How Uber and Lyft Flipped an Election

One of the most interesting amendments to appear on the ballot this November 3rd was Proposition 22 in California. Proposition 22 would change the law so that app-based transportation and delivery drivers could remain defined as independent contractors and adopt labor and wage policies specific to their line of work. This would allow Uber and Lyft to be exempt from the current California labor law, AB5 or the "gig worker bill," which requires companies that hire independent contractors to reclassify them as employees. Classification as an employee means that drivers would receive employer-sponsored benefits, but also retain less flexibility in their working choices. 

Six weeks prior to election day, the proposition had only garnered the support of about 39% of the constituency, with another 25% remaining undecided. However, on election day, a whopping 58% of voters supported the amendment - how did this massive surge in support occur? 

The approval of the proposition can be attributed solely to the efforts of Uber, Lyft, DoorDash, and other gig economy companies in a perfect representation of capture theory. Capture theory is Stigler's theory that regulation is acquired by an industry and is designed and operated primarily for its benefit. In this case the gig economy industry, lead by its key players, spent over $200M to acquire "yes" votes on the ballot for the initiative. They argued that as their businesses currently remain unprofitable, this exemption from having to pay for employee benefits is crucial to their future health. The firms employed TV and digital marketing in order to reach a wide range of constituents, and utilized in-app advertising to reach gig economy workers and customers. Additionally, Uber and Lyft threatened to leave California, raise prices, and/or cut jobs if they were required to reclassify their drivers as employees and modify their business model. This threat likely scared many voters into defaulting to the safe, status-quo vote of "yes." The most impressive results from their efforts were the significant numbers of drivers and minorities who supported the proposition. Going forward, this approved proposition will be operated and enforced to the benefit of Uber, Lyft, and other firms within the industry who will retain their market shares and current business models.