Entrenching the Gig Model

The year 2020 was a big one for the major companies of the gig economy. Though ridership on Uber and Lyft’s ride-hailing services plummeted with the pandemic, the increased demand for grocery-delivery services like Instacart and meal-delivery services like Uber Eats and DoorDash saw workers join in droves to fulfill orders for low wages — all while risking their health and safety.

Uber and Airbnb lobbied hard to get relief for their drivers and hosts through the CARES Act, but when it passed, drivers reported that their employers were blocking them from accessing those very benefits. The goal wasn’t actually to support workers but to create legal recognition of their status as contractors — an effort that went much further in California.

With the passing of Assembly Bill 5 in September 2019, the California State Legislature expected Uber and the other gig companies to reclassify their contract workers as employees by January 1, 2020, and to give them the associated rights and benefits. But that date came and went, with nothing changing as the companies continued to argue that their workers were not employees.

In May, California attorney general Xavier Becerra was joined by the city attorneys for San Francisco, Los Angeles, and San Diego in a lawsuit against Uber and Lyft for worker misclassification. On August 10, San Francisco Superior Court judge Ethan Schulman ruled that Uber and Lyft workers were employees, but just before the ruling was to take effect, an appeals court delayed its implementation until after the November election.

As all this was happening, the gig companies were pouring hundreds of millions of dollars into Proposition 22, a ballot initiative that would create a third category of labor to cover gig workers: they would still be contractors, but would get some benefits if they qualified. Knowing that public opinion was on the side of the workers, the companies peddled their ballot measure as a progressive improvement to gig workers’ conditions, and, in November, after flooding users with push notifications, buying endorsements, and sending out misleading mailers, the campaign won. The gig companies bought a new labor classification that would deny workers the rights and benefits of being an employee — the very rights the legislature and the California Supreme Court had clarified and upheld.

The events of 2020, and especially the campaign for Prop 22, were a mask-off moment for the gig companies. Though they covered up their true business models with empowering language and clever marketing strategies, the pandemic showed them for what they were: companies using the excuse of technology to roll back workers’ rights in service of the power and profits of their wealthy shareholders and, by extension, the entirety of the capitalist class. No company is a better example of this than Uber.

Uber’s War on Workers

Uber began in 2009 as a way for cofounder Travis Kalanick and his rich buddies to get cheaper access to black-car service by flooding the market with new drivers willing to accept lower rates. It then expanded with a lower-cost taxi competitor called UberX in 2012. The number of taxis in San Francisco had been regulated to ensure the streets weren’t flooded with vehicles and that drivers could make a decent living, but Uber blew that up by arguing it wasn’t a taxi company — and regulators let the company get away with it.

Uber undertook aggressive global expansion, funded by its deep-pocketed investors, with the goal of monopolizing transport markets around the world. However, the cost of drivers was always Uber’s biggest problem. Kalanick promised it would be solved by replacing drivers with self-driving cars, but that vision was thrown out, along with Kalanick, as the industry began to admit that the technology had been wildly overestimated.

In 2017, Kalanick was replaced with current CEO Dara Khosrowshahi, who promised a more ethical Uber that would do right by drivers. He also rolled out a new vision for profitability: the Amazon for transportation. Khosrowshahi wanted to turn the Uber app into the one-stop shop for transport services. It would have Uber’s ride-hailing and food-delivery services, its Jump dockless bike and scooter services, and integration with public transit in certain cities, with plans to expand to flying-car services and autonomous vehicles whenever those technologies reached maturity.

“Amazon for transportation” was above all a marketing ploy to keep investors on board, not a serious plan to make the company profitable. As Hubert Horan identifies, Uber did not actually deliver its service at a lower cost than traditional taxi companies. Relying on drivers to have their own vehicles instead of having a fleet increased vehicle costs in terms of acquisition, maintenance, and insurance. Corporate costs were also much higher because of its high executive salaries, fancy global headquarters, political lobbying, and expensive projects, like research into self-driving and flying cars, that didn’t amount to anything. But the biggest cost was always the cost of labor — and keeping that low was the key to profitability, as became undeniably clear in 2020.

As Uber was waging a war on workers’ rights with Prop 22, it was also shedding the expansive vision Khosrowshahi had championed just two years earlier. In May, Lime announced it had raised $170 million despite its revenue having crashed during the pandemic. Uber led the funding round in exchange for Lime taking its money-losing bike and scooter business off its hands. But that was only the first domino to fall.

In December, Uber announced it had struck a similar deal with Aurora to have it take over Uber ATG, its self-driving division. In exchange for taking on the expensive project, Aurora received a $400-million investment from Uber, which also took a seat on its board. The sale was expected after Uber laid off 6,700 workers and closed forty-five offices earlier in the year. Finally, Uber also off-loaded Elevate, its flying-car business, onto Joby Aviation with a $75 million investment.

With these sales, Khosrowshahi refocused Uber’s business on its core ride-hailing and food-delivery services, with the explicit recognition that reaching profitability will require fighting employee status for drivers and couriers. He plans to do that by cementing a legal framework the company is calling “IC+” that ensures workers remain independent contractors with some additional benefits few can even access. Uber’s own data, for example, shows three-quarters of its drivers wouldn’t be eligible for its health care subsidy. But this isn’t just about Uber workers or gig workers; every worker should be concerned about what these companies are doing to workers’ rights.

Fighting for Workers’ Rights

The law professor Veena Dubal has characterized Prop 22 as “the most radical undoing of labor legislation since Taft-Hartley in 1947” — a measure that restricted the power of unions and helped employers fight them off in the decades that followed. The strategy of the gig companies should be seen in that light: while these changes might start with gig workers, they’ll eventually come for everyone, in the same way that many current Uber drivers and Instacart shoppers once thought they wouldn’t lose their middle-class jobs either.

Gig workers are already fighting back. After failing to defeat Prop 22, drivers filed a lawsuit with the support of two major unions in California’s Supreme Court, seeking to have it deemed unconstitutional. Rideshare Drivers United, an organization founded by ride-hail drivers to fight for their rights, also recently launched the Tech Workers for Tech Workers campaign to get the support it needs to step up its efforts. Meanwhile, white-collar workers at Uber, Amazon, Google, and other tech companies have been speaking out in support of their blue-collar colleagues. Google workers even revealed plans to create a wall-to-wall union that would include contractors, temps, and vendors. But this isn’t just a fight for gig or tech workers; it’s a fight for all workers.

Already, the effects of Prop 22 are being felt. Gig companies introduced additional customer fees to cover workers’ supposed benefits, despite suggesting in the campaign that prices would only go up if they didn’t get their way. Grubhub workers say tipping was made optional when that change occurred, so they’re actually worse off than before. Meanwhile, Albertsons Companies, which runs a number of grocery chains across the United States, laid off their unionized delivery drivers in California at the beginning of the year so they could take advantage of gig labor instead. This is just the beginning of the repercussions Prop 22 will have beyond the gig economy.

In 2021, Uber and its allies will only escalate their war on workers’ rights. The gig companies have already signaled their intention to bring their new labor classification to other states. Uber drivers won’t be able to defeat the company on their own — they’ll need solidarity from the rest of the working class to not only gain employment rights for themselves but to protect them for all workers. Because just as capitalists have decimated unions over several decades, if gig companies are successful in solidifying contractor status for their workforce, other employers will copy them — and that means the rights of all working people are in jeopardy.