Voters to Decide Fate of App-Based Drivers in California
After coming within mere hours of seeing ride sharing companies shut down their operations in California, the appeal against new legislation has now been sent to the people.
The idea of having people work as independent contractors is far from a new one, and actually has been around for as long as people have been paid for selling things. Independent contracting is very much alive and well today, where people don’t work for who they contract with per se, where both the contractor and the company work together in a partnership to achieve a mutual goal.
In these cases, both the company and the contractor not only freely agree to the terms of their contract, the arrangement itself, independent contracting, competes with more traditional employment relationships. In the case of ride sharing drivers, they are free to choose not only between competitors for their contracted services, like between Uber and Lyft for instance, but are also free to work for a traditional taxi company or any other employment-based contract that they may qualify for.
Labor laws are designed exclusively to protect employees from undue coercion, especially involving employers colluding with one another to restrain competition and enrich themselves at the expense of workers.
Given that labor laws are specifically intended to benefit workers, any laws that do not accomplish this goal are not only unwarranted but regrettable, as if our laws diminish the opportunity and welfare of workers, this is no way to accomplish the goal of benefiting them, if they become harmed instead.
Placing undue restrictions on individuals becoming independent contractors ultimately serves to quash the entrepreneurial spirit that is the lifeblood of our economy and way of life, and even though life will go on if we destroy this arrangement that technology-based companies like Uber, Lyft, and others have built, we will lose most of the benefits that these companies have provided to themselves, their drivers, their customers, and the economy as a whole.
When we speak of the efficiencies that are gained by permitting independent contracting, this just isn’t about the improvements in overall economic efficiency that this delivers, it also plays out at the level of the individual driver, and not all the benefits are economic. To the drivers, the freedom of working for yourself is also seen as a high priority, especially among the legion of drivers who are only engaged because the additional flexibility of the arrangement permits it.
The fact that app-based ride sharing and delivery has had has captured as much of their markets as they have managed has not been by accident, as they have provided a better way, one that customers have been very in favor of, as evidenced by how much they use them. Every stakeholder wins in this scenario, the companies, the drivers, the customers, the economy, even the government in additional tax revenue generated.
There are some non-stakeholders that may not be so happy, although you can’t make everyone happy and there are always those who put their own interests, whether financial or ideological, above the interests of stakeholders, even in a scenario so one sided as this.
Traditional competitors hated this idea all along, for obvious reasons, as it took money out of their pocket. Just like less efficient retailers rallied against Wal-Mart coming to town and beating them, taxi and delivery companies have not been too pleased, but this is to the benefit of the public, and that always needs to be the standard we use.
If we can get a better deal at Walmart than at a local retailer, we should not wish to constrain efficiency in favor of special interests such as these retailers, who are only promoting their own well-being and not the well-being of the market or the public. Restricting efficiency to benefit these folks and having our laws favor them over the people that the law owes a duty to protect is simply corrupt, and arguing for more corruption is not one that we should pay any heed to, let alone use to harm.
We do this in part when we look to use protectionist strategies to look to benefit domestic commerce, where we take money out of the pockets of Americans to unduly enrich American businesses, where people prefer to get more value from goods produced abroad and we seek to deny them by way of tariffs, which generally leads to not more American jobs but money flowing directly from consumers to the government.
People still buy these things, and if the goal really was to direct people away from these imports, they would just ban them, giving people no choice but to buy American, and while this would put the price of things up even more, this at least would put the money in the companies’ pockets and not the government.
With tariffs, the substantial impact is to see it serve as a tax on imports, where the tariff gets added to the price of things directly and then goes directly to governments in tax revenue. In their zeal to tax more, the government is choosing to pick on foreign produced goods more, and people generally do not understand how these things work and may actually think that these things benefit the American economy more, seeing a few jobs added perhaps but blind to the overall harm that these things do.
Everyone Wins with the Gig Economy, and Everyone Loses When We Rid Ourselves of It
There isn’t even an illusion of benefits involved in our looking to regulate what they call the gig economy, which is a slang term that musicians use when they perform, getting paid by the gig rather than by way of some other arrangement.
Ride sharing and delivery isn’t quite like normal gigs, as the gigs that they play at is generally done by way of a single contract, although many drivers contract with multiple providers and this is one of the things that they are complaining that they will use if we actually succeed in reclassifying them from gig performers to traditional employees.
An even bigger issue is that they will lose all the flexibility that they enjoy from being independent, where they set their own schedules and can work whenever and wherever they want. This has allowed the gig market to attract a lot of drivers who would not otherwise be participating in the industry, those who require this flexibility.
When these drivers are excluded from being re-classified, this harms them, and by reducing the supply of labor, this itself drives the price of labor for these positions up, independent of all the other costs that this new legislation demands be added to the cost of the service because they say so.
This has placed the very existence of app-based services in California in jeopardy, as well as in other regions should others seek to join them in this destruction. Both Uber and Lyft have said that this new law will at best drastically cut their footprint in the state, if it is even viable at all, and it very well may not be.
Every stakeholder will suffer if they lose their ability to hire contractors and need to hire employees instead. This is not anything that we even need to think about more than a little to figure out, as the companies’ business will suffer, they will have to let go the majority of their drivers who will now be out of work, people’s access to these services will be greatly diminished, they will pay a lot more for the same thing, the state’s economy will suffer in turn, and the government will collect less.
This involves a dead weight economic loss, which always happens when we lose efficiency. You have to wait longer for a ride if they even provide such a service anymore, and you have to pay more for it. Gig rides and deliveries both increase access and lower cost, and if they are no longer competitive in these areas, they will probably just go under, and given that they have lost so much money building up this market.
It is not that either Uber or Lyft or any of these gig-based businesses are enriching themselves, as they even haven’t been able to achieve a profit yet, and therefore have no room for tolerance when it comes to legislation adding all these costs to their business model. They don’t even have a business model for these changes and it’s unlikely they could even come up with one that works if they tried.
Perhaps California does want to kick out these companies from their state, and go back to the old days before these companies improved the lives of all involved, but they need to at least approach the matter pragmatically. The state government has done their best so far to try to shut them down and came within hours of this on Thursday before the court stepped in and granted another stay, with an appeal mechanism that is expected to now delay the matter to the election, where Californians will vote on the matter directly.
Why would California take such a stance, ignoring the concerns of all stakeholders the way that they are doing, and ignoring the consequences of their actions? We only need to look who is on the other side of the ball to gain all the insight we need.
This Move Has Been Spearheaded by the Real Ringleaders of Radical Socialism
In addition to the state politicians involved, and the labor unions that certainly oppose these things in principle, we also see some prominent federal Democrats sitting with them, including such names as Joe Biden, Kamala Harris, and Elizabeth Warren. Knowing the mentality of these three explains everything, all of whom place their radical left-wing political ideologies over any consideration of the welfare of the people, and this particular issue may capture the divergence better than anything else since the issue is completely one-sided from a pragmatic point of view.
They either have no shame or are simply too stupid to know how stupid they are, and this could be classified as a comedy act if not for the fact that it is not so funny to see so many people put out of work and so many people see their transportation options so diminished.
We are guessing the latter, and believe that these people do genuinely think that they are somehow helping someone, although no one has any idea of who they may actually be helping. They may think that it is the drivers, and with some of their other policies you actually have to work things out to see who is harmed, like with corporate tax harming everyone right down to the poorest person, and especially the poorest people, but there is no math or even no special understanding required with this one.
They want benefits for these workers, like unemployment benefits, but somehow having unemployment benefits in theory is enough and still counts as they lose their jobs even before their idea even sees the light of day. Hopefully the voting public in California can have this explained to them well enough, where in the name of providing protection against unemployment, we instead throw the great majority of them and probably all of them out of work.
You don’t have to worry about unemployment benefits if you lose your job later, if you just lose it now, and this is exactly what will happen if this law is upheld by defeating Proposition 22 in California. It’s not even that passing this will put us back to the good old days, as this is at best a compromise and will harm app-based companies significantly, and could still spell the end of ride sharing and app-based deliveries in California anyway, in a way that is placing them on death row instead of seeing them be executed immediately.
California Democrats will unleash their will either way, where the bill just has them setting for a pound of flesh rather than taking the life of this industry. Whether or not they can survive by just being significantly wounded is a question that only time can answer, but the fact that they won’t be able to survive very well and will at best see this industry mortally wounded if Prop 22 is defeated is not in question at all.
As usual, the Democrats just conveniently point their fingers at companies and demand that they give workers more, and do not think past this point. Fingers don’t think very much though. It doesn’t even matter that these workers will not receive any benefits at all as a result, including their even getting paid, because somehow the cause is more important than even any consideration of how this affects those that they seek to protect, even when their actions visit pure harm on them, as is the case here.
If we simply do not ask any questions and just look to apply the principle that all workers should enjoy the benefits that we wish them to enjoy, whether they will enjoy them or not in practice just doesn’t come up. This may seem incredible, but superheroes such as Biden, Harris, Warren on your team, it’s just not in the nature of these superheroes to think about what they are doing, even a little bit, being so overcome by their anger against the machine that they are more than prepared to blow the whole thing up and kill everyone in the name of trying to “help.”
There are no winners with this law, only losers. The fact that we do not need anyone to win and have become so blinded with political ideology that we use political power to diminish everything without the need for anyone to benefit speaks loudly to how much the political environment has deteriorated.
It is up to the people of California now, and they will decide whether to pull the switch on companies like Uber and Lyft and see them fry now, or just throw them in prison and see if they can survive the harsher climate of incarceration, companies that are not of the sort that will do very well in prison anyway given how fragile they are. Already in survival mode overall, already bleeding red ink profusely every quarter, California may already be pricing itself out of this market either way.
The guillotine will fall on them if Prop 22 does not pass though, which may actually be more merciful. We can only wonder whether they will regret the outcome, but when your minds have become this numb to reality, perhaps they are even capable of ignoring all those people that they wished to protect being thrown out onto the street, and maybe even can put them up in luxury hotels for a while like they did with all the junkies recently, even buying them hard drugs to enjoy while they trashed these rooms.
California is definitely a different animal, and they pride themselves in leading the way in innovation, but not all innovation is a good thing. They certainly lead the way by far as being a blue state, being so overwhelmingly Democratic, but when you are this blue already, you don’t notice when you turn bluer from lack of oxygen, especially to the brain.
These companies are already turning blue without any help, and cannot even price their services in a way that even allows them to break even right now. Adding any additional costs to their services is a very dangerous practice and they have already told us that this exceeds their appetite for losses in the state. We at least need to pay attention and if that’s what California really wants, they at least need to make sure that their choosing to mutilate themselves is an informed one.
If they really want to help the so-called rank and file, as these politicians tell us, they need to at least take public welfare into account a little, which will require that they start by passing Prop 22 and at least pretend to want to do what is sensible, or in this case, limit the harm they wish to do to this industry who simply cannot bear the weight of this attack and will just pack up and leave, which helps no one.
Editor, MarketReview.com
Andrew is passionate about anything related to finance, and provides readers with his keen insights into how the numbers add up and what they mean.
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