’s, but now that has changed. With on tape auditions and areas around the world offering tax rebates, the entertainment industry is undergoing a decentralization. We can live pretty much anywhere, and places like Georgia offer lower costs of living, gorgeous countryside, and a booming entertainment industry that is already getting back to business.
The elimination of gig jobs in places like LA and San Fran will be a huge detriment to those towns. Perhaps the companies will be able to survive be adding the million+ people that participate, but the odds are slim. Companies like Uber and Lyft are hemorrhaging money and are very dependent on feeding off tourism and the service industry. With bars, restaurants, and travel deflating more and more everyday, I can’t see the gig economies recovering quickly, and the pile on of added cost will only impair that recovery.
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