Workers Turn To Gig Platforms Like Uber And Lyft As An ‘Alternative Safety Net’

Sep 9, 2019

The on-demand gig economy isn’t just a new type of work. Some economists say platforms like Uber and Lyft have also evolved into a new kind of economic safety net for those who can’t rely on their primary job to make ends meet.

Workers can fall back on the gig economy when they’re between jobs, when their freelance projects dry up, or when their part-time job doesn’t provide enough hours to keep up with California’s high cost of living. 

“There's not a lot out there that's as quick and easy for bringing some of your earnings back,” said Stanford University economics professor Paul Oyer.

California companies pioneered this kind of flexible, app-based gig work. But in California, the nature of this work is in flux. 

A bill coming up for a vote in the state Senate next week would codify a 2018 California Supreme Court decision pushing gig companies to reclassify their workers as employees, rather than independent contractors. Gov. Gavin Newsom has pledged to sign the bill into law.

That change would provide gig workers with many benefits and protections they currently lack. But, if companies respond by placing new restrictions on workers’ flexibility, these platforms could become less viable as what Oyer calls an “alternative safety net.”  

“If Uber and Lyft have to reclassify these jobs, all bets are off,” Oyer said.  

Driver by day, Comedian by night

Some Uber and Lyft drivers use gig work to pay the bills while they pursue their passion. 

As an up-and-coming comedian in Los Angeles, Madison Shepard performs stand-up a few nights a week. She said making people laugh is her calling, and she’s been getting herself in front of bigger audiences. But for now, comedy doesn’t provide enough to live on.  

“Exposure can't pay my rent,” Shepard said. “So for me, Lyft is kind of like a back door into supporting myself.” 

She used to work more traditional nine-to-five jobs. But they never gave her the flexibility she needed — the option to drop everything for an audition, a stand-up set or a video shoot.

"Imagine if I went to my employer, and I was like, ‘I know I asked for Thursday off, but my shoot got rescheduled. Oh and by the way, on Monday I need to leave early so I can drive down to San Diego. So I'll see you I guess sometime Tuesday at 10 or 11a.m.?’ There's no way I'm going to be able to keep my job doing that,” Shepard said. 

Shepard said she knows other aspiring actors who work for gig platforms while waiting for their big break. Other workers are turning to the gig economy for survival.

In a 2018 survey of California workers from the non-partisan Public Religion Research Institute in Washington, D.C., 38 percent of California gig workers said they or someone in their household lost a job or had their hours cut in the previous year. 

The survey also found that workers struggling with poverty were about twice as likely as those not struggling with poverty to say they’ve participated in the gig economy during the previous year. 

Even with unemployment rates hitting record lows thanks to a prolonged economic expansion, California still has a relatively high percentage of workers who want full-time jobs but can’t find them. 

In Los Angeles County, the official unemployment rate reported by the U.S. Bureau of Labor Statistics is 4.6 percent. But when “involuntary part-time” workers are factored in, that figure jumps to 10.4 percent, compared to the nationwide average of 7.4 percent. 

An 'Alternative Safety Net'

For these workers, simply having a job is no guarantee of consistent earnings.  

"The typical household deals with a lot of income volatility from month to month,” said Dmitri Koustas, an assistant professor at the University of Chicago’s Harris School of Public Policy.  

Koustas knows that people in the middle of an income crisis are often turning to gig platforms, because he’s seen it in their financial data. For a recent study, he got access to anonymized data from an online personal financial services company. 

He saw a common storyline in that data. People’s income from their main job would go down, perhaps because their hours were cut. They would initially respond by spending down their savings or racking up credit card debt. Eventually, they would start driving for Uber or Lyft. 

Those who start driving “become better able to deal with these periods of income volatility,” Koustas said. He found that driving for gig platforms replaced 73 percent of lost income from a main job, on average. 

Stanford’s Oyer said evidence like this points to the emergence of the gig economy as a new kind of economic safety net. 

“Our safety net for people who don't have jobs is not generally as generous as in some other Western countries,” Oyer said. 

Whether they’re out of work, or dealing with unreliable scheduling, people in these situations  have to find a new source of income quickly. Oyer said for many, getting on Uber or Lyft may be the easiest option. 

"The barriers to entry are so low, it's really unprecedented,” Oyer said. 

The Limits of Gig Work

However, the gig economy can be a leaky safety net. Many drivers still rely on traditional safety net programs like food stamps and subsidized medical care. Nearly one in five L.A. County drivers receives public assistance, according to a 2018 UCLA Labor Center survey

Because Uber and Lyft classify their drivers as independent contractors, they do not provide employee benefits or protections like health insurance, overtime pay, workers’ compensation or even a guarantee that drivers will earn at least California’s minimum hourly wage.  

State lawmakers are aiming to change that. The state Assembly has already passed — and the state Senate is now considering — AB5, a bill that would require gig companies to reclassify their workers as employees, rather than independent contractors. 

But some drivers — including Shepard, the L.A. comedian — worry that under an employee model, Uber and Lyft would put new restrictions on when, where and how much drivers would be able to use the apps.  

The bill’s author, Assemblywoman Lorena Gonzalez, responded to that concern in an emailed statement, saying, “There is nothing in labor law that says employee status would prevent these companies from giving their drivers flexible scheduling.”

Asked about the possibility of companies putting up new barriers to entry, potentially making it harder for workers to tap into the gig economy as a kind of safety net, Gonzalez said, “We do not need an alternative safety net.” 

Gonzalez, (D-San Diego), said, “We need to strengthen our current labor laws so workers don't have to rely on a taxpayer-subsidized safety net — that's what AB5 is all about. We need to stop allowing multi-billion dollar corporations to break the rules and avoid contributing their share to the social compact."

Whatever happens in Sacramento, economists say gig platforms have other limitations when it comes to providing workers with a cushion from the ups and downs of other employment. 

The gig economy can help individuals get through a rough patch, as long as the broader economy is doing well. But that probably wouldn’t hold true during a recession, said Koustas of the University of Chicago. 

“More people are going to want to be rideshare drivers, and fewer people are going to demand any type of transportation,” he said. “As a result, that's going to drive wages in rideshare way down.” 

The California Dream series is a statewide media collaboration of CALmatters, KPBS, KPCC, KQED and Capital Public Radio with support from the Corporation for Public Broadcasting and the James Irvine Foundation.

 

 

 

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