Uber’s Proposal to Benefit Gig Workers

Joe Kennedy August 11, 2020
August 11, 2020

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Although still a small portion of the total workforce, the number of “gig” workers continues to grow. These workers use Internet platforms such as ThumbTack, Uber, or Upwork to advertise their services, find customers, and arrange payment. The platforms have been growing quickly because they offer a highly efficient way to match workers who want to provide a service with customers.

Unfortunately, state and federal labor laws are relatively inflexible when it comes to meeting the needs of workers who do not fit into the traditional employer/employee model. Much of our system for delivering legal rights, disability protection, pensions, and health insurance is built on this traditional model in which workers give up control over how and when they work and employers provide both pay and benefits. This model ties workers to their employers and leaves little space for those who do not want to fit into the traditional mold. We need a better system.

So it is a welcome development that Uber this week has released a set of recommendations to enhance the quality and security of independent work in the United States. For one thing, many gig workers are Uber drivers. Although Uber’s proposals would only apply to independent workers for transportation and delivery Internet platforms, such as Lyft and DoorDash, they serve as a possible model not only for other gig workers, but for the much larger number of independent and temporary workers across all sectors of the economy.

Any evaluation of gig work should be guided by two facts. The first is that workers pay most of the cost of any benefits they receive, even if they are employed as permanent workers. In the case of gig work, although some of the cost may be borne by the platforms and customers, most is borne by workers—especially in competitive, fairly standard industries such as transportation. It is therefore important to ensure any mandated benefits are worth the decline in take-home earnings needed to pay for them. Many gig workers already have some of the most important benefits, including health care and pension accounts, either through another job or a family member. For these workers, take-home pay may be much more important than additional benefits.

The second fact is the significant flexibility that gig work provides and its importance to a distinct population of workers. Most gig workers say flexibility is a high priority for them. Some may be people who just don’t like having a boss. Others may be parents, students, or retirees who either don’t want to work full time or cannot fit their schedules into that of an employer. Making them traditional employees would remove much of the flexibility associated with their jobs, possibly excluding them from the workforce altogether and resulting in fewer total jobs. Although it could be done, the welfare losses would be great.

The nature of gig work can make it difficult to determine benefits. Should someone qualify if they are logged into the Uber network all day but don’t accept any rides? Should Uber pay benefits if half a driver’s rides come because she is also working for Uber’s competitor Lyft? When a driver is logged onto both platforms but not engaged in a ride, should any benefits be given, and if so then by whom?

Uber’s proposal begins with a concession. The company is asking the state and federal governments to extend current laws to protect independent workers from discrimination, harassment, and prejudice. Surprisingly, many laws only protect employees, and in some cases only those who work at companies above a certain size, even though the need for the law extends to all workers, gig or otherwise. The proposal also calls for a similar mandate to provide occupational insurance covering medical and disability expenses for accidents while working.

Uber further calls on states to require the gig transportation industry to contribute to funds workers would be able to use for paid time off or any benefits they want. The proposal does not indicate how much should be set aside, but it does indicate that benefits should be proportional to the amount of work done on the platform, that workers should be able to combine benefit funds across platforms, and that they should get to choose and control the benefits most important to them.

Uber’s proposal also commits it to two further changes. The first is to create a voice for their drivers to interact with company management. Although the proposal is not very specific, it does mention polling drivers to get their opinions and identifying representatives who can credibly represent workers’ interests. As ITIF has previously suggested, one way to do this would be to encourage workers to self-organize on a voluntary basis outside of a union, possibly with a union’s tactical support.

Uber is also committing to the career development of their drivers. Although some drivers are content with their current situations, younger drivers are likely to see Uber as a temporary job. The company intends to work with governments to develop better plans for education-to-work pathways for independent workers, including the development of stackable micro-credentials. For example, Uber has already partnered with Arizona State University to offer eligible drivers access to free undergraduate degrees online.

The aging of the workforce, the heightened need for educated workers who learn throughout their careers, and higher levels of economic and technological uncertainty all point to a future workforce that values flexibility and control. State and national laws need to reflect this. In some cases, such as anti-discrimination and worker safety, existing laws should be expanded to cover all workers, regardless of their legal status. In other cases, including health care and pensions, the law should make it easier for workers to set up individual accounts so that they are less dependent on a company.

Laws such as California’s AB5, which tries to shoehorn all workers into a traditional employer/employee relationship so that state can mandate numerous benefits, will reduce flexibility and employee welfare. Uber’s proposal offers a good start to a more productive approach. Hopefully state and federal legislators will turn to more effective ways of supporting all workers.