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  • Writer's pictureVeronica Irwin

How much does gig work cost taxpayers?

Some drivers and labor experts say Prop. 22 pushed an undue burden on to everyday taxpayers.


SF Examiner

When Ahmad Ibrahim Moss first filed for unemployment last summer, the process was fairly simple. Though he got tripped up a few times on the application’s notoriously confusing questions, once he knew which boxes to tick, his claim was approved and he was promptly receiving biweekly payments. Moss, who faced less demand for rides as a Lyft driver during the pandemic, was exactly the type of person Pandemic Unemployment Assistance, or PUA, was created for.

But months later, Moss lost his unemployment assistance because of bureaucratic hiccups. Over Labor Day weekend, millions more workers like him lost their PUA, too. Now, 63-year-old Moss is back to driving 40 hours a week, relying on government-subsidized food assistance and health insurance to make ends meet.

“It was hard for me to go back. I had to be really, really desperate,” says Moss. “It’s almost like when you have someone telling you they love you, but you know they’re cheating on you.”

Gig workers who drive for Uber, Uber Eats, Lyft, DoorDash and Instacart are classified as independent contractors instead of employees. Under California’s Proposition 22, they’re afforded some benefits, like a stipend for health care expenses and guaranteed minimum earnings.

However, Moss was one of 2.2 million gig workers in California who were relying on PUA. Many more rely on other core elements of California’s social safety net, like food stamps and Medi-Cal. And according to research from PolicyLink, only 10% are eligible for help from gig companies through the health care stipend offered under Prop. 22.

Because gig drivers aren’t employees, companies like Uber, Lyft, DoorDash and Instacart are not obligated to pay unemployment taxes for these workers.

The social services gig workers use add up to millions of dollars paid for by California taxpayers. Critics of gig companies look at these numbers together and see a tremendous cost on citizens and small businesses so that gig companies can protect their bottom line.

“When firms pay too little for their employees to meet their basic needs, then those costs fall back on taxpayers,” explains Ken Jacobs, chair of the UC Berkeley Center for Labor Research and Education. “There is a public cost to low-wage work.”

Jacobs has been trying to quantify the cost of gig work on taxpayers for several years. A report he published with his colleague Michael Reich said that if Uber and Lyft drivers were employees between 2014 and 2019, the two companies alone would have contributed $413 million to the California Unemployment Insurance Fund. For reference, California is currently $23 billion in debt to the federal government after borrowing to pay for unemployment claims during the pandemic.

Health insurance is a similar story. According to recent research from the advocacy group PolicyLink, 29% of gig workers who were part of the organization Rideshare Drivers United rely on Medi-Cal, while 16% were entirely uninsured. The cost of Medi-Cal is split between the state and federal budgets, though local governments, primarily via public hospitals, contribute an average of 15% of Medicaid budgets nationwide. With approximately 50,000 rideshare drivers in San Francisco, as many as 14,500 drivers are relying on this government subsidized health care.

There are other unseen costs: given that 75% of San Franciscans on Medi-Cal also use food stamps, as many as 10,875 rideshare drivers may be relying on food assistance. Excluding additional federal subsidies for food assistance offered during the pandemic, that food assistance costs The City an average of $186 per person. Many drivers also turn for assistance to local nonprofits, free clinics and food banks, each of which are subsidized by the government through tax breaks.

Gig companies contest the underlying premise of this argument: 80% of drivers work less than 20 hours per week, they argue, so gig companies should not be treated like they are drivers’ primary source of employment. Rather, they serve as a supplemental source of income, improving drivers’ quality of life.

Geoff Vetter, who represents an industry group that includes San Francisco companies Uber, Lyft, DoorDash and Instacart, instead argues that flexible gig work was a “lifeline for workers who lost jobs or income, or who needed a new way to earn, during this historic recession.” He also adds that “most of these drivers have other jobs that provide benefits like health care.”

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