Stocks in gig-economy companies such as Uber, Lyft, and DoorDash plummeted on Thursday after Labor Secretary Marty Walsh said many workers in the sector were mistakenly classified as contractors. “We are looking at it but in a lot of cases gig workers should be classified as employees,” Walsh told Reuters in an interview.
With that, Walsh steps into the decade-long controversy over the treatment of the independent contractors who make up much of the workforce behind the on-demand economy, and whose poor treatment continues to inspire protests. Reuters framed his comments as a sign that the Biden administration might take a more proactive approach toward regulating these companies.
Treating contractors as employees would require start-ups to provide minimum wage, health insurance, and unemployment insurance, which has made the companies really, really reluctant to make the switch. After California reclassified gig workers as employees, Uber, Lyft, and other companies poured $200 million into a ballot initiative to overturn the law. The referendum, under the banner of protecting workers’ freedom (and consumers’ pockets), passed in November.
In a statement to the Washington Post, the Labor Department urged observers not to take Walsh’s comments as a policy shift: “The Secretary was reiterating that misclassification is a pervasive issue that impacts both the economy and workers.”
But the big threat to the gig-economy business model is not the government—it’s the economy. Amazon, for example, has been on a pandemic-era hiring spree at $15 an hour—and just announced it would raise wages for half a million workers on top of that. Restaurants, manufacturing plants, and logistics businesses also say they are in stiff competition for workers—which you can see on the ubiquitous signs in industrial park yards and storefront windows: “No experience necessary!”
So far, there is not much evidence that the Biden Boom is forcing employers to raise wages and improve conditions to compete for low-income workers. Yet! But there’s a lot of anecdotes, and those—not Marty Walsh—is what Uber, Lyft, and DoorDash (and their shareholders) should be worried about.
If independent contractors want better jobs than bringing the remote-work crowd a burrito every day for lunch, they may not need to wait for more regulations for it to happen.