One of the bright spots in the recent election was the passage of Prop 22, which exempts some companies (Uber/Lyft) from some of AB5's requirements.
AB5, as you may recall, was a bill that requires companies that make heavy use of gig employees--such as Uber / Lyft--to treat gig employees as full time employee.
AB5 would substantially increase the costs of hiring gig employees, making it uneconomical for companies like Uber / Lyft to continue operating in California.
IMO, pricing gig employees out of the market was the intent of AB5, as AB5 was written and sponsored by Lorena Gonzalez, a former labor organizer for AFL-CIO.
The government transportation unions / cartels pushed for AB5 because a) they want to kill off non-unionized competitors b) its easier to unionize full time employees.
For the last 100 years or so, the transit unions / taxi cartels successfully suppressed competition by passing taxi licensing laws. In NYC, for example, the number of taxi licenses now (13,587) is actually _less_ than the number of licenses issued when the taxi medallion system was started in 1938 (13,595). As a result, the cost of a taxi license peaked above $1.3 million dollars/license in 2013.
$1.3 million. Just for permission to give people rides. (Where were progressives while this nonsense was going on? )
However, Uber / Lyft were able to successfully defeat the taxi cartels / government transit unions by pouring money into rapidly building their networks, growing the constituency for their services faster than the unions/cartels could fight back.
Of course, the unions / cartels didn't give up. However, they no longer had the political power to simply ban Uber / Lyft outright. What to do?
If they can't ban them outright, maybe they could increase their regulatory cost enough to drive them out of business?
Here's how it works:
A lot of people want flexible hours and non-standard pay/benefit packages. AB5 forces companies to offer the same pay/benefits package to someone working 10 hours per week as they do to someone working 40 hours per week. Benefits for a full-time worker average about 30% of total compensation.
So, AB5 substantially increases the per hour cost of hiring a gig worker relative to a full time worker doing the same job.
For example, consider a full time worker (40 hours/week * 50 weeks = 2000 hours / year) nominally making $40/hr. The benefits package will typically cost an additional 30%, so add another $12/hr in benefit costs to bring the total cost/hour to the employer to $52/hour. Over a year, that's an extra $24 K in compensation.
Now suppose the company hired a gig worker, also at $40/hour, who worked for 10 hours per week (10 hours/week * 50 weeks = 500 hours). That puts their total annual compensation at $20 K ($40 * 500). But now add another $24 K full time benefits package to the cost of hiring them. That puts their total compensation at $44 K/year, and raises their hourly total compensation to $88/hour (44000/500 = 88).
Obviously, given a choice between hiring a full-time employee at $52/hour vs a gig employee at $88/hour, few people are going to hire the gig employee.
AB5, as you may recall, was a bill that requires companies that make heavy use of gig employees--such as Uber / Lyft--to treat gig employees as full time employee.
AB5 would substantially increase the costs of hiring gig employees, making it uneconomical for companies like Uber / Lyft to continue operating in California.
IMO, pricing gig employees out of the market was the intent of AB5, as AB5 was written and sponsored by Lorena Gonzalez, a former labor organizer for AFL-CIO.
The government transportation unions / cartels pushed for AB5 because a) they want to kill off non-unionized competitors b) its easier to unionize full time employees.
For the last 100 years or so, the transit unions / taxi cartels successfully suppressed competition by passing taxi licensing laws. In NYC, for example, the number of taxi licenses now (13,587) is actually _less_ than the number of licenses issued when the taxi medallion system was started in 1938 (13,595). As a result, the cost of a taxi license peaked above $1.3 million dollars/license in 2013.
$1.3 million. Just for permission to give people rides. (Where were progressives while this nonsense was going on? )
However, Uber / Lyft were able to successfully defeat the taxi cartels / government transit unions by pouring money into rapidly building their networks, growing the constituency for their services faster than the unions/cartels could fight back.
Of course, the unions / cartels didn't give up. However, they no longer had the political power to simply ban Uber / Lyft outright. What to do?
If they can't ban them outright, maybe they could increase their regulatory cost enough to drive them out of business?
Here's how it works:
A lot of people want flexible hours and non-standard pay/benefit packages. AB5 forces companies to offer the same pay/benefits package to someone working 10 hours per week as they do to someone working 40 hours per week. Benefits for a full-time worker average about 30% of total compensation.
So, AB5 substantially increases the per hour cost of hiring a gig worker relative to a full time worker doing the same job.
For example, consider a full time worker (40 hours/week * 50 weeks = 2000 hours / year) nominally making $40/hr. The benefits package will typically cost an additional 30%, so add another $12/hr in benefit costs to bring the total cost/hour to the employer to $52/hour. Over a year, that's an extra $24 K in compensation.
Now suppose the company hired a gig worker, also at $40/hour, who worked for 10 hours per week (10 hours/week * 50 weeks = 500 hours). That puts their total annual compensation at $20 K ($40 * 500). But now add another $24 K full time benefits package to the cost of hiring them. That puts their total compensation at $44 K/year, and raises their hourly total compensation to $88/hour (44000/500 = 88).
Obviously, given a choice between hiring a full-time employee at $52/hour vs a gig employee at $88/hour, few people are going to hire the gig employee.