A Race To The Bottom

Gig economy companies push to impoverish their workers

In a recent post, Will The Democrats Roll Back The Gig Economy?, I reviewed some aspects of the ongoing contention between gig economy companies, like ride-hailing and food delivery services, and various governments. I laid out the framework of the Protecting The Right to Organize Act (or PRO Act) that the US House passed in February 2020, and in Biden’s campaign materials he and his team have plans that go beyond the PRO Act:

Ensure workers in the "gig economy" and beyond receive the legal benefits and protections they deserve. Employer misclassification of "gig economy" workers as independent contractors deprives these workers of legally mandated benefits and protections. Employers in construction, service industries, and other industries also misclassify millions of their employees as independent contractors to reduce their labor costs at the expense of these workers. This epidemic of misclassification is made possible by ambiguous legal tests that give too much discretion to employers, too little protection to workers, and too little direction to government agencies and courts. States like California have already paved the way by adopting a clearer, simpler, and stronger three-prong "ABC test" to distinguish employees from independent contractors. The ABC test will mean many more workers will get the legal protections and benefits they rightfully should receive. As president, Biden will work with Congress to establish a federal standard modeled on the ABC test for all labor, employment, and tax laws.

But the ride-hailing companies continue to penalize workers, and seek to cut their pay, since Biden has yet to establish that federal standard. In Lyft test program offers drivers more rides in exchange for 10% pay cut, Dara Kerr looks into Lyft's pandemic-inspired 'priority mode' which nominally gives participating drivers more rides in exchange for a 10% cut in pay:

The feature is Lyft's latest attempt to cope with the coronavirus pandemic, which has weighed on the ride-hailing industry because people around the world have sheltered in place with nowhere to go. Lyft's rides were down 75% year-over-year in mid-April, and even though the company has since seen an increase in passengers, rides were still off by 50% year-over-year in November. Drivers have been left scrambling to pick up any ride possible to make ends meet.

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Priority mode also helps Lyft compete with Uber by keeping more drivers available to pick up rides. Since many drivers use both apps, priority mode could get those drivers to choose Lyft over Uber.

J.J. Fueser, a researcher with RideFair, considers the program exploitative, 'a race to the bottom', since drivers may find they have to compete against others participating in the program to get any rides at all. And the ride-hailing companies — who are not making a profit — have adopted various coercive strategies like priority mode that end up cutting the pay of drivers:

About a decade ago, when the companies first started out, drivers could reportedly expect to make roughly $20 per hour after expenses. Now that number is believed to have dropped by half. According to a 2019 study by the Economic Policy Institute, Uber drivers make around $9 per hour. Uber has disputed those findings.

I am looking to Biden's administration and the EU to step in and determine how gig economy companies should compensate workers.

There is no reason to let these policies go forward, aside from satisfying the bottomless desires of investors.