California’s Prop 22 passed to the relief of gig companies like Uber and Lyft, which spent millions of dollars on the ballot initiative to continue classifying their drivers as independent contractors. The landmark vote, passed with 58% majority, saves the companies the heavy costs associated with making their workers employees and providing them full benefits.
But make no mistake, Prop 22 will still come at a cost to the companies. And if the companies expand the benefits to drivers outside of California—as several have already suggested they’ll do—the costs may rise even higher.
So what does that mean for Uber and Lyft’s business models and their customers?
Edward Yruma, an analyst at investment banking firm KeyBanc Capital Markets, expects a big portion of the new expenses to trickle down to customers. But those nominal increases likely won’t drive many people away from the services. Meanwhile, the companies will be able to keep much of their business models intact.
“There will be some financial burden” on the companies, Yruma said. “But I don’t believe it will terribly noteworthy.”
D.A. Davidson’s Tom White said he thinks Uber and Lyft factored the costs of the benefits into their profitability projections. “The timetables for profitability would’ve been jeopardized if Prop 22 hadn’t passed,” he said. “But the fact that the cost increases aren’t going to be severe basically keeps the profitability timelines still achievable.”
These companies now have a model to present to states beyond California that have been concerned over the lack of benefits for gig workers. “The bigger concern would be thousands of different rules from different states,” Yruma said.
White expects that the gig companies will soon start contacting states considering laws similar to California’s. But the companies likely won’t be shopping the new benefits around to all states—at least not yet, White said.
Uber, Lyft, and DoorDash have already suggested they have intentions to expand their benefits programs beyond California.
“Now is the time to push forward, focused on better, permanent, collaborative solutions for millions of workers across the country,” DoorDash CEO Tony Xu said in a blog post on Wednesday. “DoorDash is committed to leading that effort.”
In a statement following the vote, Lyft called the decision a “groundbreaking step toward the creation of a ‘third way’” of handling independent contractors in the U.S. And though Uber did not release any new statements on the matter, earlier this year CEO Dara Khosrowshahi pushed for the adoption of new laws across the nation that would require gig companies to provide more benefits while keeping their workers as independent contractors.
We could hear more from those companies in a matter of days: Uber reports its third-quarter earnings on Thursday, and Lyft will follow next week.
Danielle Abril
NEWSWORTHY
Privacy crackdown. Prop 22 wasn’t the only California ballot initiative that may have implications beyond the state. Voters also passed Prop 24, which places stricter privacy rules on companies that collect personal data from consumers. The prop passed nearly one year after California’s Consumer Protection Act went into effect. Now that Prop 24 has passed, it could set a nationwide tone for how companies handle consumer data.
Battling misinformation. As expected, the presidential race was not decided on Election Night. Twitter and Facebook's struggle to keep up with widespread misinformation continued on Wednesday as politicos and people associated with the Trump campaign claimed victory and cheating in key states before results had been determined. Meanwhile, CNBC reports that YouTube opted not to remove a video from a right-wing media organization claiming that Democrats were committing voter fraud.
Regulatory fines. Turkey authorities fined Facebook, Twitter, Instagram, Periscope, and TikTok about $1.2 million each after they didn’t appoint country representatives earlier this week, according to The Wall Street Journal. The representatives are required under a new law aimed at giving the government more power to control what content remains on the social networks.
Power problems. Apple is reportedly running short on chips that manage the power consumption of several of its devices including the iPhone, according to Bloomberg. The troubling news comes as Apple heads towards its busiest part of the year: the holiday season. The issue stems from supply-chain disruptions related to the pandemic coupled with increasing demand.
FOOD FOR THOUGHT
An evolving scientific field called synthetic biology may allow researchers to digitally program genetic structures from scratch. Amy Webb, founder of the Future Today Institute and professor at the NYU Stern School of Business, explored the field in Wired. Webb suggests that the field could not only play a key role in fighting viruses like COVID-19 but also in revolutionizing manufacturing, agriculture, food and beverage, and space travel. However, she also calls for caution ahead.
"Synthetic biology promises to improve human existence, but if we don’t have a plan, public confusion will grow to untenable levels.... Within the next decade, we will need to make important decisions: whether to program novel viruses to fight diseases, what genetic privacy will look like, who will 'own' living organisms, how companies should earn revenue from engineered cells, and how to contain a synthetic organism in a lab," Webb writes.
IN CASE YOU MISSED IT
As America holds its breath over an election outcome, Twitter lights up with cracks from around the world By Bernhard Warner
Wyoming elects first Bitcoin owner to U.S. Senate By Jeff John Roberts
Uber and Lyft shares soar after a California labor-protections vote goes their way By Phil Wahba
Will the world’s biggest IPO face a valuation ding after its delay? By Lucinda Shen
California just passed tougher privacy rules that may reverberate nationwide By Jonathan Vanian
BEFORE YOU GO
As the presidential election plays out, I turned to my most trusted source for predictions: Paul the octopus.
If you recall, the ocean creature correctly predicted the outcomes of seven of Germany’s World Cup matches in 2010. I wondered if he had a similar knack for politics. Sadly, and to my surprise, Paul also died in 2010.
However, three other animals are predicting the outcome of the 2020 presidential election. A bear and two tigers in Siberia along with a squirrel in South Carolina all made guesses. The bear, which correctly predicted the 2016 presidential outcome, selected Biden as the expected leader. The squirrel (which has since died) chose Biden too. The two tigers picked Trump.
It seems the animal kingdom can’t agree on how this will go either.
