Uber has been calculating the data, and it has come up with an internal analysis of what would happen if a California driver was reclassified as an employee, according tomedia CNET. According to the company, passengers could see price increases of 20 to 120 per cent, and tens of thousands of drivers could lose their jobs. The company said 76 percent of Uber’s 209,000 drivers in the state could lose their jobs on a ride-sharing platform. Uber said rural areas would be hardest hit by the job cuts.
“The shift to the employment model will force us to limit the number of people driving on Uber to manage the fixed cost per employee,” the company said. “
Most economists agree that the system will change if drivers become employees. But others say numbers like this need more context. Uber, for example, has little coverage in rural areas, with some drivers working only a few hours a week. Michael Reich, co-chair of the Center for Wage and Employment Dynamics Research at the University of California, Berkeley, says the platform will be more efficient if drivers become employees. “Some drivers who work more than 40 hours a week will reduce their working hours,” Reich said. “Many drivers who drive less than 40 hours a week may increase their working hours. “
Uber’s new analysis comes amid a growing debate in California over the classification of “zero-hours” workers. Currently, most “zero-hours economy” companies classify their workers as independent contractors, not employees. This means that companies are not responsible for benefits such as health insurance, sick leave and the minimum wage. California passed a law last fall that requires temporary workers to be classified as employees. The law, AB 5, entered into force on 1 January.
Instead of making their employees, Uber, Lyft, DoorDash, Instacart and Postmates spent $110 million sponsoring a ballot measure that would exempt them from AB 5. The measure proposes to keep drivers as independent contractors, while increasing benefits such as “income guarantees”. On Friday, the measure officially became a subject of debate in November’s election.
As the election approaches, the issue is bound to become more intense. Several politicians, including Elizabeth Warren, Bernie Sanders and Kamala Harris, supported AB5. On Tuesday, Democratic presidential candidate Joe Biden tweeted that “private economic giants are trying to tamper with the law and exempt their workers.” This is unacceptable. I urge Californians to vote against the initiative in November. “
Uber’s internal analysis is based on data from the days before the new coronavirus pandemic in early March. A spokesman for the company said the newer figures could show higher prices and more job losses. Uber said in its analysis that prices in rural areas will rise more than in cities. Prices in San Francisco, for example, would rise by 20 to 30 per cent, while prices in the Central Valley would rise by 110 to 120 per cent. So in San Francisco, today’s $10 trip will be $12, while in the Central Valley it could be as high as $22.
Uber says higher prices will reduce passenger demand, which means fewer trips and fewer job opportunities for drivers. Uber’s analysis only takes into account that there are full-time drivers on the platform who work 40 hours a week. Uber’s conclusions are not as radical as a report released two weeks ago by the Berkeley Research Group, which said 80 to 90 percent of jobs could be eliminated if independent contractors were reclassified as employees.
Reich, who has written several reports on temporary workers and employment, is using California data for similar research. If drivers become employees, he said, ride-hailing fees may increase, but not as much as Uber estimates. He thinks they will rise by between 5 and 15 per cent, which means passenger demand will fall by about 3 per cent.
Reich cites New York City as an example of what could happen in California if the driver became an employee. After New York City set a minimum wage for drivers in 2018, drivers’ wages have risen, a measure the city expects will also ease traffic congestion. “Uber and Lyft are currently inefficient for drivers because they carry only about half of their drivers,” Reich said. “Under AB5, efficiency will increase, resulting in more compensation for drivers, reduced traffic on the streets and less air pollution. Traffic speeds will increase, making passengers less traveling. “