Gig Economy— Yes or No?

App companies want Californians to enshrine their drivers’ contractor status

Sarah McGregor, Ellen Huet, with Jacqueline Davalos

The gig economy is preparing for a reckoning. California voters are set to pick sides during the Nov. 3 elections in one of the most fraught debates of today’s labor market: Are flexible working arrangements worth the trade-offs of weaker job security and fewer benefits? A state ballot measure, known as Prop app-based companies from California’s new gig economy law, which makes it tougher for companies to classify workers as contractors rather than employees. If voters reject the proposition, the companies would have to start treating drivers as staff who are eligible for benefits such as guaranteed minimum wages, paid sick days, and other standard protections.

Ride-hailing apps Uber and Lyft and food delivery services DoorDash, Instacart, and Postmates sponsored the initiative, pouring a record $200 million into the campaign to convince voters that app-based drivers want to preserve their freedom and that an employee-based model would raise costs for customers. The outcome— while legally binding only in California—could have ramifications across the U.S., potentially influencing states looking to tighten regulation of the gig economy, which has thrived in the era of app-based work. Lawmakers from New York to Illinois who are also rethinking labor laws for gig and freelance workers may take a cue from California’s handling of Prop 22.

App-based companies have propelled “this longer-term trend away from stable full-time employment,” says Juliet Schor, a professor at Boston College who studies gig workers. “The dangerous thing about it is, the bigger this gig economy is and the more it undermines protections for workers, the more likely you see the reduction of those stable, secure jobs.”

The stakes are high in California, where the gig economy has been a driver of economic growth and an often-mimicked business model for many technology companies based in Silicon Valley. A study by the U.S. Bureau of Labor Statistics estimates 10% of American workers now take part in “alternative work arrangements.” These include temp agency and on-call workers, though most economists can’t even agree on a formal definition of gig work, let alone on the size of its contribution to the workforce. The Federal Reserve says 31% of adults age 18 and older participate in the gig economy, at least for supplemental income. In academia, researchers at the sister institutions University of California at Riverside and UC Berkeley are feuding via papers and rebuttals over how to calculate hourly earnings: Should the time in which drivers are waiting for rides count, or not?