During this election cycle, the entire country focused their attention on major political candidates. However, while everyone was keeping an eye on Philadelphia, California made a decision that will impact millions. In 2019 the state of California passed Assembly Bill 5 or AB 5. This new piece of legislation reclassified gig workers from independent contractors to employees. Under the new law, gig companies would have to start providing benefits, including minimum pay and health insurance to their gig workers. Immediately gig companies like Uber and Lyft voiced their disagreement. To counter AB 5, a collection of big gig companies introduced the ballot initiative Proposition 22. Proposition 22 would override AB 5 and reinstate gig workers as independent contractors and not employees. On November 3, California’s citizens overwhelmingly voted to approve Proposition 22 58% to 42%.
What does a ballot incentive like Prop 22 mean for the rest of the country? Also, why are gig companies so opposed to reclassifying their workers as employees. This article will take a deep dive into what a gig economy looks like. We will also examine who supports a gig economy and who is against it. The American worker landscape is changing. Is the gig economy going to usher in that change?
What is a Gig Economy?
Gig work is any work that is short term or independent. In recent history, the word gig work was reserved for artists such as musicians. However, as technology and automation continue to shake up the American workforce, more and more people classify themselves as gig workers. According to the Bureau of Labor Statistics, over 34% of America’s workforce classified themselves as gig workers in 2017. The Bureau of Labor Statistics predicts the number of Americans working in the gig economy will increase to over 45% by the end of 2020.
Gig work provides a lot of benefits to working Americans. First, you are considered an independent contractor. Working as an independent contractor allows you more flexibility in your work schedule and the freedom to work for multiple companies.
However, while working in the gig economy provides workers more freedom, it also takes away a lot of protection. For example, under US labor law, when a worker is classified as an independent contractor, they forfeit the right to many of the benefits a company has to offer. These benefits can include minimum pay requirements. Gig workers can also miss out on benefits like health insurance and unemployment protection.
Should Gig Workers be Considered Employees?
AB 5 and Prop 22 brought up a lot of important questions. Should we change US labor law to reclassify gig workers as employees? As the gig economy grows in America, labor groups and gig workers alike call for major reform. However, making changes to US labor law is extremely difficult and comes with a lot of opposition.
The main argument in support of the gig economy revolves around its inevitable growth. Alex Rosenblat of the Harvard Business Review has an interesting theory on how to get gig workers the benefits enjoyed by employees. Alex argues that the recent COVID-19 pandemic acted as a spotlight to show the prevalence of the gig economy. However, Alex believes companies can give gig workers benefits without reclassifying them as employees. Alex says this on the subject, “We need to acknowledge and plan for the reality of a rapidly expanding gig economy. Instead of hoping in vain for gig employers to reclassify their workers as employees, we should accept that the gig model will only become more entrenched, and as such we should focus on expanding the temporary gains gig workers have seen during the pandemic into a permanent social safety net.”
The opponents of reclassifying gig workers as employees focus on the massive expense. During the campaign for Prop 22, Uber made the argument that if AB 5 were allowed to stand, they would be forced to fire thousands of drivers. Gig companies also stated that if they had to classify their workers as employees, they would raise the prices on all their services to mitigate the extra cost. They hammered home the idea that reclassifying gig workers is anti-consumer and only serves to hurt both customers and gig workers alike.
The Future of the Gig Economy
If you need to know one thing about American corporations, it is a fact they hate change. With this in mind, the road to recognizing gig workers as employees will be rough and long. Prop 22 proved that gig companies are willing to spend millions of dollars on protecting their models. Over the entire life of Prop 22, Uber and other gig companies spent over $200 million in campaigning costs. Smaller organizations and labor groups cannot compete with the amount of money gig companies can spend to suppress them. The SEIU was only able to spend $20 million on campaigning for Prop 22.
However, it is important to note that it is not all doom and gloom for the gig economy. AB 5 acted as a spark that is quickly spreading throughout the United States. At the beginning of the COVID-19 pandemic, we saw Congress recognize the struggles of gig workers. The CARES act granted unemployment benefits to gig workers suffering from the pandemic. This act has now opened the door to making these benefits permanent.
Bibliography
Bensinger, Greg. “Other States Should Worry About What Happened in California.” The New York Times, The New York Times, 7 Nov. 2020, www.nytimes.com/2020/11/06/opinion/prop-22-california-labor-law.html.
“California Proposition 22, App-Based Drivers as Contractors and Labor Policies Initiative (2020).” Ballotpedia, ballotpedia.org/California_Proposition_22,_App-Based_Drivers_as_Contractors_and_Labor_Policies_Initiative_(2020).
O'Brien, Sara Ashley. “Prop 22 Passes in California, Exempting Uber and Lyft from Classifying Drivers as Employees.” CNN, Cable News Network, 4 Nov. 2020, www.cnn.com/2020/11/04/tech/california-proposition-22/index.html.
Rosenblat, Alex. “Gig Workers Are Here to Stay. It's Time to Give Them Benefits.” Harvard Business Review, 17 Aug. 2020, hbr.org/2020/07/gig-workers-are-here-to-stay-its-time-to-give-them-benefits.
Shah, Darpan. “A Case Against the Gig Economy.” Medium, The Startup, 17 June 2019, medium.com/swlh/a-case-against-the-gig-economy-1251dd77de2.
