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California is dead set on killing the gig economy

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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:

We will be leaving California

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.

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.

 

Opinions, reviews, analyses & recommendations are the author’s alone, and have not been reviewed, endorsed or approved by any of these entities.

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14 Comments

  • stogieguy7 August 19, 2020

    Do us all a favor: if you leave California because of the way that progressive governance there has been horrible for business, and has resulted in high costs for a lower quality of life, then please – please – PLEASE – leave your liberal voting tendencies behind when you leave. Don’t move to TX or GA or NC, only to vote for the same kinds of assclowns that caused you to flee there in the first place. Thank you.

    • dot August 19, 2020

      Stogieguy7 you are absolutely CORRECT look at south florida always voting like they LIVE in NYC or NJ or Calif

  • Jackson Henderson August 18, 2020

    California has nice scenery but that’s it. I just hope people who like the governance and prominent ideology in California stay in California and those who hate it leave for greener pastures. The nonsense going on in California is very sad. Driving for Uber/Lyft provides a great source of income for people who need it. It’s illogical how politicians are hellbent on destroying independent contractor status. They somehow think that forcing people to be employees with set schedules and set mandatory earnings will mean those jobs will exist; they won’t. The reason a lot of people drive for Uber/Lyft is because it offers flexible schedules. Cut that out and it doesn’t work for a lot of people. These people will do no work and users will be stranded with less transportation options. The current set up with Uber/Lyft allows decent drivers to earn good compensation. More government, less freedom, more regulations, and more bureaucracy: cancer.

  • Ghostrider5408 August 18, 2020

    Socialism at its best. Frankly both car sharing services should close up shop in California, the sooner the better.

  • dot August 18, 2020

    I hope the millenials get the memo NO UBER OR LYFT could make their day to day activities very difficult!! But in Calif there is no choice 99% of those running for office are DEMS who support this nonsense

  • JakePB August 18, 2020

    The World’s 5th largest economy, with an impressive state income tax rate and still in the red. After 27 years here that I’ve mostly loved, sold the house in June and will take the money and run to FL.
    Too many people taking advantage of the state’s various entitlement programs intended for people that truly need the hand up. My former neighbor was in a $2M home and wasn’t married to the mother of his 10 yr old daughter just so she could get public assistance. His move is not uncommon here.
    I’m out!

  • Christian August 18, 2020

    The new law is certainly polarizing. I’ve commented on other travel blogs that have breached the subject that Uber and similar companies seemingly had zero interest in proposing any sort of workable compromise, instead preferring to hurl lawsuits. I find that telling. If there’s a proposed law that you’ll hate, why not suggest how to make things more viable? Uber as a corporation already had an atrocious reputation and looking like they want to push for underpaid labor isn’t doing much to help, even if that’s an inaccurate picture.
    As an admittedly ignorant outsider I’ve suggested that if a company provides someone with x percentage of their income, then the company could pay the same percentage of their benefits. That would make it so that part timers with a company who have a full time job elsewhere could earn some extra money without the part time employer being on the hook for massive expenses. It would also make it so that companies that have chosen to classify people as independent contractors just to get out of paying benefits would be taken to task. I’m not pretending that this is some great solution, just that some creative thinking may work out to the benefit of all parties.

  • Doug August 18, 2020

    Biden has said that he supports the contents of AB5 being the law in the entire US. Remember that in November. Democrats destroy the economy.

  • Earl Lee August 18, 2020

    I think definitely Lyft and Uber need to keep their word and stop services considering how ignorant California is being. Just a few weeks without those vital services, and people will be complaining to their politicians. Considering a whopping 4 to 1 drivers are in favor AGAINST becoming W2 employees the politicians are being ignorant.

    Once they see how pissed people are, they should get voted out of office in November.

  • Bob August 18, 2020

    There is no legal mandate in AB5 for them to follow schedules, either as a contractor or as an employee. That is a threat which Lyft and Uber have suggested to it’s drivers to persuade them to want to remain contractors. It’s an empty threat too, as it would merely introduce inefficiencies and cause Uber/Lyft to hemorage even more money.

    California’s population has gone up in the past decade, and goes up every year. The 600k that have left — for which 60k/year is not a huge number for a state of this size — is much smaller than the incoming immigration into California over that decade. It seems natural too that immigrants would first land in California and over time make their way further inland, and not very indicative of some bizarro argument about business climates.

    Very misleading and poorly construed representation of the facts, basically regurgitating political talking points without actual consideration. It’s great that you’ve found a place you prefer to live, but it’s a weird look to go so far as to misuse data to try and justify that decision. Perhaps just have more confidence in your own preferences?

    • SonomaWine August 18, 2020

      Thank you, I couldn’t agree more. And living in California and Georgia is like comparing a steak to tofu!

      • ktc August 18, 2020

        “population has gone up in the past decade” — where from? haven for illegals? I’ve not heard any around me packed up for CA, I know a lot of neighbors are here from CA. I have no preconception, I did not come to US until my twenties, just observation.

      • AlohaDaveKennedy August 19, 2020

        SonomaWine: Have to fix your error – living in California and Georgia is like comparing tofu to a steak! I’m a 3rd generation native expat who has lived in the south for over 30 years and wouldn’t return back to live in California for any sum of money.

    • WR2 August 18, 2020

      There is no legal mandate? That’s your reasoning? This sounds like logic from a CA politician, unable to foresee any unintended consequences. If drivers are all employees, then they’ll have to pay them minimum wage when on the clock. If workers get to work when they want, they will still have to be paid even if there are no deliveries. As a result, every driver will log in during off peak hours, and get paid to do nothing, then log out during peak hours. The companies will obviously have to control worker schedules.

      Uber and Lyft already lose money. This move would bankrupt them. It’s not a bluff. They will be shutting down operations in CA soon. Most will be blaming CA politicians…though they really should be blaming themselves since they voted for this (I didn’t). Just another example of leftist policies hurting the ones they claim to care about.

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