How California can create a safety net for gig workers
What would a safety net look like for gig workers?
It would provide health insurance, retirement sick leave, and injured worker and unemployment compensation. It would be equitable and portable: A person working part time for different companies would have robust benefits that travel with them from job to job.
The good news is that we know how to design that sort of safety net. The bad news is that the digital platform companies refuse to make it a reality.
Uber and Lyft are aware of ideas for building better benefits systems. Following the publication of my book “Raw Deal” in 2015, I met with ride-sharing executives to discuss my proposal for an “Individual Security Account,” a portable safety net for drivers and freelance workers.
Under my proposal, each worker would have a mandatory, government-regulated Individual Security Account to which any business that hires a worker would contribute an amount prorated to the number of hours worked for that business. The worker would then use those funds to pay health care, Social Security, sick leave, injured worker and unemployment compensation. Instead of pitting flexibility against security — making a gig worker choose between the work they want and the benefits they need — a portable safety net based on this kind of an “hours bank” system would allow for both.
President Barack Obama endorsed my idea in his 2016 State of the Union address. Forty business and government leaders — including the co-founders of Lyft — signed a statement of principles calling for a portable safety net.. Uber
CEO Dara Khosrowshahi called for a portable safety net plan.
But when states introduced bills for portable safety nets, Uber and Lyft, rather than contributing 20% of a worker’s wages (the minimum to fund an adequate safety net according to federal actuarial tables) offered to contribute 2.5%.
Without a serious offer from the companies, the California Legislature passed AB 5, which attempted to solve the problem by reclassifying drivers as employees rather than independent contractors. Uber and Lyft refused to implement the law, and pursued Proposition 22 instead.
Why can’t these companies, rich enough to spend hundreds of millions of dollars on a ruinous ballot measure, do better by their workers?
The answer is that Uber and Lyft are in huge financial trouble. They lose bil
lions of dollars every year. Profit margins are inherently low in the taxi business, and their predatory model subsidizes more than half the cost of every ride in a bid to undercut competition.
With Prop. 22, the companies have now legislated
into existence another miserly version of a portable safety net, along with a face-saving attempt at a minimum wage. The value of Prop. 22’s health benefit is estimated at about $1.20 an hour — well below the $4 to $6 value of benefits mandated for employees under state and federal laws.
Prop. 22 also appears to offer to drivers a new hourly minimum wage of at least $16.80 per hour. But if you read the fine print, a complex formula will be used in which only “engaged hours” (when the driver has a passenger in the car) will be counted as hours worked when calculating the minimum wage.
A driver, in a 10-hour shift, might only have passengers for five hours. If the driver earns $100 in that shift, that would amount to only $10 per hour — less than California’s legal minimum wage of $12 per hour. Yet the Prop. 22 formula will calculate that wage as $20 per hour.