Pay, Passengers and Profits: Effects of Employee Status for California TNC Drivers

Michael Reich

Institute for Research on Labor and Employment, Working Paper Series from Institute of Industrial Relations, UC Berkeley

Abstract: Uber and Lyft currently treat their California drivers as independent contractors, despite state employment law giving the drivers employee status. The companies claim that drivers are already well-paid and that employee status would bring the industry to its knees. Driver advocates claim that drivers are low-paid and do not receive basic benefits and protections, such as unemployment insurance and workers’ compensation, and that the companies should treat the drivers as employees and adhere to California employment law. I examine here the economic and financial consequences of switching the drivers to employee status. In particular, I examine the effects on pay and employment of the drivers, the effects on passengers, and the profitability of the industry. I find that: most drivers are paid much less than the current minimum wage and that overall compensation of drivers would increase 30 percent; that driver schedule flexibility would not be affected; passenger demand would fall by 1 or 2 percent; and profits of the companies would increase.

Keywords: Social and Behavioral Sciences; gig economy; rideshare; independent contractors; transportation network companies; Uber; Lyft (search for similar items in EconPapers)
Date: 2020-10-05
New Economics Papers: this item is included in nep-tre
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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