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An analysis of labor regulations for transportation network companies

Author

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  • Shetty, Akhil
  • Li, Sen
  • Tavafoghi, Hamidreza
  • Qin, Junjie
  • Poolla, Kameshwar
  • Varaiya, Pravin

Abstract

There is a growing movement worldwide to regulate transportation network companies (TNCs) such as Uber and Lyft. This is driven by concerns over low driver wages. Two recent labor regulations that were passed in California are Assembly Bill 5 (AB5) and Proposition 22 (Prop 22). AB5 classifies drivers (and other gig-economy workers) as employees as opposed to contractors. The implication is that ride-hailing companies must pay drivers a minimum wage and associated benefits, and that the drivers work full-time. This negatively impacts the TNC business model in two ways: (a) wage effect: higher wages and benefits reduce profit margins significantly, and (b) flexibility effect: having a base of full time drivers reduces the ability of TNCs like Uber and Lyft to match driver supply to customer demand on a fine temporal scale. As an alternative, TNCs lobbied fiercely for Prop 22. This regulation offers drivers 120% of minimum wage, but only for driving hours spent servicing a trip (engaged time).

Suggested Citation

  • Shetty, Akhil & Li, Sen & Tavafoghi, Hamidreza & Qin, Junjie & Poolla, Kameshwar & Varaiya, Pravin, 2022. "An analysis of labor regulations for transportation network companies," Economics of Transportation, Elsevier, vol. 32(C).
    • Handle: RePEc:eee:ecotra:v:32:y:2022:i:c:s2212012222000351
    DOI: 10.1016/j.ecotra.2022.100284
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    References listed on IDEAS

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