The proposition 22 promises to pay drivers 120% of the minimum wage, reimburse them for some expenses, and provide some health benefits. However, according to Jacobs and Reich (2019), the promises are worth much less than they appear. Uber and Lyft would not compensate drivers for their waiting time and expenses, and their promised reimbursements of expenses are well below the costs faced by the drivers who provide most of the rides. As a result, the promises in the proposition were estimated to be worth the equivalent of only $5.64 per hour. Independent studies consistently find that Uber and Lyft drivers are paid less than the minimum wage, which is not surprising when only two companies hire all the workers in an industry. Uber and Lyft possess considerable power to set pay at below-competitive levels. Meanwhile, the drivers who provide most of the rides are locked in to the industry through their long-term financial commitments in their vehicles. Strong evidence for these “monopsony” arguments comes from Uber’s own experiments with driver pay in Boston and Houston. A Lyft-funded recent report by Dr. Christopher Thornberg and his colleagues at the UC Riverside Center for Economic Forecasting and Development (CEFD) critiques our claims. However, we argue here that Thornberg’s report rests on evidence that is not relevant for California and that he curiously ignores a study funded by Lyft that finds lower driver pay in California.
