LAs of Monday, the California Supreme Court handed down a land law ruling that appears to be taking the wind out of the sails of at least some parts of the ‘gig economy’. The case was brought by the Attorney General of the State of California, along with the city attorneys of Los Angeles, San Diego and San Francisco, on the grounds that the companies that drive Uber and Lyft “mistaken their drivers as independent. Contractors then Employees ”in violation of a California law that came into force in January. This statute is intended to ensure that all workers who meet its criteria receive the basic rights and protections guaranteed to workers under California law.
The companies rejected this idea, for the understandable (but obviously not stated) reason that following the law would blow their business models on forges. In submissions hidden under three layers of primary legal ban, they tried to delay the hearing until after the November presidential election, complaining that the Attorney General should not have beaten them together (they are, after all, commercial rivals) and that judgment should postponed until all other cases concerning them in the US and elsewhere need to be decided.
Judge Ethan Schulman was not impressed by these arguments. The U.S. Supreme Court, he pointed out, had produced three tests to decide whether one was an independent contractor or not. They are that the person must a) “be free from the control and direction of the hiring entity”; b) “performs work that is outside the normal course of business of the hiring entity”; and (c) “is engaged in an independently established trade, profession or business of the same nature as that involved in the work performed”. Because it was obvious that the suspects could not meet criterion b, the judge declared: “The chance that the peoples will rule on their claim that the defenders have wronged their drivers is overwhelming.” QED.
It is not often that reading a legal transcript is good for your blood pressure, but this is an exception. It shows what happens when a sharp judicial mind comes face to face with the pretensions of the neoliberal racket that sails under the gig-economy flag of convenience.
This “economy” is neoliberal because it embodies the idea that society consists only of brands and individuals. In the case of Uber / Lyft there is a market for rides and there are people who can ride. Thus, a software platform has been built to connect named individuals with those who need their services. The owner of the platform has no obligations to the atomic persons providing the service: they are free to work (or not) and are ‘managed’ by an algorithm and drivers do not have any of those expensive rights that come with of a normal ’employee’ ”. Prices of the services are determined algorithmically: if there is a thunderstorm, the cost of a ride goes up; when there is silence, they go down. Truly, the gig economy is a Hayekian wet dream.
The length at which companies with gig economics go to make up for when they are not as employers are comical. A while back, the Financial Times received an internal handbook from Deliveroo. Never say “We pay you every two weeks”, it advises; instead it is “Rider invoices are processed two weeks”. Never say “Yesterday, you were late to start your shift”; instead it is “Yesterday, you logged in later than you agreed were available”. And of course never mention “uniforms”: they are “branded clothes”.
So much for the neoliberal lexicon. But the gig economy is also a racket, because it is based on a deadly business model. Many of the companies burn money as it goes out of fashion. Uber, for example, lost $ 8.5 billion in 2019. “We have made significant losses since its inception, including in the United States and other major markets,” the company wrote in its SEC report. “We expect our operating costs to increase significantly in the foreseeable future and we may not achieve profitability.”
The reason Uber is not profitable is because the rides are cheaper than those of conventional taxi companies. And that’s a feature, not a bug: it’s a strategy to drive conventional companies out of business. The money it burns belongs to investors (such as the Saudi Sovereign Wealth Fund) who bet that once the company is the only one left standing, they will have a monopolistic possession. This is “creative destruction” at its worst.
None of this means that the services provided by companies for business enterprises are not useful or valuable: if nothing else, the pandemic has established that. But, like the more conventional tech giants, they have grown exponentially in a period in which relevant laws have been behind the curve or, in some cases, not enforced. The significance of the California judgment is that this is finally starting to change. And over time too.
What I have read
Calculate this …
“Why Calculate Within the Social Sciences”. Really unexpected essay – by a computer scientist – in a major academic journal.
The fall of America
“The Loss of the State”. Sobering edited by Nathan Gardels on the page of Noema magazine.
Conspiracy conundrum
“QAnon was a message board theory. Now it’s going to Congress. ” Charlie Warzel, writes in the new York imes, about how an early conspiracy theory traction remains in the US.
