"I am not a great fan of Uber—you can quote me on that," declared Democratic hopeful Bernie Sanders in August. The main reason he has "serious problems" with the ride-sharing service? It's "unregulated," he told Bloomberg. In this, if little else, Sanders finds himself in agreement with rival Hillary Clinton, who decried the "gig economy" in a major economic address around the same time last summer.
On the face of it, the sharing economy should make people of virtually all political stripes feel warm and fuzzy. Nearly any 21st century stump speech is going to be full of buzzwords—entrepreneurship, fairness, choice, opportunity, consumer empowerment, flexibility—that best describe this fast-growing commercial sector. The vast majority of people who have taken an Uber, shopped on Etsy, or found a place to stay through Airbnb enthusiastically embrace these new services which allow individual buyers and sellers to interact more easily and directly. Yet many sharing-economy companies have faced staunch political resistance.
Initially that hostility mostly came from state and municipal governments, at the behest of local special interests—legacy hotel and taxi companies chief among them—who slyly suggested that their new competition posed a threat to "public safety" by often operating outside of traditional regulatory frameworks. But as more people participated in the sharing economy, as consumers or as workers, cities and states reversed course and began implementing rules that were friendlier to the newcomers, essentially caving to the reality already in place on the ground. It's hard to believe that Virginia was issuing cease-and-desist letters to Uber and Lyft only two years ago. Now the state has regulations, pushed by Democratic Gov. Terry McAuliffe, that are generally welcoming to the ride-sharing industry.
Not everyone is on board. In Chicago there's a push to require Uber drivers to get the same licenses as full-time taxi drivers, for example, and New York City is attempting to crack down on what are deemed "illegal" Airbnb rentals. But those are the exceptions, not the norm they were a few years ago. And both of those measures, like similar restrictions under consideration elsewhere, are likely to fail.
Within states, the sharing economy sometimes pits politicians from the same party against one another. In New York, Democratic Gov. Andrew Cuomo called Uber "one of these great inventions, startups, of this new economy" and said he doesn't "think the government should be in the business of trying to restrict job growth." Cuomo is working with state legislators to harmonize local regulations and bring Uber to all New Yorkers. At the same time, Democratic New York City Mayor Bill de Blasio has assumed a decidedly anti-sharing economy posture. Last year de Blasio unsuccessfully attempted to cap the growth of ride-hailing services in the city, citing concerns over traffic congestion in downtown and midtown Manhattan.
But just as pols from both parties in most localities were wising up, powerful national special interests started taking notice of Uber and Airbnb for reasons of their own. Facing declining membership, especially among young workers, unions have seized on the sharing economy as just another example of evil capitalists exploiting helpless workers.
Today, many Democratic federal politicians beholden to Big Labor blame sharing economy companies for America's tepid recovery from the Great Recession of 2007–2009. The problem, the International Brotherhood of Teamsters explained in its newsletter, is that "these companies are simply recycling old ideas and taking us backwards to a time when workers had no rights on the job." The complaints do not stop there. "Don't let the term 'sharing economy' fool you. There is no sharing. It's really just the 1 percent making money by stripping workers of the rights for which the labor movement has fought so hard to secure." The Teamsters' solution: Reclassify sharing economy workers as "employees" instead of independent contractors, their current status, thus subjecting the companies to burdensome federal labor laws that favor unions.
If successful, this strategy will not only destroy service providers that benefit consumers, costing jobs and damaging the economy in the process. It will hurt these politicians with the next generation of U.S. voters. Unfortunately, national Democrats don't seem to have noticed.
The Battle Brews in Washington
What Hillary Clinton less-than-affectionately refers to as the "gig economy" is "raising hard questions about workplace protections and what a good job will look like in the future," she said at the New School in July 2015. The candidate is promising to "crack down on bosses who exploit employees by misclassifying them as contractors or even steal their wages."
Clinton's only competition for the Democratic nomination, Sen. Bernie Sanders of Vermont, is if anything even less supportive of the sharing economy—though it should be noted that shortly after he went on the record with his concerns about Uber to Bloomberg this summer, National Journal reported that the Sanders campaign was using Uber for "100 percent" of its taxi rides.
On the other side, Sen. Ted Cruz (R–Texas) wrote a letter to Federal Trade Commission Chairwoman Edith Ramirez urging her to resist applying additional or outdated regulations to the sharing economy. "Over and over again, government is sought out as an ally of incumbent businesses to restrict competition from new entrants," Cruz wrote in July 2015. "In a number of instances, and in a number of states, pre-existing regulatory regimes have been extended to new entrants in ways that may ultimately deprive consumers of significant cost savings and convenience that would otherwise accompany an expanded sharing economy."
Meanwhile, one of Cruz's then-opponents for the Republican nomination, Ohio Gov. John Kasich, was repeatedly calling on policy makers to "uberize" government. (By which he seems to mean using technology to bring private-sector efficiency to the public realm.) "Government shouldn't fight Uber by trying to keep them out of places," Kasich has said.
There are two main reasons for this striking difference in tone: labor unions' considerable influence over the Democratic Party, and the effect that federal labor laws can have on the sharing economy.
The AFL-CIO, American's largest labor union, released a statement in February 2016 that made clear how its leaderships views sharing economy workers: as a potential boon to union member rolls. "Making the right policy choices begins with ensuring people who work for on-demand companies enjoy the rights and protections of employees," the statement reads. "The AFL-CIO is committed to ensuring new technology—and new forms of employer manipulation—do not erode the rights of working people. Rest assured that if employers get away with pretending their workers aren't employees, your job could be next."
Nearly all sharing economy workers are classified as independent contractors rather than employees. Union interest arises because federal labor law does not extend the collective bargaining rights laid out in the 1935 National Labor Relations Act to independent contractors. Ultimately independent contractors work for themselves, the thinking goes, so they shouldn't be forced to follow labor agreements that they do not support just because a majority of the other contractors vote for union representation. While independent contractors are free to join groups (such as the growing Freelancers Union) to gain access to benefits and career development resources, these organizations cannot collectively bargain.
The flexibility of being an independent contractor is vital to the sharing economy's success. While some people work on these platforms full-time, the vast majority use them as a way to earn supplemental income. About 8 in 10 Lyft drivers choose to drive 15 hours a week or less, and half of Uber drivers use the platform for under 10 hours a week. Furthermore, half of Lyft's drivers and two-thirds of Uber's work another job while partnering with the company. Independent contractor status allows decisions about when and how long to work to be controlled by individual drivers, not a boss.
Even people who only work with one company don't all have the same priorities regarding work arrangements. Those who use Uber for supplemental income and part-time work have vastly different concerns than those who treat the service as a full-time job. Under collective bargaining, which group's interests will the union represent? Majority rule could take away one of the cornerstones of the sharing economy: the diverse benefits that come from flexible, individualized work opportunities.
Yet the Department of Labor (DOL) is working to categorize all sharing economy workers, regardless of their specific circumstances, as company employees. The agency's Wage and Hour Division recently issued an "administrator's interpretation," effective immediately, to clarify the definition of independent contractors. It states that "most workers are employees" regardless of changes in the way they work. Because the new interpretation was termed "guidance," it didn't have to go before the public for comment, or before Congress for a vote, even though it has the potential to upend the sharing economy.