Estimated guaranteed hourly wage is less than one-third of the minimum wage
FOR IMMEDIATE RELEASE: September 29, 2021
Contacts:
- Ana Fox-Hodess, IRLE Communications Director, afoxhodess@berkeley.edu, (510) 915-6993
- Van Nguyen, Labor Center Communications Director, vann@berkeley.edu, (415) 506-8054
BERKELEY, CA — A new UC Berkeley analysis finds that a Massachusetts measure proposed by Uber, Lyft, and several delivery network companies would create a subminimum wage of as little as $4.82 an hour.
The measure, which could appear on the November 2022 ballot, claims to offer drivers a guaranteed pay equal to 120 percent of the minimum wage, or $18, when the proposition would take effect in 2023. However, the new report estimates that Massachusetts drivers could earn an actual wage equivalent of as little as $4.82 an hour, or less than one-third the 2023 state minimum wage, once significant loopholes are taken into account.
The study is authored by Ken Jacobs, chair of the UC Berkeley Labor Center, and Michael Reich, UC Berkeley professor of economics and co-chair of the Center on Wage and Employment Dynamics. They identify costly loopholes, including unpaid driver wait times, underpaid and unreimbursed expenses, and unpaid payroll taxes. Even the minority of drivers who would qualify for the measure’s health care stipend would be guaranteed a wage equivalent of as little as $7.64 an hour. The brief uses data from studies conducted for Uber and Lyft, AAA, and JP Morgan Chase, among others.
Michael Reich said, “The Uber/Lyft measure contains hidden costs that drivers can’t avoid. These hidden costs ravage drivers’ pay.” While this study focuses on the value of the pay guarantee—that is, how little drivers could be paid under the proposition, numerous independent studies have consistently found gig drivers’ net earnings do, in fact, fall below the minimum wage.
The measure is one of several industry-sponsored initiatives around the country modeled after California’s Proposition 22, which passed in 2020 and was recently ruled unconstitutional by a California Superior Court judge. Like Prop 22, the Massachusetts measure would classify rideshare drivers as independent contractors.
“Minimum wage and other labor standards laws set a floor for worker earnings. The company-sponsored ballot proposition significantly lowers that floor for drivers, well below the current requirements of Massachusetts law,” said Ken Jacobs. “The companies are looking to legalize paying a subminimum wage.”
Jacobs and Reich are national experts on wage standards and worker classifications in the gig economy. In 2019, they released a similar analysis of Prop 22, which revealed loopholes that changed the measure’s wage guarantee from $15.60 to just $5.64 an hour. Their 2020 report, released as hundreds of thousands of gig workers lost work as a result of the COVID-19 pandemic, found that if Uber and Lyft had classified their drivers as employees they would have paid $413 million into California’s Unemployment Insurance Fund between 2014 and 2019.
Read the full brief here.
The Labor Center and the Center for Wage and Employment Dynamics (CWED) are both projects of the Institute for Research on Labor and Employment (IRLE) at UC Berkeley. IRLE connects world-class research with policy to improve workers’ lives, communities, and society.