Los Angeles isn’t widely known for its labor movement, but there’s been a change over the past few years—and something remarkable happened this week that could end up being a step forward for workers in the gig economy.
On Monday, thousands of Uber and Lyft drivers refused to turn on their smartphone apps, declined to pick up customers and urged locals to take public transportation to work. They were joined by drivers in other California cities such as San Diego and San Francisco.
Part of the reason behind this one-day strike was Uber’s recent announcement that its per-mile pay would be reduced 25 percent across much of greater Los Angeles, including parts of Orange County. The optics of these ride-hailing companies—neither of which is profitable yet—becoming worth billions of dollars after their expected initial public offerings (IPOs) was also on many drivers’ minds. While many white-collar employees, especially those who joined either company during their early days, will become millionaires, those who drive for Uber and Lyft will continue to work at rates that aren’t much more than minimum wage after fuel, insurance and other expenses kick in.
“Lyft and Uber have seen it fit to subsidize their IPOs on the backs of the drivers,” one driver in San Francisco told Slate. “They want to generate as much profit right now as possible to make them look really attractive to investors, but they’re not doing that responsibly.”
The challenge for many drivers is that, as independent contractors (who submit IRS forms 1099 instead of W-2), they aren’t eligible for standard job protections such as minimum wage laws or worker’s compensation. So now, drivers in Los Angeles are demanding guarantees that they will make at least $28 an hour while urging Uber to reverse that per-mile rate cut. Both companies said they are considering revamping their drivers’ pay structures, and Uber told Vox in a statement that if things soon go according to plan, the company will again pay drivers rates similar to what they earned in September. But there’s one problem with such a concession.
“Drivers striking in Los Angeles said they don’t want to earn the same amount they did six months ago,” wrote Vox’s Alexia Fernández Campbell.
Meanwhile, Lyft has said it would roll out a suite of services, which the company described as “an ambitious economic initiative to help drivers succeed on their own terms.” Among the perks promised is a no-fee bank account and debit card that will add drivers’ fares to their accounts in real time.
As Fast Company’s Eillie Anzillotti incredulously asked, “What good is a free debit card if you don’t have enough income to fund it?”
Current macroeconomics tilt in the drivers’ favor. Low unemployment paired with a tight labor market means more workers are realizing that they have far more leverage than they did a few years ago. In the U.S. overall, there are more job positions open than workers willing to fill them.
Hence Uber and Lyft find themselves cornered into a position where they will have to figure something out, and figure it out fast. Plenty of observers have already criticized these companies “unicorn” status—that is, being worth more than $1 billion—as overvalued. But it’s not just the fact that these companies have been talking about going public for months, which of course adds to both the hype and expected market cap for these companies. Once Uber and Lyft go public, they will be accountable to shareholders as well as public disclosure laws mandated by the Securities and Exchange Commission (SEC). Shareholders will expect growth, but that will be hard to come by if more potential drivers shun Uber and Lyft, which could tamper down any expectation of long-term success.
The result is that we have emerged on a new frontier when it comes to employee engagement. Companies have long realized that they need to do what they can to keep employees happy, especially as more millennials and Gen Z’ers join the workforce with expectations that they will work for organizations that aren’t only profitable, but also contribute to social good. In turn, we have seen more companies doing more for hourly workers, usually in the form of higher hourly wages, whether they work in retail or fast food—or as in the case of Starbucks, offering baristas once-unheard of perks such as sick time or even stock bonuses (in addition to healthcare and even opportunities to work on a college degree with no fees, long a perk of working at a Starbucks).
Now it’s time for companies to acknowledge that they can’t overlook workers in the gig economy, or as many prefer to call themselves, freelancers. Estimates of the size of this workforce varies, as the U.S. government does not keep excessive tabs. The total number could run anywhere from 57 million to even 75 million people, if you count jobs such as babysitting or running your own food truck.
Watch for more companies striving to make the gig economy more appealing, and not just these two ridesharing companies—the same could go for companies that run apps designed to deliver food or those that deliver services, such as TaskRabbit. After all, companies want to protect their profitability and brand reputation, but market realities will dictate that these companies will have to start treating these workers as people—even if hey are not technically employees.
Image credit: Pixabay
Leon Kaye has written for TriplePundit since 2010, and became its Executive Editor in 2018. He's based in Fresno, CA, from where he happily explores California’s stellar Central Coast and the national parks in the Sierra Nevadas. He's lived in South Korea, the United Arab Emirates and Uruguay, and has traveled to over 70 countries. He's an alum of the University of Maryland, Baltimore County and the University of Southern California.