California politicians aren’t the ones who will suffer when Uber and Lyft depart
As you’ve likely read or seen by now, Uber and Lyft are on life support in California.
Last week, a last-minute order from a California judge halted a previous mandate requiring Uber and Lyft to classify drivers as employees, undermining the freedom and flexibility that comes from gig economy work. Uber and Lyft’s threatened exit from California would leave hundreds of thousands of drivers without work and millions of Californians searching for transportation alternatives.
Despite the temporary delay, Uber and Lyft are right to go to the mat and stand up to politicians who want to undermine freelance work. Businesses can and should stand up to governments that make irrational, unrealistic demands.
In 2019, the California state legislature passed AB 5, a bill that placed heavy restrictions on independent contracting and freelancing across many occupations. It’s not just ride share drivers and customers that AB 5 threatens, it would destroy gig economy work and harm freelancers across the board. That’s why my colleagues at Americans for Prosperity Foundation are supporting a lawsuit challenging AB 5 for harming freelance journalists.
It is abundantly clear now that California legislators didn’t care about the chaos their legislation would create — indeed, undermining the freedom to work in a flexible manner is entirely the point. They were hoping to force all workers into the same narrow category, undermine the gig economy, and provide a giveaway to large labor unions. All short-term wins for themselves with long-term harms for their constituents.
Despite the temporary reprieve last week, the initial order for Uber and Lyft to comply with the regulation stands. Since this new law effectively outlaws the gig economy, companies that already struggle to make the unit economics viable may have to shut down operations in California.
And we applaud them for being willing to withdraw from the market rather than comply with absurd demands. Giving up on a large market like California or the European Union where politicians impose unreasonable demands on business is never easy. There are many customers who love the flexibility that Uber and Lyft offer. But it is still the right thing to do. A company should be willing to stand on principle against excessive government overreach.
This willingness to stand up to illegitimate government coercion is one of the factors that has made the US the global innovation leader. That is why as part of our Principles for Continued American Tech Leadership, we encourage private firms to stand their ground against excessive regulation. This isn’t new for ride sharing or the tech industry more broadly. It is reminiscent of Uber’s 2015 ‘De Blasio mode’ and 2014’s Google News in Spain. Nonetheless, it’s encouraging to see companies hold their ground against policies that will ultimately leave everyone worse off.
Companies should articulate and demonstrate through their actions how burdensome policies keep Americans from realizing the promise of innovation. By stepping out of the market in California, Uber and Lyft are showing lawmakers around the nation what happens when you make it impossible for a business to operate. And the workers and consumers are inevitably the ones who suffer, not the politicians who decided to pick winners and losers in the marketplace.
Uber and Lyft drivers in California deserve better. The same politicians that purported to advocate for them are now on the brink of leaving hundreds of thousands without work in the middle of an economic crisis. It was a foolish decision that had the worst possible outcome. States and federal lawmakers around the nation should take note.
