The classical idea in economics that competitive-equilibrium pricing maximizes social welfare relies on the assumption that every participant in the market has the same welfare weight—but that’s not the case in markets where there is significant inequality.
While the gig model delivers real benefits to customers in terms of convenience and low prices, the paradigm exists in a legal gray area in terms of worker classification, depriving workers of minimum wage protection, workers’ compensation, health insurance, retirement plans, and paid time off.
Through our collective experiences studying the future of work from various angles—as participants, builders, and investors in the category—we’ve come to believe that the gig economy is broken, and Prop 22 ensures it stays that way.
Prop 22 is the California ballot proposition that would exempt app-based transportation and delivery companies from having to provide employee benefits (such as minimum wage, paid time off, and sick leave) to gig workers.
The economy is undergoing a profound shift to platform-mediated work, and the conditions around labor are rapidly changing. While the rules of the future of work are currently being debated and litigated, let’s not forget that in centuries past, people died for what we have today: the 8-hour workday, minimum wage, and the prohibition of child labor... See more
And importantly, though the nature of work is constantly evolving, Prop 22 requires a seven-eighths supermajority of the California legislature to amend, making it next to impossible to change the law in the future.
It’s clear that Uber, Lyft, Postmates, etc. have led to tremendous value creation, but that value has disproportionately accrued to executives, employees, and investors of those companies, rather than to the workers that enable these services to operate on a daily basis.
We’re concerned that the gig model is reliant on the misclassification of workers, and fear for the future of work in this country should the model continue to gain steam without significant updates.