- The passing of Proposition 22 in California dealt a serious blow to gig workers in the state.
- The threat of similar policies loom across the nation.
- The Biden administration is in a position to fight back by reinvigorationg the Federal Trade Commission and being agressive with the Department of Labor.
- Pat Garofalo is director of state and local policy at the American Economic Liberties Project.
- This is an opinion column. The thoughts expressed are those of the author.
- Visit Business Insider’s homepage for more stories.
The passage of Proposition 22 in California was a serious blow to workers in the state, and the disaster could soon spread nationwide.
The new law came in response to AB5, a California law that required companies to give many freelancers and gig workers the employee benefits that they deserve, such as health care, But Prop 22 made it so drivers for the dominant ride-hailing and delivery app corporations – Uber, Lyft, Doordash, and the like – will be exempted from AB5 regulations and in turn relegated to a perpetual underclass
These drivers will be permanently paid poor wages and receive paltry benefits. Prop. 22 also leaves drivers no recourse in the California legislature, since it includes the requirement that any future changes to the regulatory framework governing driver treatment be passed with a 7/8ths majority, making a mockery of the notion of democratic governance.
The measure succeeded, even in the deeply blue Golden State, thanks to massive ad spending by Uber and Lyft, which topped $200 million. It was the most ever spent on a ballot initiative in US history, and the ad deluge came with copious amounts of misinformation. The barrage was paired with the corporations threatening to pull out of the state should Prop. 22 fail.
Now that they’ve won, Uber and Lyft have signaled their intention to take the same model nationwide.
President-elect Joe Biden has pledged to create millions of good-paying jobs, restore manufacturing facilities and supply chains to US shores, and improve the lot of so-called gig workers. But without addressing the power that corporations’ like Uber and Lyft wielded in the Prop. 22 fight, achieving those aims will be next to impossible.
The growth of corporate power
For the last several decades, corporate power has grown by leaps and bounds. Major corporations flourished thanks to a bipartisan embrace of neoliberal tax and trade policies, as well as an antitrust ideology that subsumed concerns about pay and inequality to focus only on consumer prices. These business giants accumulated economic and political power, while small businesses languished and workers suffered.
This increased corporate power harms workers in several ways.
First, it gives major corporations the ability to drive down wages. As corporate giants eat up smaller competitors are fewer employers to whom workers can sell their labor. This gives workers fewer opportunities to negotiate for more pay and fewer options if they want to move to a higher-paying firm.
This buying – or monopsony – power, is incredibly costly. Median annual compensation would be $10,000 higher today if American employers were less concentrated, according to Suresh Naidu, Eric Posner, and Glen Weyl.. As corporate profits have gone up and up in recent years, worker pay has barely budged, because there’s simply no pressure for corporate executives to share in the spoils.
But pay stubs aren’t the only way in which corporate power manifests itself to keep workers down.
Uber and Lyft’s treatment of drivers is a perfect example. By misclassifying their often full-time drivers as independent contractors, the rideshare companies are able to avoid paying for benefits, and offload other costs onto drivers, such as responsibility for maintaining their vehicles.
Corporations also increasingly demand restrictions on worker movement, such as non-compete clauses, which prevent workers from selling their labor to the highest bidder. Firms also make no-poach agreements, in which companies agree not to hire workers from each other as a way to prevent competition over pay. And large companies use their power to quash union organizing, threatening to move jobs overseas or to non-union states if workers exercise their right to bargain collectively.
Finally, corporations pressure state and city governments into giving them subsidies for substandard jobs. For example, Amazon wields its power to leverage tax breaks and cheap land for its fulfillment and distribution centers, where workers toil in dangerous conditions and which enable Amazon to undermine small, independent businesses.
These policies combine to create a modern version of the company town, but instead of being run by Carnegie and Pullman, they’re dominated by the likes of Amazon and Disney, and the politicians whose campaigns they purchase.
It’s time to fight back
Fortunately, there are several steps the incoming Biden administration can take to directly confront the power corporations have over workers.
First, the administration can reinvigorate the Federal Trade Commission and the Antitrust Division of the Department of Justice. The two agencies need to step up and enforce existing antitrust law, challenge illegal mergers, and break up big companies, all in service of returning competition to labor markets. The antitrust agencies have not brought a case against a corporation for being a monopsonist in labor markets – now is the time to do so.
The FTC can also issue rules disallowing non-competes in labor contracts, while DoJ can argue that no-poach agreements are illegal. The Biden team has already called for such steps to occur and needs to follow through.
The Department of Labor should also immediately discard a Trump-proposed rule making it easier for corporations to classify workers as independent contractors, and propose a new one ensuring that full-time employees are treated as such. Biden has also called for a rule based on the California law that Prop. 22 overrode.
Congress also has a role to play, of course, building on the work done by the House Antitrust Subcommittee in its recent report on corporate power in digital markets. But even if congressional efforts run aground, the Biden team has significant power all on its own, by simply using antitrust law and the executive agencies as they were intended to be used.
In a 1936 fireside chat, President Franklin Delano Roosevelt said:
“our workers with hand and brain deserve more than respect for their labor. They deserve practical protection in the opportunity to use their labor at a return adequate to support them at a decent and constantly rising standard of living, and to accumulate a margin of security against the inevitable vicissitudes of life.”
Those practical protections have largely been abandoned. The Biden administration, though, can begin to resurrect them. And as a country, we can begin to keep our promises to American workers.
Pat Garofalo is director of state and local policy at the American Economic Liberties Project, and the author of “The Billionaire Boondoggle: How Our Politicians Let Corporations and Bigwigs Steal Our Money and Jobs” and the Boondoggle newsletter.
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