by Alison Stein, Economist at Uber
On August 10, Uber CEO Dara Khosrowshahi wrote an op-ed in the New York Times, proposing that the U.S. employment system be updated to require gig platform companies like Uber to pay for new benefits and grant new protections to drivers.
One of his key arguments was that today’s system forces a choice for every worker and every company: you’re either an employee with more benefits but less flexibility, or an independent contractor with more flexibility but almost no safety net. Uber’s new proposal aims to eliminate this forced choice — yet many of our critics say it doesn’t actually exist.
They believe Uber and other companies can make every driver an employee while continuing to let them work in exactly the same way they do today — for example, starting and stopping work whenever and wherever they choose; only accepting the trips they want to take; or working for competitors at the same time.
As proof, they cite the fact that labor laws, including California’s A.B. 5, do not mandate shift schedules or the other rigid requirements most employees have. That’s true. But what they don’t mention is that there is no major company in the state of California or, indeed, in the entire country, where hourly employees can work like drivers currently do with Uber.
Think about it this way: Starbucks offers one of the most flexible part-time jobs around, but baristas can’t just walk in unannounced, decide they will only make lattes while refusing all orders for cappuccinos, leave during the morning rush to go pick up their kid from school (without permission from their boss), and return to work at a Peet’s Coffee. That would absolutely be allowed under the law, so why doesn’t it happen?
The answer is simple: businesses simply won’t survive if they have zero control over what their hourly employees, whether full- or part-time, actually do. Imagine a restaurant that offered their employees the same freedoms that drivers currently have with Uber. On any given night they might have a single waiter trying to serve 100 customers or 100 waiters all serving one customer. In the middle of preparing a dish, the chef could leave to go cook for the food truck across the street. And anytime their employees decided to be on-shift, they would have to be paid, whether they had any work to do or the restaurant was closed. Why should anyone believe this same logic wouldn’t also apply to companies like Uber?
Being an employee ultimately means making a tradeoff. An employee gets paid at least the state minimum wage, the possibility of unemployment support, workers’ compensation for injuries on the job, an employer contribution for payroll taxes, health insurance (for workers meeting minimum hours thresholds) and, in some states, sick leave. But being an employee also means you have to show up when your employer asks, you must do exactly what your boss says, and if you miss too many shifts, aren’t productive, or come in late, you risk getting fired. You also can’t work for a few weeks and then stop to do something else, like school or caregiving.
The structure of employment is intentionally rigid because it was designed around how businesses deploy hourly employees within set schedules. Companies aim to match the number of employees on their payroll with the volume of their business. A tax preparer might bring on more accountants ahead of Tax Day, or might let existing employees work overtime, but then reduce hours or the number of staff after April 15th.
With app-based work today, demand fluctuates constantly — and simply having the Uber app open doesn’t mean a driver is actually working. Uber’s incentive as an employer, then, would be to limit the number of employed drivers, hiring fewer drivers to each do more trips, and requiring them to work a certain number of hours (but likely preventing them from working overtime). This would be particularly tough on very part-time drivers, who would be relatively more expensive to employ, because the cost of their employee benefits would be spread over fewer working hours. Keep in mind that 91% of drivers in the U.S. work fewer than 40 hours a week today.
Drivers understand this tradeoff all too well:
Many have worked hourly jobs, where they have to show up 8 hours a day, 5–7 days a week, no matter what. The vast majority of drivers choose app work precisely because it is so different from being an employee. In nearly every survey, drivers by a 4:1 margin say they don’t want to be employees. A more recent survey of California drivers showed that 88% began driving because they needed a job where they could choose where and when they work — and 68% of drivers said that they would stop working if the flexibility they have today was no longer provided. New research estimating driver demand for hourly and daily flexibility finds that drivers who are female, Black or Hispanic, or from a poorer area tend to value this flexibility the most — and stand to lose the most if faced with mandated employment.
If platform companies were required to only offer employment, it’s not logical to assume we wouldn’t set up the exact same structures as companies that depend on an hourly workforce. In fact, we took an honest look at what this would mean in California. What we found was hardly shocking: if we were, for example, to shift to all full-time employees, we estimate that 158,000 work opportunities on Uber would be eliminated, leaving 76% of current drivers without work. Markets outside of California’s major cities, where demand is sparsest, would be hardest hit and would see the sharpest price increases and work reductions.
None of this is to say that being an independent contractor is perfect. We’re not arguing for the status quo. We’ve put forward detailed proposals, including Proposition 22 in California, to give more benefits to drivers — like healthcare, earnings guarantees, accident insurance and anti-discrimination protections — while maintaining the independent contractor model they prefer, and on which Uber and so many other California businesses are built. Drivers know this is the better way, and that’s why they overwhelmingly support Prop 22 and similar proposals.
Some have said that listening to drivers is a “bogus” argument. We don’t think listening to the voices of the people most affected by these laws is bogus. The forced choice is real: do we want drivers to keep their flexibility and get new benefits, or make some of them employees while putting the rest out of work?