Ridesharing

Uber Says California's AB5 Law Could Cost 158,000 Drivers Their Jobs

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If Uber is forced to classify its drivers in California as employees, 158,000 will be out of work, the company said.

C/NET reported the San Francisco-based ride sharing firm’s internal analysis revealed in addition to massive job losses, passengers could see prices rise by as much as 120 percent while rural areas would be especially impacted.

Uber has 209,000 drivers in the state, the company said, and 76 percent are at risk of losing their jobs. 

“Shifting to an employment model would force us to limit the number of people who could drive on Uber in order to manage costs that are fixed per employee,” the company told the news service.

Analysts and most economists agree the system would change if drivers were to become employees.

But some say rural areas are already underserved by Uber, while some drivers only work a few hours a week, CNET reported.

Michael Reich, co-chair of the Center on Wage and Employment Dynamics at the University of California at Berkeley, told the news service if drivers were employees, Uber would run more efficiently.

“Some drivers who work more than 40 hours per week will reduce their hours,” Reich said. “Many who drive less than 40 hours per week are likely to increase their hours.”

Uber’s study comes amid the debate over so-called gig worker classification in California. Today, most gig economy companies classify their workers as independent contractors, not employees, CNET reported.

As a result, these companies do not provide health insurance, sick leave or pay minimum wage to these workers.

California lawmakers passed a measure that requires them to be classified as employees. The law took effect in January.

Uber, Lyft, DoorDash, Instacart and Postmates spent $110 million to sponsor a ballot measure that could exempt them from the legislation, CNET reported. The question will be on the November ballot at the same time voters choose their next president.

On Tuesday, Democratic presidential hopeful Joe Biden said on Twitter “gig economy giants are trying to gut the law and exempt their workers. It’s unacceptable. I urge Californians to vote no on the initiative this November,” CNET reported.

Uber said the new law would bring higher fares.

In San Francisco, a $10 trip today would be $12 — and in the Central Valley could get as high as $22.

But Reich, who has studied the issue of gig workers and employment status, said fares would increase if drivers become employees, but not by as high as Uber’s estimates.

He said prices would rise by between 5 percent and 15 percent, which would mean passenger demand would fall around 3 percent, the news service reported.

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