ridesharing

Uber and Lyft Offer Drivers a $21 Minimum Wage. California Lawmakers Say It's Not Enough.

The state is set to pass a sweeping bill that would reclassify drivers as employees.

|

California is on the verge of passing a bill that would reclassify all "gig economy" workers—those who drive for Uber or Lyft, for example—as employees rather than contractors. Ride-sharing companies have responded by offering to pay drivers a minimum hourly wage of $21, but labor activists say the hike isn't enough.

The measure, known as AB 5, passed the California State Assembly in May and is expected to pass the state Senate next week. It will then head to Gov. Gavin Newsom, who has put his full support behind the bill.

Such a move would require gig economy companies to provide a wide array of benefits—including paid time off, worker's compensation, and reimbursement for expenses—to every employee, upending the flexible business model where drivers can choose their own hours, answer to themselves, and work for competing companies simultaneously. This would fly in the face of national practice: The Department of Labor and the National Labor Relations Board have ruled separately that gig economy workers are indeed contractors.

Uber and Lyft countered that they would provide a $21 minimum wage, which would apply both when driving a passenger and when en route to pick up a new one. Labor rights activists, including the ones behind AB 5, demurred at the offer. "The voters of California won't stand for billionaires allowing their workers less rights than Walmart employees," Assemblywoman Lorena Gonzalez (D–San Diego), who authored the bill, said in a statement.

But under AB 5, many of those workers would have less work, not more rights. Approximately 6,461 Lyft drivers in the assemblywoman's district alone would lose their jobs, according to an economic study by Beacon Economics LLC. As I wrote back in March:

Vulnerable populations stand to lose the most from reduced access to rideshare opportunities. In New York City, for instance, a staggering 90 percent of app-based drivers are first-generation immigrations who speak English as a second language. Uber's current driver qualifications—they must be 21 years of age, have a valid driver's license, and own a decent car—allow large swaths of people to get ahead on the ride-hailing app. But the barriers to entry would be much higher if the company were encumbered with such heavy costs per driver.

Consumers would pay a hefty price too—literally. Estimates currently indicate that the plan would raise prices by 20 to 30 percent, a big blow to the low-income Californians who have benefited from Uber and Lyft's accessible pricing. And fares aside, those in poorer areas would see fewer drivers willing to come their way, as app surge prices are more lucrative in bustling, more populous areas.

A $21 minimum wage would be a compromise, and a generous one at that. But California's lawmakers are instead opting for the more extreme option—one that might look nice on paper but would be terrible in practice.

NEXT: San Francisco's Anti-NRA Policy Could Be Unconstitutional

Editor's Note: We invite comments and request that they be civil and on-topic. We do not moderate or assume any responsibility for comments, which are owned by the readers who post them. Comments do not represent the views of Reason.com or Reason Foundation. We reserve the right to delete any comment for any reason at any time. Report abuses.

  1. $100/hr would not be enough.

    Woke companies go broke.

    Just tell these people to fuck off and run your business like you want.

    1. Yeah – when these companies are willing to take up arms against the government, that is the only time they’ll have a chance in succeeding doing that.

      Because the people in government have no problem gathering up large numbers of people who would be more than willing to kill you if you don’t submit to their rule.

      1. Here’s our violent people. Hello Slavers.

        1. Lefties are funny.

          1. Only unintentionally. Most time, they’re just fucking ignoramuses, like our newest sock

  2. Great: ruin in Uber in LA, assholes. Way to go.

      1. Jesus, I need a lyft uber alles this shit.

    1. I thought traffic ruined it.

      1. ‘Twas MTV

  3. You know how every libertarian know what TANSTAAFL stands for?

    TTHCFoA should be like that.

    There’s this thing called freedom of association, and the people who own, manage, and work for Lyft and Uber have it–and the State of California shouldn’t be able to do anything about that.

    I suspect freedom of association has a bad rap is because people tend to associate it with racism and homophobia, but I also suspect the reason people tend to associate it with racism and homophobia is because we so often fail to bring it up within other contexts.

    1. TTTCFoA = . . .

      You knew what I meant!

    2. we so often fail to bring it up within other contexts

      My experience has been that when you do bring up freedom of association in other contexts, you get accused of Trojan Horsing your racism and homophobia.

      1. If people falsely accuse us of something, when it isn’t warranted by the situation or the facts, it means the false accusers lose.

        If they accuse everybody who doesn’t want to stand in line at the grocery store of being a racist or a homophobe because of that, then they’re making an awful lot of enemies. The fact is that most people don’t want to wait in line–and that doesn’t make them racist or homophobic.

        1. But we know you are a racist. Your entitlement is showing. Just like how you show up to disregard racism when Reason does an article. Or how you want to abuse people who come here for better opportunities.

          1. ohlookitsMaryStack

          2. “But we know you are a racist”

            Fuck off and die.

  4. Is this even constitutional?

    1. Of course, state power to regulate INTRASTATE business includes forcing INTERSTATE companies to pay their workers a certain wage even if it means the business will go out of business.

      1. The $21/hour is joke. Thats $5.25 per 15 minutes. So 2 rides per hour you get $11. Awesome. Shouldnt they pay workers comp and social security contribution like everyone else? Exploiting labor force and still not profitable. Let taxi industry replace them. Early investors cashed out already

        1. If people are willing to work for Uber for whatever it is they’re getting, that’s their business. Not enough for you? Don’t work for them.

          Problem solved.

        2. Rodeshare drivers are freelance contract labor. They are not cab drivers. They meet all the tests required to be considered independent contractors. Many drivers even simultaneously run both Uber and Lyft apps. Switching off the one app when they get a ride request from he other.

          In no way are they employees.

          1. Keep wishing

          2. +100

    2. I wonder where the courts will draw the line. How far can you redefine common terms before courts waggle their fingers?

      There was the skim milk flap in Florida. A dairy produced excellent butter and had lots of real skim milk left over, but the Florida Ag Dept said they couldn’t call it skim milk unless they added Vitamin A to it. I forget how it was ended — rule withdrawn, court order, legislature. But it was ended because they were not allowed to redefine common English usage.

      What if California passed a law that any work over 10 hours a week was full time?

      What if they said any work requiring lifting more than 10 pounds was so strenuous it had to pay double?

      How far can they redefine common terms?

      1. They’ve already labeled a civil rights organization a terrorist group.

    3. “Is this even constitutional?”

      That is such a homophobic question.

      1. Really? I assumed it was racist.

        1. Can’t it be both?

          1. Throw in transphobic, islamophobic and socialisiphobic (new one not sure if the spelling would be correct though).

  5. It’s not enough, because the goal isn’t making sure the drivers are ok. The goal is to ensure that people stay employed at large, centralized organizations, and don’t have the freedom to swing from gig to gig. This way, they’re far easier to control.

  6. Well Californians, enjoy your brief taste of innovation and personal freedom. Back to your taxi cartels and taking the bus.

    1. There’s only one thing to blame and one solution.

      The problem is the Republicans in Sacramento. They’re taking their cues from Donald Trump, and the only solution is to vote for Democrats even harder next time.

      Besides, how much of a problem is this compared to the problems of homophobia, racism, sexism, xenophobia, income disparity, Trumpism, and global warming?

  7. To live and die in LA.

    1. Escape from L.A.

    2. I wonder. Why in LA?

      1. That’s LA Confidential

      2. Whole thing is just more californication.

  8. California Lawmakers Say It’s Not Enough.

    Uber and Lyft are confused. They thought this was about “living wages” and it ain’t. It never was. It’s about greasing the union palm.

    1. +100

      Uber and Lyft are in the wrong Union.

      Union Soviet Socialist Republic of Commifornia.

  9. California legislature:
    1. Create a pigeonhole called “worker”
    2. Sweep as many humans as possible into the hole.
    3. Squat over hole and shit on them.

    1. Dont forget tax them so many flee the state.

      1. Then don’t forget to institute an exit tax. And then don’t forget to widen the definition of ‘tax nexus’ that anyone who’s lived in CA is on the hook for state taxes for ever.

      2. …Flee the state AND get even by voting libertarian for the rest of their lives. I like it when autistic Altrurians send thugs to stick guns in people’s faces. It’s the nationalsocialist secret of how to make friends and influence da peeps.

  10. I realize that CA is a huge market but Uber and Lyft need to cease operations there. Amazon told AOC to fuck off and took their business elsewhere. California is isolating itself from civilized society. I say give them what they want.

    1. Or they’re beating a trail the rest of civilized society will eventually follow. Who can say? Not me and not you. If Uber and Lyft give up on California, the state and/or its various municipalities will launch their own ride-share apps. It’s not at all hard to do. Uber and Lyft are just brands, and ride-sharing itself is at this point unequivocally unpatentable.

      1. Uber and Lyft are also not the only ride share companies in the market.

      2. So you really think a *state or municipality* ride-share app is workable? Like municipal broadband? Or city-run water supplies? Yeah, how about ‘worse service at a higher price’.

        It’ll be funny when CA outlaws taxi’s to preserver the city monopolies on shitty, unsecure apps.

  11. If a Universal Basic Income is only 12 thousand a year, it stands to reason that minimum wage doesn’t need to be more than 6 bucks and hour.

    1. In california? You cant rent a closet for 1000 a month.

      1. Because the idiots there don’t allow enough housing to be built.

  12. Ride share companies don’t charge enough and don’t pay enough. There will be a market correction, and the prices will triple overnight. They were hoping to bankrupt all the taxis first, but you can only charge below market price to gain market share for so long. Wait for it, the shock will be bigly huge.

    1. “Ride share companies don’t charge enough and don’t pay enough.”

      If they didn’t pay enough, nobody would drive for them. I think your theory needs a little work.

    2. Not joking here folks, DenverJ really believes that shit.

      1. If you believe otherwise, you are perfectly free to invest in Uber. My opinion has been stated, and mocked.

        1. I’m sure investors don’t take little things like legislation guaranteed to drop stock value into account when investing.

  13. A thinly-veiled attempt to protect traditional taxi can drivers and companies by making it more expensive for the competition.

  14. I wonder how much the taxi companies have paid the politicians voting for this?

  15. I think AB 5 is an excellent bill that should be passed. Let’s see what the impact is. This is a perfect opportunity for a natural experiment. Instead of basing our opinion on philosophical priors, we can see what the actual effect of this legislation is in California compared to other states. I believe it will be a positive for drivers and for society. Probably, many drivers overestimate the value of the opportunity when it comes to Uber and Lyft, and this law would shift risk from drivers to Uber and Lyft, who are more able to absorb it. Also, customers should not be getting cheap rides based on driver miscalculation. But the best way to find out the true impact is to have California change its law while other states maintain older business models. Then we can have a debate based on actual data rather than mere speculation or philosophical priors.

    A side note. The $21 minimum wage is an illusion for two reasons. It doesn’t include time when drivers are waiting to be hailed. So, it is not comparable to other minimum wages. If you work in a convenience store, you don’t only get paid when customers are in the store. Second, Uber and Lyft drivers, unlike other workers, have expenses. But a clerk in a convenience store does not buy inventory out of their own pocket while taking a commission. And a clerk does not have to deal with the cost of the risk of the inventory spoiling before it can be sold.

    Reason writers are obviously smart enough to note these sorts of obvious differences between the so-called “minimum wage” offered by Uber and Lyft and ordinary minimum wages without me mentioning them. So, hopefully, next time they do so.

    1. “I think AB 5 is an excellent bill that should be passed.”

      I think you’re a slaver and should fuck off and die.

    2. The Prophets of Government Gunfire are out in force–and always with the same prophesying about what joy their altruist future will bring. Never do they point to the successes of Soviet, Venezuelan, Nationalsocialist or Mafia soft machine taxi-extortion regulators. The mark of a mindless myrmidon of mooching marxism is the inability to recall facts while deluged with the projection of fantasies.

  16. It sounds to me like the clerk you describe is an employee, and not an independent contractor. But I don’t live in California.

  17. If Lorena Gonzalez is allowed to accuse Lyft and Uber of being ran by nasty greedy billions, Lyft and Uber should be able to accuse Lorena of being corrupt for taxi medallion companies. It wouldn’t have gotten anywhere, but dang it would be sweet to read the exchange of insults hurled at each other.

  18. How does that compare to a SF taxi driver?

      1. Just curious if they are trying to mandate that uber drivers make even more than taxi drivers, to protect the taxi drivers/companies.

  19. California is not concerned about the Lyft and Uber drivers. The ONLY reason they want to have all “gig” (what a stupid word) economy contractors classified as employees is the extra taxes they could then extort…errr…COLLECT from those companies.

    If it weren’t for that they wouldn’t even bother with them.

  20. I think the key point everyone is missing here (including the article is this:). Uber and Lyft lie about what they pay. It is nowhere near $21 per hour. Lucky if it is half that. And there is no reimbursement for use of your personal cell phone, your having to pay for insurance, your paying your car payment, the miles racked up on your vehicle (thus depreciation of its value), the maintenance on the vehicle and worst of all, the cost of fuel. I know a few drivers of Lyft and Uber and they all say the same thing: Uber and Lyft are using them, running their vehicles into the ground and paying peanuts to boot. I work sometimes for the other gig-work industry (food _ door dash, Postmates etc). What I make running two app at once driving all over hell every day is not enough to pay for rent, food, car, gas, clothing, and minimal utilities were I to try to strike out on my own as a single man with no room mates in the suburbs. One can’t afford to live on what these vulture-tech companies pay even when they bust @$$ to work as much, as efficient as possible. The equations used in these jobs heavily favor the company’s profits and undermine the sustainability of their workforce. And these companies know this. I drive a Prius and I still couldn’t afford to live on my own doing this kind of work. Believe me, I’ve tried to make a go of it.. But the companies really are taking advantage of people (knowing that this kind of work is the only work some people can easily find for one reason or another, built-in slave work force is thus a given given little economic opportunity in more traditional jobs which have all downsized, hiring frozen, or only pay minimum wage. These type Jobs are paying less than minimum wage. When I calculated what I made minus just fuel and one meal, I make only $5.83 per hour, and that isn’t considering long term costs of wear, tires, brakes, oil changes, insurance, depreciation, repairs, etc.. These companies aren’t profitable because they aren’t asking enough from the clients, they spend too much on advertising when their names are already house-hold well known, and their executives are over-paid for what their actual work should be worth to the company, vastly overpaid. Given that these companies are basically using their workforce and slowly sapping them of their economic ability to continue to work for them, we call them employment leaches… They such their employees dry by inadequate compensation with no benefits. The state thus should step in to defend decent values in employment practices and demand more fair compensation for the drivers. Heck to get paid on a daily basis, one of these charges their own employees $2 every day they want to get paid before a scheduled direct deposit would have paid them. While its competitor only charges $.50 for the same service. It shows you, where they can take advantage of their own employees, some of these companies really do. It’s the fleecing of the contract gig workers. It’s despicable! It’s simple enough to whine about coming needed regulation with your simpleton “If you don’t like the TV station, turn the channel” type metaphor but lets be real here. For some people, this kind of work is all that there is besides maybe McDonalds. for whatever reasons, their age, inexperience, fired from previous employer, physically unattractive, pregnant or have young kids at home can’t afford all day babysitting at regular job, physical disabilities that prevent most common traditional work, not a resident citizen, and many other good reasons preventing even skilled people who want to work from getting hired successfully… These gig contracting companies know this is a driving reason for a lot of people to work for them (they couldn’t quickly get anything else that paid better in a time of seasonal or overall financial need) so they just swoop on in and take advantage of the people who are already at a disadvantage to encourage them to run their vehicles into the ground in exchange for bogus hyper-inflated promised wages they will never get nomatter how hard they try to get good tips… The State is finally recognizing this and considering steps to remedy the injustice of these lower-than-minimm wage contracted app user schemes. Rightly so IMHO! I applaud California for having the balls to recognize predatory employment schemes like these for what they are, all rediculously over-inflated pay deceptions and expense traps on the employees. The employees are doing most of the work (and a contractual basis of employment is still considered by any agency or bank to be formal employment! and getting the shaft in terms of the percentage fo the overall take because they are literally bearing all the risk and liability and financial burden for the running and maintaining of the company’ virtual on-demand fleet of vehicles. which makes what you do make work half of what It is, because most of your earnings—even given a fuel efficient car and doing your own mechanics etc will disappear into fuel and maintenance costs associated with carrying out that kind of work. It’s sad and its time to fix this problem by demanding customers pay what’s fair to the driver and the company. This will only happen through regulation. Because competition in this space will always steel pay from the driver (no tip, low pay for mileage or time spent being the first things to go) because each company will try to underbid the other but to make it happen they lower driver compensation, not their cushy corporate exec salaries. To ensure low pay they will flood the area with workers so that there are too many people working and the pay is thus less because more people desperate for work will accept less and less pay for what is already very low-paying work. They don’t limit their labor pool for this very reason. It’s pathetic!

    1. The ride share companies (probably) aren’t going to retain you if the state passes this measure. You’re going to lose out on the 5 bucks you used to make an hour.

      Uber was founded by progressives, and at least one of them worked for the Obama campaign. They obviously knew ACA costs on a business and other rising expenditures presented an opportunity for their business model. Most people would rather work in a conventional office setting. These gig economies flourish because brick and mortar are dying out, especially in heavily taxed and business unfriendly states like CA.

      If Uber isn’t paying enough money, don’t work for them or work only when it suits your situation. If you can’t find jobs in the state to the point where you an only turn to gig work, then you have to move. That’s the stark reality. People move out of CA all the time.

    2. EVERYTHING IS SO TERRIBLE AND UNFAIR!!!!

      Haha. Wow.

    3. Who is forcing your friends to work for Uber and Lyft? You should report the slavers to the local police.

    4. So you knowingly started a business. Didn’t consider costs verses revenue. Eventually figured out its almost impossible to run a transportation business via ride-share apps. Then decided the solution is not “I shouldn’t do this” but the State Government should make my Business profitable.

  21. Libertarian candidate Roger MacBride defended individual rights for women under the first three words of the 14th Amendment AND stuck op for your right to make money as a rideshare driver… “You should be free enough to work on your own…” he said, in 1976! This was 33 years before Uber became a real thing. Republican Fountains of Fascism still aren’t OK with anything the LP is for.

  22. Uber and Lyft are also not the only ride share companies in the market.

  23. So if the drivers are employees now, that means Uber will now have more control over its drivers, right? No more working for both Uber and Lyft at the same time. No more running other errands while waiting for a fair to pop up. No more parking and making a phone call or playing a game, etc. This is a two edged sword. Both edges cut the consumer, of course.

  24. No more innovation, of this sort, in California.

    New York City has gypsy cabs (illegal, underground or informal economy). California has plenty of immigrants who come from places with lots of informal underground illegal businesses. Is this something that can be imported to California?

Please to post comments

Comments are closed.