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Gig Economy and Proposition-22 

  • IASbaba
  • November 12, 2020
  • 0
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INTERNATIONAL/ ECONOMY/ GOVERNANCE

Topic: General Studies 2,3:

  • Effect of policies and politics of developed and developing countries on India’s interests.
  • Awareness in the fields of IT
  • Economy and issues relating to planning, mobilization, of resources, growth, development 

Gig Economy and Proposition-22

Context: Gig-economy giants in the US such as Uber, Lyft and DoorDash celebrated a major win last week as voters in California green-signalled Proposition 22

What was the issue all about? Contractors Vs Employees

  • When companies such as Uber and Lyft first started in California in the 2010s, they did not hire drivers as employees, and instead classified them as independent contractors. 
  • For drivers, the gig work was supposed to bring greater flexibility than traditional employment.
  • The industries argued that they were technology companies, and said that they should not be burdened with the legal requirements applicable to transportation companies.
  • Under California’s labour law, this business model was controversial from the beginning, since the companies did not provide drivers and other workers unemployment insurance, health care, sick leaves or guaranteed pay– the binding responsibilities of an employer.
  • The gig business model came under attack in 2018, when the California Supreme Court in its landmark ‘Dynamex’ ruling held workers were to be treated as employees in every case, except if they were: free from the control and direction of the hirer; performed work outside the usual course of the hirer’s business; and were engaged in their own independent business
  • The California legislature saw the Dynamex judgment as a welcome move which could rein in the burgeoning gig industry, and in 2019 enshrined it in a state law called Assembly Bill 5 (AB5), that extended employee protections to gig workers.

The battle for Prop 22

  • Gig Companies argued that with AB5 law, drivers would be forced to become full-time or leave the platform, and prices would increase.
  • The app-based companies came together to draft a ballot proposal– a legal measure available in several US states by which citizens can suggest propositions to be put to popular referendum in the state, bypassing the legislature.
  • Named Proposition 22, the ballot proposal aims to exempt ride-sharing and food delivery firms from AB5 law.
  • Prop 22 also brings some advantages for gig workers. They would be able to work independently, but with new benefits such as minimum pay, vehicle insurance and some health care options.
  • The gig industries poured money into their ‘Yes on Prop. 22’ campaign, raising over $200 million — the most in California’s history on a proposition campaign — to get voters on their side
  • Those opposed to the proposition, such as labour unions, argued that drivers should get full employee protections, and criticised the companies for trying to write their own labour laws. 

What the passing of Proposition 22 means?

  • The popular approval of Proposition 22 on November 3 is seen as a major achievement for app-based companies, as it brings stability to their contract-based business model, especially since many of them, such as Uber and Lyft, are yet to turn a profit.
  • Enthused, the gig industry has already announced that it would seek to replicate the measure in other states

Criticisms of the Proposition 22

  • Against Labour Protections: Critics accuse the ballot measure of undoing the achievements of the labour movement of over a century. 
  • Wrong Precedent: With the success of Prop 22, experts worry that traditional businesses in the US would follow the same path as app-based companies to reduce costs – only choosing to hire gig workers and not offer full employment
  • Questions on Democratic Process: Prop 22 is also criticised for undermining the democratic process. Because of a provision contained in the ballot measure, the California legislature would now require a seven-eighths majority– an unusually high bar– to make any legal amendments affecting gig workers.

Connecting the dots:

  • Should India also adopt Ballot Proposal tools to get citizen’s feedback on legislations?

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