Would Prop. 22 actually compel gig apps to pay their workers more? Don’t count on it.

GigCompare
Oct 28, 2020 · 7 min read

GigCompare is running the numbers, and when applying the language of Prop. 22 to prior pay statements, the “Earnings Guarantee” appears to fall short of the status quo for the majority of gig workers.

This ad ran on Facebook in October, paid for by the “Yes on 22” campaign, which is in turn funded by gig companies. It makes the claim that Prop. 22 would provide “guaranteed earnings” for app-based drivers. What might this actually look like? How does the “guarantee” compare to the status quo for gig workers?

Introduction

GigCompare.com launched in early August with the mission of helping gig workers across the United States better understand how they are being paid. Our initial focus has been on hourly earnings estimates, using a calculator powered by actual pay statements. Over time, we plan to provide more insights into how pay differs between apps, how it changes over time, and how differences in local markets can impact earnings. We believe that easier access to this information will help workers make more informed decisions and decrease the data disparity between them and the apps they power.

While our mission does not have inherently political goals, regulation of the gig economy (or its absence) makes a very real impact on earnings for workers. We believe it’s important for GigCompare to pay close attention to political developments in order to help workers understand how their earnings may be impacted.

With the debate over Prop. 22 raging in California, we decided to study the issue more deeply and provide our perspective on how its passage/failure might impact earnings for gig workers in California. It’s worth noting that there have been dozens of in-depth studies put forward by those who are far better equipped to comment on the full impact of changes to labor law — we do not claim such expertise. However, we do claim independence: GigCompare has never received funding from political groups or businesses that represent either side of this issue.

Instead of trying to comment on or address all aspects of Prop. 22, we decided to focus on what we do best: pay calculations and earnings estimates for workers.

Specifically, how would the “earnings guarantee” in Prop. 22 + the dollar value of the proposed “benefits” compare to the status quo for gig workers? In other words, if Prop. 22’s pay floor had been in place all along, how often would it have compelled an increase in pay for a given worker in a given week?

Initial Findings

Prop. 22 has been branded as a compromise that provides workers with new and improved pay & benefits. In exchange, gig companies like Uber, Lyft, Doordash and Instacart would be exempt from California labor laws that guarantee employees minimum wage, unemployment benefits, overtime, etc.

With that in mind, one would expect that this proposed “deal” would be an improvement over the status quo for workers. After all, Uber’s CEO has stated that “gig workers deserve better.” Gig platforms make claims about potential earnings regularly, and we’ve found that some do not hold up to close scrutiny. So what does “better” actually mean when defined by Prop. 22?

After processing over 150 weekly pay statements representing 7500+ individual jobs submitted by Uber (both Eats & Rideshare), Lyft, Doordash, Grubhub and Instacart workers, we found that Prop. 22 appears to set the “Earnings Guarantee” lower than the status quo for 84% of workers, and lower than California minimum wage for 91% of workers.

Even in the 16% of cases where Prop. 22 would have compelled an increase in pay, those “boosts” would rarely have moved the impacted workers above CA minimum wage when accounting for all logged hours and estimated expenses. In other words, chances are that most workers would see no positive impact to earnings from Prop. 22, and for the few do, they will likely still be earning less than California minimum wage when accounting for expenses.

To be clear, Prop. 22 would not prevent apps from paying more than the “Earnings Guarantee,” but nothing in the law would force them to do so — in our opinion, relying only on the generosity of gig companies to pay minimum wage would not be smart policy.

What is driving these results? The devil is in the details, and in this case, it’s the way that gig companies define “work” and other factors in the language of Prop. 22. Here are some examples:

  1. Time spent between fares or deliveries is not compensated, and we’ve found that on average, workers spend roughly 20-30% of their time in this “unengaged” state waiting for work (this is in-line with other studies on the topic). This “downtime” more than negates the “1.2x minimum wage” standard applied to “engaged time” in the proposition.
  2. Mileage in Prop. 22 is reimbursed at $.30 per “engaged mile.” Of workers who submitted earnings statements through GigCompare, the average estimated per-mile expense/depreciation is much closer to the IRS recommendation of $0.575 per mile, based on the type of vehicle driven. And again, miles driven in-between jobs are not compensated at all under Prop. 22, even though those miles represent real expenses for workers.
  3. The estimated value of “benefits” in Prop. 22 is determined by the number of “engaged hours” a worker completes in a week. For this sample, we estimate that this benefit comes to about $1.62 per Online Hour, on average, which was not enough to boost net earnings above minimum wage for most workers.

Conclusion (for now)

We recognize that our current sample size is relatively small when compared with the total population of gig workers in California. We are working to expand our reach and will continue to update our findings accordingly.

With this in mind, we are treating these initial findings as directional, and you should too. The easiest way for a gig app to refute the findings of this report would be to perform the same exercise on its own dataset and publicly release the results. We invite them to do so.

If you’re a gig worker who is reading this, please try GigCompare yourself. In just a few minutes, you can calculate what Prop. 22 might mean for you within the context of a prior pay statement. Ask yourself: is the “earnings guarantee” worth giving up rights and protections that other California workers are entitled to?

From GigCompare’s point of view, it appears that Prop. 22 is unlikely to result in a meaningful improvement to earnings compared to the status quo. On that basis, we recommend that California voters reject this “deal” from gig companies: workers deserve a better one.

Methodology

Prop. 22’s pay formula itself is a bit complicated to understand, even for workers, but especially for the average voter who is less familiar with the gig economy. We built an add-on to our earnings calculator that does all of the leg work (full documentation on our Methodology page). The calculation is as follows:

Prop. 22’s “Guaranteed Earnings” = Total Engaged Hours x 1.20 Local Minimum Wage + $.30 x Total Engaged Miles + 82% of the average Covered California Bronze Plan IF the number of Engaged Hours is greater than 25 per week, or half that number if the number of Engaged Hours is between 15 and 25 per week, + value of additional occupational insurance mandated by Prop. 22.

Estimated Expenses = Total Driven Miles x Estimated Per-Mile Expense/Depreciation + Misc. Expense (such as vehicle cleaning or PPE)

Estimated Prop. 22 “Earnings Guarantee” per Online Hour= Total Prop. 22 “Earnings Guarantee” - Estimated Expenses, divided by the total number of hours worked, which Gig Compare defines as all “Online Time” a worker logs on the app.

Additional notes on defaults/assumptions:

While we typically get most of the information we need from a worker-submitted pay statement, there are times where fields are missing. In those cases, we set the following defaults based on the following assumptions. In all cases, we ask the worker to review and edit any inputs before submitting.

  1. Pay statements where the percent of time spent “engaged” was less than 50% were excluded from this report to account for likely “multi-app” use cases. The average percent of time spent “engaged” for this sample was 78%.
  2. Any statement with less than 60 minutes of Active/Engaged Time reported was also excluded from this report. The average number of Active Hours for workers in this sample was 16.6 (measured on a weekly basis).
  3. We (generously) assume that 90% of total miles driven are “engaged” for the purpose of this calculation. The real number is likely lower, but we did not ask workers to estimate this figure themselves.
  4. Local minimum wage is determined by the city a worker selects when performing a calculation. If no city was selected, we default to $13/hour in California.
  5. If only Online Time is reported (Active/Engaged Time is missing), we assume an Active:Online ratio of 70%, which is in-line with prior studies on this topic.
  6. Estimated expense/mile is calculated using AAA’s estimated cost of vehicle ownership report from 2019. Workers select their type of vehicle when submitting a statement, and they have the opportunity to adjust this figure themselves if desired. If no vehicle is specified, we use the IRS recommendation of $.575/mile as the default value.
  7. Average Mileage/Job is set to “6” by default, though we ask workers to adjust their total mileage to match reality when submitting a statement. The “6 mile per job” default is conservative and based on the average for manually-adjusted submissions made to GigCompare. Prior estimates of average mileage for gig workers are similar (this report estimates 8 miles / job average for Doordash drivers in the Bay Area, and this report estimates over 11 miles per trip for rideshare drivers in Los Angeles).
  8. Misc. Expenses. This category includes expenses not directly tied to mileage, such as vehicle cleaning and cell phone data plans. The default is set to $15/week, workers can adjust as they see fit.
  9. Taxes. Given the complexity of calculating individual tax estimates for an individual worker with only a weekly pay statement, we have chosen to leave this category aside. This means we do not account for any potential deductions or estimated payroll taxes when performing calculations.

If you have any feedback on GigCompare’s methodology (or this post in general), you can reach us at feedback@gigcompare.com.

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We use this space to share our thoughts on the gig economy and how that perspective influences our work. We do not claim to have a unique or novel point-of-view on many issues, however, we believe it’s important to provide a window into the “why” behind GigCompare.com

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Bringing pay transparency to the gig economy

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We use this space to share our thoughts on the gig economy and how that perspective influences our work. We do not claim to have a unique or novel point-of-view on many issues, however, we believe it’s important to provide a window into the “why” behind GigCompare.com