Sacramento Gig Wars: Defining the Future of Making a Living
A showdown over the status of people working in app-based industries is taking shape in California. Months of negotiations with rideshare companies over proposals in Assem. Lorena Gonzalez’ AB 5, aimed at codifying and clarifying the ruling in Dynamex Operations West, Inc. v. Superior Court of Los Angeles (2018) have hit a wall.
The legal issues raised in the decision applied going forward will define a big part of what working for a living in the future will look like. Will the people creating tangible value for businesses be treated as contractors or employees? Does tangible value even mean anything anymore?
How this dispute is resolved will set the standard nationally, as the one thing everybody involved agrees on is that the Trump administration is incapable of coming up with a solution beyond affirming the status quo prior to the California court ruling.
Put simply, it’s “every human for themselves” vs a “victory for one is a victory for all.” Many traditional modes of employment don’t look to have much of a future, meaning things like unemployment insurance, benefits, and legal protections are/will be no longer considered employer responsibilities.
Companies whose business models depend on a contracted on-demand workforce have shown they’re willing to dress up working conditions as long as they don’t have to redefine the status of the humans working for them.
Yesterday, the industry threw down it’s last, best offer. From Politico:
Tech companies publicly backed a framework with wage and benefit guarantees months ago, but the new proposal gets more concrete, offering an explicit $21-per-hour wage floor guarantee while incorporating a fleshed-out bargaining agreement aimed at satisfying labor by setting up a tailored avenue for tech industry workers to organize.
Even more crucial to the deal’s prospects in labor-friendly Sacramento, the proposal would also set up a collective bargaining mechanism — unique to California — that would apply broadly to the tech sector, rather than be negotiated company by company, and would be overseen by a new state entity. But with only about two weeks remaining in California’s legislative session, the announcement launches a down-to-the-wire political scramble that will no doubt fire up significant pushback from labor-aligned legislators.
If lawmakers do not fall in line and send Newsom the deal, Uber, Lyft and DoorDash are prepared to go directly to the voters: Each company has committed $30 million to qualifying a ballot initiative. If the issue does end up on the 2020 ballot, it would represent the first time California’s cash-flush and increasingly politically engaged tech industry takes an issue to voters.
The worker classification issue didn’t get resolved in this offer. However, it would give the firms immunity from costly class action lawsuits stemming from allegations of misclassification.
Based on what I’ve seen in the way of public statements, if the tech industry wants a ballot showdown over these issues, organized labor is willing to take them on.
And let's face reality folks, organized labor --warts and all-- is the only force capable of doing the right thing here.
A history of resounding defeats for what have been termed “anti-worker” efforts at ballot box legislating gives unions a leg up. And since Californians’ votes for elected offices are unlikely to have much of an impact, a rallying cry for the state’s most effective ground game offers labor just what it needs to remain politically relevant.
Assem. Gonzalez certainly didn’t seem afraid of a fight in November 2020:
“If they have millions of dollars to put into a ballot initiative, why don’t they pay their workers more?” Gonzalez asked, saying the companies’ stance was “either you eat it or we’re going to force-feed it to you. It’s no different from Walmart.”
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There are factors beyond this specific conflict that need to be considered.
Companies using the on-demand workforce model are losing money, as this snip about the big rideshare companies from The Verge indicates:
Uber just reported its second quarterly earnings ever as a public company, and hoo boy! That’s a lot of red ink! The ride-hailing giant reported losing a whopping $5.2 billion in the last three months. No, there isn’t dirt on your screen. That’s billion with a “b.”
Lyft, which reported its earnings on Wednesday, fared better but still posted a loss of $644 million during the quarter. The numbers for both companies look a lot better when adjusted for things like amortization of intangible assets and stock-based compensation for employees post-IPO. Excluding you exclude one-time stock-based compensation payments of $3.9 billion, Uber lost $1.3 billion. Tweaking those numbers more, like adjusting for so-called EBITDA (earnings before interest, tax, depreciation and amortization), and Uber lost $656 million, while Lyft lost $197 million.
There are two roads to profitability in the case of Uber/Lyft.
One is expansion by way of the privatization/or control of public assets. Uber is telling investors it can capture 15% of all $80 trillion in global economic activity. Capture is the operative word here, for example...
Here’s Jeremy Mohler, with In The Public Interest:
...back in April, Uber admitted it wants to replace public transit.
In documents filed with the Securities and Exchange Commission (SEC), the rideshare corporation's executives see a “massive market opportunity” in the estimated 4.4 trillion miles traveled each year by people using public transit in 175 countries.
The second way to profitability--and the way they’re continuing to be attractive to investors--is to reduce and/or eliminate labor costs. A world dominated by self-driving cars is a decade or more away.
That leaves paying less is the likely short term alternative, and Uber/Lyft have both cut pay for drivers this year. Any promised deal for drivers like the one proposed this week will of necessity have enough pay reducing workarounds built in so any promise of a living wage will remain unfulfilled.
In short, they’ll cheat. Because they have to.
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The real problem here goes way beyond what the tech bros of today aren’t doing for their workers. Many traditionally unionized workers are in financial straits.
The fact is that too many companies pay too many people wages they can’t live on. Wages are no longer tied to productivity. Valuation on Wall Street is the only marker that counts.
The 2017 Tax and Jobs Act signed into law by Trump cut the corporate tax rate from 35 to 21%, the largest such rate cut in US history. Despite promises of shared prosperity, and well-publicized bonus distributions by US companies, just 6% of the tax savings was spent on workers, according to Just Capital.
A majority of the $150 billion tax cut realized by corporations in 2018 went into shareholder dividends and stock buy-backs, both of which line the pockets of the 10% of Americans who own 84% of the stocks.
Read between the lines, folks: they don't care.
The average worker isn’t making enough to cover rent for a two-bedroom apartment in 15 of the largest cities across the country. 40% of hourly workers have nothing saved up for an emergency, while 75% have less than $500.
A Pew Research Center report, based on data from the Census Bureau, found that in 2016 Americans in the top tenth of the income distribution earned 8.7 times as much as Americans in the bottom tenth ($109,578 versus $12,523). In 1970, when the analysis period began, the top tenth earned 6.9 times as much as the bottom tenth ($63,512 versus $9,212).
I could go on, but why bother? Yes, it will be great if AB 5 becomes law and the tech bros’ ballot measure goes down in flames. But the overall economic system is now structured in such a manner as to guarantee income growth to an increasingly smaller part of the population.
Folks, we need change. Big change. And it starts with you. One conversation a day. One bit of research into something not purely for entertainment purposes. One call to an elected representative. One visit to a meeting of citizens who care. And finally, one vote.
There will be no hero riding in to save the day. There is only us.
As in “We, the People.”
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