California law could upend gig economy — and progress

Heads up, millennials: Some of your favorite services may soon disappear. The California Senate just passed AB5, a bill almost sure to become law that could shut down the “gig” economy — endangering companies like Uber and DoorDash, firms your generation has come to depend on.   

You can thank the so-called “progressive” politicians in California and elsewhere, who claim to be protecting America’s workers. What they are really protecting is the status quo, and Big Labor. Labor unions were by far the largest contributors to Lorena Gonzalez, the Democrat who wrote AB5, donating nearly half a million dollars to her 2018 campaign.

Do not be duped. Presidential candidates Bernie Sanders (I-Vt.) and Elizabeth Warren (D-Mass.) rail against the “special interests” governing our politics and the “dark money” influencing our elections. But they don’t really mind those things, as long as the funds end up in their pockets. Money from labor unions, for instance, is quite ok, since it floods into Democratic coffers. In 2016 that amounted to a cool $217 million, 90 percent of which went to Democrats.  

It is union money that is funding the all-out war against Uber, Lyft, DoorDash and other so-called “gig” enterprises in California and elsewhere. Big Labor is desperate to shut down the kind of business-model disruption that cheers entrepreneurs and enlivens economies — and loosens their hold over workers. This resistance to progress and to technology leads to stagnation such as now evident in Europe, and threatens our future growth, as well.

The just-passed California bill AB5, promoted heavily by the Teamsters Union, demands that ride-sharing and other companies reclassify so-called “gig” workers, or contractors, as employees, thus upending the very model upon which the firms were built.

Treating workers as employees is estimated to raise costs 20 to 30 percent, as firms become subject to the gazillion employment laws that burden California’s companies, and which are driving thousands of businesses to leave the state.

Democrats like Warren, Sanders, Kamala Harris and Pete Buttigieg endorsed the bill, which assumes that drivers who want the flexibility to work part-time don’t know what’s good for them. As usual, the socialist agenda is not just about money; it’s about control.

A few years ago, Uber commissioned a survey of their drivers. Almost 9 out of 10 Uber drivers said that “being their own boss” and setting their own schedule was a main reason they chose to work with the company. Eighty-five percent of respondents also said a major reason they work with Uber is to have a greater work-life balance. That’s what Democrats want to take away.

Think about it. Someone who is working on her doctoral thesis and needs to work sporadic hours to make her rent would no longer be able to hit the roads when her schedule permits and when demand for drivers is high. Instead, she would be subject to top-down scheduling and limitations. It is ridiculous. After all, if a Lyft driver isn’t happy with the terms now offered, she is able to walk away. The job market is red-hot; there are opportunities aplenty.

Why aren’t young tech-lovers crying foul? After all, it’s millennials who so eagerly climbed aboard the Uber express, clutching their cell phones and hailing the ease of summoning a ride anywhere, any time. Why don’t they protest this erosion of progress?

While the attacks on the gig economy may help Democrats, they do not benefit our country. The rise of the internet has allowed substantial productivity gains, especially in the services sector. Internet-inspired communications platforms have enabled on-demand work, matching people with available hours or facilities to customers who need services.

The California bill is expected to inspire similar legislation in other blue states. It is not just ride-sharing firms that will be affected. Firms like Postmates and DoorDash, which started out delivering food to people from restaurants, envision a broader service where everything and anything can be quickly brought to the customer. DoorDash’s website searches for workers saying: “Delivering with DoorDash, you get flexibility and financial stability. Dash for a living or for a goal, all on your schedule and on your own terms.”

Good luck with that promise. The California law could up-end such opportunities for students, stay-at-home moms and other people who want to set their own flexible work hours.

Who benefits from AB5? The Teamsters Union, among others, which is hoping to unionize Uber and Lyft drivers. They have seen their ranks shrink over time, and especially in recent years as drivers have opted for self-employment and the consequent freedom to work as they choose.  

In the process, AB5 will cost many their jobs. Already, Uber has announced layoffs of 800 people in their marketing and engineering departments, as management adjusts to expected higher costs. Lyft and Uber are already hemorrhaging money; some are estimating that the change in employee classification will cost the two companies a combined $800 million per year.

The battle is not over. The legislation exempted numerous professions, including doctors and hairstylists, and more groups will likely challenge the bill in court. Independent truckers have already protested its passage. Meanwhile, the tech firms are planning to push back by putting a voter proposition on the next ballot; the California Labor Federation, which represents 1,200 unions, will muster opposition to that proposal.

On the ballot: freedom and innovation versus Big Labor. How progressive Californians vote could determine whether our country embraces real progress and growth or settles for stagnation and the status quo. The choice is stark. 

Liz Peek is a former partner of major bracket Wall Street firm Wertheim & Company. Follow her on Twitter @lizpeek.