The gig’s far from up
The resolution of Prop 22 means on-demand, app-based businesses in California are here to stay, exempt from state labor laws that would force them to classify their workers as employees. It’s a win for companies like Uber and Lyft and one that will be felt far beyond the California state border: Prop 22 could set a precedent for creating laws with similar exemptions in other states. But where labor activists see a door closing, others see a business opportunity. Now new companies are voluntarily offering the benefits Prop 22 takes away — creating more enticing job opportunities for workers and giving consumers a way to stand against gig-economy practices with their wallets. And in a time when conscious consumerism is trending up, offering these benefits could ultimately benefit these businesses’ bottom lines.
Back up, how did we get here?
The tug of war between workers who want better pay and benefits versus employers who want to cut costs far predates the first smartphone. But app-based services like Uber, Lyft, and Instacart have given rise to a new type of gig worker and made side hustles the norm. These companies rely on independent contractors to carry out the services their apps offer, and re-classifying these contractors as employees would cost them up to 30% more. It’s no wonder Uber, Lyft, Instacart, and Doordash spent over $200 million promoting Prop 22, making it CA’s most expensive ballot measure, ever. The Proposition came as app companies’ answer to California’s AB5 law, which narrowed the definition for independent contractors and would require more employers to offer benefits like a minimum wage and paid sick leave. App companies said, “how about no?” and voters agreed: Prop 22 passed in November with 58% of the vote. But it didn’t leave drivers out to dry entirely. Prop 22 introduces a standard floor wage and limited benefits.
Enter the new apps on the block
Newcomers to the app-based service space may be the solution for workers who want the benefits AB5 promised and consumers who want to support them. Up & Go is an NYC-based co-op of cleaners that operates like an app, allowing users to schedule service from one of 50+ housekeepers who are each part-owners of the biz. This gives app-users the peace of mind they’re not hiring an underpaid worker, but the owner themselves. Meanwhile, Dallas rideshare app Alto hopes to offer the same A-to-B convenience of an Uber, but from drivers who are vetted thoroughly and fully-employed with benefits. These firms are hoping consumers will pass on cheaper, ubiquitous services in favor of ones that offer fairer pay and benefits to workers who haven’t simply downloaded an app. They’ll have been vetted, trained, and in some cases hold a stake in the long-term success of the business they work for.
What’s in it for workers?
- Increased pay: Housekeepers at Up & Go went from earning roughly $11/hour from app-based gigs to $25/hour.
- Simplicity and flexibility: Employees can still enjoy a top benefit of app-based employment — a single, accessible portal connecting workers to customers.
- Increased job satisfaction: Benefits have been found to increase worker loyalty and motivation, so workers can concentrate on work, not finding another job.
What’s in it for consumers?
- Higher costs: The price of better pay and benefits will translate to higher prices, but Uber and DoorDash are raising prices in CA too, despite Prop 22’s success.
- Speed and safety: The same speedy services with the tap of a finger can be had here, but you’ll be booking a vetted full-time employee and not an anonymous contractor.
- Social responsibility: Nearly one third of gig workers work full time but don’t enjoy benefits or protections. Choosing these apps lets consumers help change that.
Will people pay more to support these workers?
So far, the answer seems to be yes. Up & Go’s plans to expand beyond the Big Apple were stymied by the pandemic, but customers have remained supportive. The business has seen 50% of its residential clients continue to pay for services, even if they haven’t been able to receive them. It still remains to be seen if these concepts have legs beyond their local markets. Alto hopes its W2 employee-based model and focus on rider safety will launch them to the same level of success in California as seen in Texas. The biz’s expansion into LA this month will test its scalability — the uber-competitive, crowded market is still reeling from a decline in demand due to Covid-19.