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Uber’s framing of gig economy regulation in terms of personal freedom

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A bid by Uber and other leading gig economy providers to put a temporary stop to California’s efforts to place restrictions on who can be classified as a contractor has been rejected, leaving firms seeking workarounds.

US District Judge Dolly Gee in Los Angeles rejected a request – filed by Uber and Postmates – for a preliminary injunction to exempt firms from Assembly Bill 5 (AB5). The companies argue that the requirements of the bill to reclassify drivers as employees would add up to 40% to their operating costs, a rise that they complain is unfair and unconstitutional.

Judge Gee isn’t sold on that argument. While acknowledging that there would be a negative impact on gig economy firms, there is a wider societal interest in securing a living wage and regulating employment terms and conditions. In her 24 page decision, the judge does not rule on the merits of the wider case, so the lawsuit can proceed, but the temporary relief has been rejected.

Workarounds

Uber, Lyft and DoorDash have pooled $90 million for a political initiative to overturn AB5 at the next state election in November. But that’s a way off and the restrictions the bill imposes have been in place since 1 January, leaving gig economy firms seeking ways to get around the legislation.

For example, Uber has started testing a new feature on its app across a number of California cities which allows drivers to determine and set their own payment rates. This will then allow Uber to make a case that because drivers are essentially setting their own wages, they are clearly independent freelance contractors.

It’s not quite that simple though. In practice, Uber will set a base fare to ensure it gets its money. What has changed is that drivers can then increase that fare in 10% increments with a maximum charge of 5x the base fare. The best fare is then matched to riders. So while Uber says this will “enhance drivers control” over their income, essentially drivers will be bidding against one another.

In further efforts to demonstrate driver independence,  Uber will also provide them with more trip information up front, including travel time, distance, destination and estimated fare, and allow drivers to reject ride requests without penalty.

CEO Dara Khosrowshahi admits it’s a work-in-progress and there’s no certainty that the changes, which are being trialed in handful of airport cities, will work or what the impact will be on Uber’s business longer term:

It’s too soon to tell at this point. The drivers are reacting quite well to the increase in information that they are receiving. On average the service levels as it relates to riders has gone a little worse as far as a predictability of getting a ride. That’s something that we’re working through pretty carefully. Prices in California are up more than, let’s say the rest of the country as a result of the combination of these factors. So some of these changes are resulting in higher prices to the end customer, but it’s very early and there’s a lot of work to do going forward.

CFO Nelson Chai is quick to emphasize the ‘early days’ message, but adds: 

Driver feedback has been positive in terms of the information, the empowerment that I think our driver partners feel. I think that [in terms of] the service itself, prices have increased more than they have nationally. So I think from a rider standpoint, the service on balance has gotten more expensive. But it’s very, very early.

And I would comment, too, that AB5 in general for a number of contractors has created a huge amount of uncertainty. We rolled out these changes to be very clear about our position as a platform and to make sure that our drivers have the freedom to choose when and if they want to work. We’re going to be working through. We want this to be a win-win for our drivers and for the riders on our platform. And we’re going to be iterating to get there. Short term, it’s been, I’d say, net negative for riders, and it’s possibly a net positive for drivers. Hopefully, we can get to a win-win situation.

Whether other gig economy firms take similar preventative measures remains to be seen. Uber rival Lyft is keeping its powder dry for the time being, with co-founder and President John Zimmer saying that the firm is watching what happens at its competitor:

We obviously look at the impacts and are always evaluating but we have no additional product features to report at this time. We’re confident in our position in the market and how the marketplace is performing overall for drivers and riders we feel good about.

What Lyft has committed to is an investment of approximately $75 million year-over-year to fund and support “key 2020 policy initiatives across the United States including the important work we are doing in California to help protect app-based drivers and services” and “help protect the flexibility that our drivers value today”.

London calling

Of course California is not the only pain point for Uber when it comes to regulation. The ban on the company operating in London imposed last year by Transport for London (TFL) is another battle to be fought. Khosrowshahi is clear here:

In London, as far as regulatory goes, we’re going to have our day in court. We respectfully disagree with TFL’s conclusions. I’ll remind you that two years ago, in court, we won the right to operate in London. And I think that our safety levels, our service levels are across the board, significantly, significantly improved versus where they were two years ago. The team is very focused on executing on safety around the world. The London team especially is focused on it. So we expect that our day in court will be positive, but we know that we’ve got to make the case. In the meantime, we operate in London as we have, as always, and where we continue to optimize our business and it’s like any other day in London as far as our operations go.

Underpinning such talk – at home and abroad –  is a fundamental thesis that the platform-enabled disruption caused by firms like Uber is unstoppable and a resulting inference that regulators better be on the right side of history here as society will demand it.  Khosrowshahi pitches it thus:

The most important factor that I point to is that we’re moving from a society that was dependent on transportation based on owned assets to a society that is going to depend on transportation-as-a-service based on shared assets. So there’s a very, very consistent tailwind that we have in the US and across the world and that tailwind is going to serve us well and continues to serve as well going forward.

I think people are changing the way that they live, that they’re changing certainly the way that they get around, and especially the younger generation is not a generation that associates car ownership with freedom. They associate non-car ownership with freedom using our services.

My take

In other words, this is a battle for freedom with Uber casting itself in the role of People’s Champion against Big Government meddling.

That’s an expedient framing in a US election year. It’s clearly in Uber’s interests to pitch a party line that it’s down to the regulators that fares have increased for customers. If that message can be amplified enough in the run-up to November’s ballots and people vote with their wallets, then perhaps AB5 can be sunk.

There’s certainly some merit in the argument made by critics that AB5 is badly-drafted piece of legislation with unintended consequences. While attention has focused on the impact on the likes of Uber and Lyft, there is, for example, a cap on freelance journalists producing more than 35 written content submissions per year.

That’s resulted in San Diego Assemblywoman Lorena Gonzalez, who was the primary drafter of the current legislation, having to promise exemptions for certain business categories in the form of a new piece of legislation, AB1850:

Based on dozens of meetings with freelance journalists & photographers, we have submitted language to legislative counsel that we hope to have available next week to put into AB1850 which will cut out the 35 submission cap & instead more clearly define freelancer journalism.

And there will be more announcements of changes to come in the next few weeks, she adds.

But such an admission of the need to rewrite legislation that’s only a few weeks old will only add weight to the arguments put forward by hostile gig economy firms that this is bad law. For her part, Gonzalez obviously rejects such criticism, insisting that these are just tweaks:

I do believe in AB5 and will fight any attempts to repeal it. I will fight Uber’s attempt to exempt themselves through initiative.

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The Music Dies for Poland’s Gig Economy Workers

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There was a time when the ruling right-wing Law and Justice party (PiS) was seen as the champion of those relying on flexible forms of employment. Five years ago, when it came to power, it declared it would abolish “junk” contracts.

But critics say all PiS has done is to introduce a minimum hourly rate for casual workers to match minimum rates for employees on full contracts.

“It takes more time for the labour market to totally get out of these types of contracts,” said Wojciech Zubowski, PiS deputy chairman of the parliament’s economy and development committee. “Besides, for many people who don’t want to be associated with one company, this kind of employment is simply suitable.”

In recent years, Poland has seen economic growth and budget surpluses thanks in part to a buoyant global economic outlook and austerity reforms brought in by PiS’s predecessors. Poland’s unemployment rate hit a record low of 2.9 per cent in January. 

But critics say PiS has squandered the conditions it inherited. Instead of reforming the chaotic labour market, it has overseen a dramatic increase in social spending.

It introduced a “13th” and then a “14th” month of annual pension payments and one-off gifts of around 70 euros for school pupils. It also brought in an immensely popular subsidy of 110 euros a month for each child, regardless of a family’s income, which has cost taxpayers 18.5 billion euros since 2016.

Critics say PiS has also distributed money among loyalists in the public media, government agencies and bureaucracy — sectors that are key to the party’s grip on power — though PiS denies it.

“In times of prosperity, PiS has neither made serious investments nor savings,” said Katarzyna Lubnauer, a member of the Modern party, which along with Civic Platform, the main opposition party, forms the Civic Coalition alliance in parliament.

“So now there are relatively few funds that can be allocated to saving the economy.”

In times of prosperity, PiS has neither made serious investments nor savings. So now there are relatively few funds that can be allocated to saving the economy.

– Katarzyna Lubnauer, the Modern party

While Lubnauer faults PiS for not reorganising the labour market, she said for some workers it was a conscious choice to work on non-standard contracts, which offered them flexibility and exemption from paying social contributions.

But “what worked in times of prosperity becomes a burden in the crisis”, Lubnauer added.

Meanwhile, singer Marcin Januszkiewicz wonders if he will ever play a concert again as social distancing looks more and more like the new normal.

Whatever happens, though, he is trying to stay upbeat.

“The thought that we’re all together facing some unknown disaster rather builds me up,” he said.



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Help is on the way for Uber, Lyft drivers and other gig workers as economy sputters

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“That shift in the economy, we’re not going back, so I think hey, when we get through this people are going to be renting out rooms again and sharing their vehicles and participating in opportunities. So I don’t think there’s any necessarily turning back on the gig economy, I think it was such a shock to the system of many folks that were participating in it that saw this as their full time job. And there really isn’t a nice safety net, although some of the programs may be addressing and supporting them,” Goldberg said.

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Collaborations helping gig economy survive COVID-19

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Multiple partnerships between local governments and private businesses in the gig economy space are playing an important role in the battle against the COVID-19 pandemic, a report by the Ola Mobility Institute (OMI), ‘Leveraging and Protecting the Gig Economy against COVID-19 has said. 

The report says such collaborations between governments and businesses has resulted in the government recognising the potential of gig workers in this crisis, by two non-fiscal strategies, i.e. by actively involving the technological capability of the platforms and their logistical networks (hands-on approach), and passively facilitating their operations through legal protection (hands-off approach). The agility of businesses implies fewer challenges to staffing their gig workforce, while also providing remunerative opportunities to gig workers, it said. 

In India, this collaboration has been seen as platforms such as Flipkart, Uber and Big Basket are partnering with each other in multiple cities to provide delivery of essentials.  

It calls for a collective effort to strengthen social partnership with platform companies to fast-track the recovery process from the COVID-19 crisis. Gig workers and platforms must be leveraged to better manage the crisis, fast-track recovery.

It also discusses steps to protect gig workers that have been taken by the new-age platforms and the governments. New businesses are strengthening safety measures, adapting to the new work environment, providing health access to all, expanding paid leave, and taking steps to secure the livelihoods of players in the gig economy. It also says that governments across the world have also announced multiple policy measures to minimise the human and economic impact of COVID-19, and particularly protect the gig workers.

Speaking on the report, Carson Dalton, Senior Director, Ola Mobility Institute said, “COVID-19 is an unprecedented crisis of our time. Under these extraordinary circumstances, gig workers and platform companies are adapting quickly and leveraging their workforce to ensure transportation services, delivery of essential commodities and medicines are available to the most vulnerable populations.” 

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