Work Mix #5: Today's low-wage jobs & the roll-out of California's new labor law

January 10, 2020

Hi there,

I hope your new year is off to a great start! Work Mix is back to its weekly schedule for the year.

Topics this week:

  • A look at the most common low-wage jobs today and implications for the labor market
  • A follow-up from last newsletter looking at the implementation of California's new labor law targeting gig workers

A/ Labor regulation follow-up as California rolls out AB5

Last Work Mix discussed California's new labor regulations targeting gig workers. Since then, the new law AB 5 took effect on January 1, leading to a number of stories.

Uber, which perhaps was the biggest targets of the law, has made changes to its business in California that it thinks will allow it to continue classifying drivers as independent contractors despite the law's tough criteria. These changes include showing drivers the destination before they accept a ride and eliminating upfront pricing—in effect returning to its earlier model where the fare is only determined at the end of the ride based on the actual route and conditions. Uber is also rolling back some of its rewards program benefits in California related to pricing, discounts and cancellations.

Drivers are largely happy with these changes.

For riders, it's a different story. Some of these changes won't have too much impact on riders. But the option for drivers to reject a rider based on their destination is likely to have a significant impact for some riders on some routes--especially at times and in places where there are few drivers. My own experience is suggestive: In the last few years, I've had more times than I can count when a driver has refused a trip across the Bay Bridge after I've already gotten in the car—one time the driver started the trip early, saw the route and drove off as I was walking to the door. We've all had drivers call us and ask what our destination was (most often, this seems to happen at the airport). Where there are many drivers with different preferences, this won't make much of a problem. But, if you're going to an area most drivers don't want to go to, you could be out of luck for a ride or in for a very long wait.

In the meantime, Uber is not relying only on this approach: it's also battling the law directly. Its multi-pronged strategy includes working with Lyft and DoorDash to promote a statewide ballot initiative in the November election to exempt their workers and also pursuing a lawsuit against the state of California in conjunction with Postmates, arguing that the law is "irrational and unconstitutional."

Beyond Uber, concerns abound in the state and beyond. Many industries and groups of workers are angling for exemptions in anticipated follow-up legislation. In other states looking at similar laws, companies and workers continue to express concern with California's approach. As one New Jersey freelancer describes (and agonizes over) legislation under consideration that is modeled on California's law:

This legislation essentially classifies every worker as an employee unless they can pass a very narrow set of criteria. While their goal is to prevent companies from misclassifying workers, they are poorly written and will prohibit many successful, independent contractors from being able to earn a living the way they choose.

As other states and the federal government potentially look at new legislation for the gig economy, they would benefit from a different approach. In a chapter of the World Economic Forum's white paper "Realizing Human Potential in the Fourth Industrial Revolution" titled "Facilitating the Transition to a New World of Work," they recommend:

Reforming employment law and regulatory classifications to better enable independent workers to benefit from new opportunities while managing associated challenges may require an agile approach that involves modifying current policies as well as testing wholly new models, and measuring and monitoring outcomes. All relevant stakeholders will need to remain open to iterative learning.

As I said last time:

Rather than address distinct features of the modern economy, AB5 tries to force the world to conform to the models of the past.

New regulations and regulatory reform are both needed. Still, the starting point needs to be a better understanding of how the labor market currently works (especially for freelancers and the gig economy), and it needs to accommodate more models for work rather than limit them.

B/ Labor market facts: top low-wage jobs

I recently came across the following interesting data that frame some of the challenges and opportunities facing the labor market. The chart shows the distribution of workers in the top ten most common low-wage occupations, which represents almost half of all low-wage workers in the US.