But What Of The Worker? Prop 22 And Our Working Lives

Smith Collection/Gado

What is happening to the American workplace?

40 years ago Kathy and Steve started their careers, Kathy in Accounts receivable for Grumman Allied and Steve in IT for Bank of America. It was relatively easy to find a good job, and if they didn’t have a job they’d be invited to ample interviews. These positions offered great benefits, competitive pay, even Christmas bonuses. The people they worked with were like family, so community was much more prominent in their working lives.

Steve was with Bank of America for a decade before joining IBM, where he stayed for almost the same amount of time. Over this period there was a noticeable decline in quality: they had to contribute more for the same benefits, workloads increased, and regular pay raises decreased or vanished along with the Christmas bonuses. Since leaving IBM, Steve has worked for at least 5 different companies as an independent contractor making less on average than earlier in his career. Both note a lack of camaraderie and community,  and worry about the opportunities available for their children. 

Steve and Kathy don’t work for an app-based company, but they do represent many people working today. Those who started their careers at a different time and in a different economy. Their story is relatable to many who have watched the cultural relationship between employer and employee change dramatically over the past 40 to 50 years. 

Last year, California passed bill AB5 requiring businesses that hire independent contractors to reclassify them as employees with some exceptions. Workers for app-based companies like Uber, Lyft, DoorDash, and Instacart do not fit the criteria to be classified as an exception under AB5. Prop 22 was sponsored and written by those aforementioned companies to carve out a specific exception allowing app-based delivery and transportation workers to remain independent contractors under state law. 

To Proponents of ‘Yes on Prop 22’ this is about preserving the flexibility of their independent contractors. Allowing contractors to work at their convenience and having the freedom to work for multiple app-based services. It’s about saving the jobs that will be eliminated due to rising costs from AB5, to keep prices affordable for customers. The aim of Prop 22 can be seen as a compromise – offering a minimum pay guarantee, by-the-mile expense compensation, a health care contribution, and occupational accident insurance, among other initiatives.

The ‘No on Prop 22’ camp argues that the bill is designed specifically to maximize the profits of its authors. It threatens middle-class jobs that provide quality and security to workers and family-owned small businesses. AB5 allows workers to more equitably share in the wealth generated by these apps. They strongly assert that Prop 22 is a sly trick, using language like “engaged hours” to measure when the earnings pay guarantee and by-the-mile expense compensation would apply. The burden of the associated costs and risks are still unfairly shouldered by the worker. While workers are also denied protections like paid sick leave, workers compensation, and unemployment benefits.

Discussions around bills like Prop 22 evoke the old free trade argument – keep the government out, and let the worker sell their labor on their own terms. Maybe this argument applies well for this specific initiative. Perhaps these companies are acting in good faith, protecting their bottom line, yes, but also to extend an olive branch to the worker. Even still, it is incumbent upon us all to view any bill written and funded by more than $180 million with a high degree of skepticism.

Modern Treatise’s resident startup commentator, Kevin Beneventine, echoes the sentiment of Prop 22’s authors. Beneventine suggests that gig-work is meant to be part-time, temporary work and full employee status for these gig workers will put an undue strain on these companies, forcing them into an unsustainable business environment. However, it is possible that these two things – employee benefits and worker flexibility – need not be in conflict with one another. In New York City, the 2018 TLC driver pay rules maintained an independent contractor status while providing a guaranteed pay floor, paid leave, and increased companies’ responsibility for costs.

Firms like Uber and Lyft thrive by taking advantage of cheap labor. This isn’t a surprising business model. However, there are credible arguments against Prop 22 claiming that the burden of operating costs and risks are unfairly borne by the workers. The UC Berkeley Labor Center estimates, after taking into account all expenses, Prop 22’s benefits could leave the average driver with only $5.64 per hour.

The non-partisan California Legislative Analyst’s Office estimates this number at $11 to $16 per hour and the UC Riverside research commissioned by Uber and Lyft estimated $25 to $27 per hour. This level of discrepancy certainly doesn’t instill a sense of security for anyone hoping to pay their bills next month.

Consider the complexity of our healthcare system and the never-ending increase in associated costs. Will Prop 22’s healthcare contribution significantly help an uninsured gig worker purchase a family health plan? The UC Berkeley Labor Center says no, calculating an average contribution of $1.22, and that’s only for the minority of drivers who would qualify.

Can we safely assume the majority of drivers who can’t meet the minimum “engaged hours” are obtaining healthcare contributions from other gig-work? Or are they at least making enough money to afford a reasonable health plan? It seems these employers are seeking to ‘pass the buck’ in regards to their workers' care, and this problem isn’t isolated in the app-based work sector.

So how do Kathy and Steve come into this? Their story is an illustration of what has happened to many in an economy with powerful multi-billion dollar corporations, rapidly changing technology, and a civilian workforce reaching a record 160 million. The Pew Research Center notes that “smaller shares of workers receive health or pension benefits in 2015 than they did in 1980.” A secure, ‘good’ job has become a chimerical hope for many, and the 36% of U.S. workers with gig-work arrangements might attest to this difficulty.

Regardless of where you stand on Prop 22, this issue is indicative of the difficulties that have muddied our new economy for everyone – not just the Uber driver and DoorDash deliverer, but Kathy and Steve as well. Let’s not forget that the real wage for most workers hasn’t moved in about four decades. Yet, amid loud accusations of worker abuse at Amazon, its CEO’s net worth was announced at $200 billion.

“Allowing big business to do this on our behalf is a mistake America keeps making.”

According to both the Bureau of Labor Statistics and the Department of Treasury, the group of workers classified as independent contractors has increased by around 30% between 2005 and 2015. In total, this makes for a conservative 10.5 to 15 million independent contractors. Americans are increasingly sourcing income outside of traditional career paths. This needs to be pragmatically approached by acknowledging how the economy is changing and reexamining the relationships between corporations, government, and workers. Allowing big business to do this on our behalf is a mistake America keeps making. 

Based on recent SurveyUSA data, most Californians are leaning in favor of Prop 22. Maybe they’re right, or maybe everyone is far too distracted by wildfires, a global pandemic, and an ideological need to keep everything as cheap and convenient as possible. This shift in our economy toward convenience and lowest-possible-prices is potentially devaluing our labor. Everything doesn’t need to be cheaper or more convenient, especially if it’s by using the legal system at the expense of the average worker.

The potential precedent Prop 22 sets is one that could ultimately normalize an unbalanced trade-off between a worker’s flexibility and a meaningful share of the enormous wealth amassed by corporate giants. It could potentially enforce a tone already set in a job market shifting toward fewer long-term jobs and more gig-type or independent contractor work. The law – our government – should be enforcing protections that secure the relationships between workers and their employer, not codifying the law as written by those employers.

Prop 22 encapsulates the role business has assumed. As they create the laws that dictate their practices, they construct a fallacy for libertarians and an abhorrent attack on the American workforce and government. In our system, where there is government involvement in the economy, the players with the largest purses should not be able to define the rules. Government is meant to ensure that the rules and practices of the game are fair, not to collect indulgences from those already ‘winning’ the game.