Making gig drivers employees could result in major job loss, study finds

Labor advocates dispute findings in tech-industry-funded report, noting it lacks third-party verification of data

While labor advocates have continued to push for gig companies to reclassify gig-economy workers, like this Instacart worker here, employees to give them access to more benefits and better wages.. Some workers balked at that notion and have said they enjoy the flexibility being a contractor gives them.David L. Ryan/Globe Staff

If Uber and other gig-economy companies are forced to make Massachusetts drivers employees, and they then require drivers to work at least 20 hours a week on average, between 49,000 and 74,000 job opportunities across four major ride-hailing and food-delivery platforms could be lost, a drop of 58 to 87 percent, according to a study commissioned by a coalition representing the four tech companies.

The job losses — which equate to the number of drivers no longer able to earn money on each individual platform, with one person potentially accounting for multiple jobs — are the result of fewer drivers working longer hours and a drop in demand if customer prices increase to cover the costs of officially employing drivers.

The companies — Uber, Lyft, DoorDash, and Instacart — are behind a ballot initiative and related legislation that would preserve drivers’ status as independent contractors, with the freedom to work whenever they want but without the full protections provided to employees.

“This study shows just how devastating it could be for drivers and Massachusetts residents who rely on their services if these drivers are stripped of their flexibility and their independence,” said Conor Yunits, spokesman for Flexibility and Benefits for Massachusetts Drivers, a ballot question committee funded by the four companies.

But labor advocates pushing for drivers to be reclassified as employees blasted the study’s findings, calling it “intellectually dishonest” and “not in line with reality.” The study was paid for by the companies, they stress, with no third-party verification of the data and no way to know if it reflects pandemic-induced changes. A serious economic study would also consider the positive impact that full employment status would have on drivers — most of whom are people of color — and their communities, they added.

“We see this ballot initiative as a craven attempt to evade our really excellent employment laws in the Commonwealth, and we feel like this report is just more of the same. It’s more PR and very little substance,” said Nikki Horberg Decter, general counsel of the Massachusetts Is Not For Sale coalition. “There’s no way to know that the data isn’t cooked, so we don’t think it should be relied upon.”

Massachusetts has become the latest battleground over the employment status of drivers for app-based companies. The first was in California, where, following the most expensive ballot initiative campaign in state history, voters in 2020 allowed the companies to continue to treat drivers as independent contractors. The measure is now tied up in court after a state judge ruled it unconstitutional.

Attorney General Maura Healey kicked things off in Massachusetts in July of 2020 when she sued Uber and Lyft, claiming they were misclassifying drivers as independent contractors in violation of state law. That case is pending. Uber and Lyft and other app-based companies support pending legislation that would maintain the drivers’ independent contractor status while granting them some benefits, including a fund the companies would pay into that drivers could put toward health care or retirement. The coalition is also pushing a pair of ballot measure petitions with a similar intent. The petitions are now being considered by state lawmakers; if they don’t act, one of them could be decided by voters this fall.

So far, the campaign to maintain drivers’ independent contractor status has generated $17.8 million in donations and in-kind contributions, including $13 million from Lyft on Dec. 30, the single largest political donation in state history. The labor-backed coalition has brought in $1 million to date.

The study on Massachusetts drivers, by the Los Angeles research firm Beacon Economics, analyzed data provided by Uber, Lyft, DoorDash, and Instacart for Massachusetts in January 2020. In all, the four platforms accounted for 85,133 jobs that month, with each driver working an average of eight hours and 26 minutes per week per company. It’s unclear how many drivers would be affected by the estimated job losses, given that the data doesn’t show how many companies each driver worked for. Around 200,000 drivers in Massachusetts are estimated to be actively working for app-based companies, according to the company-backed coalition.

The labor-backed coalition disputed the average driving time in the study, noting that it doesn’t include time workers spend in the car between customers.

“This study is basically based on a fantasy,” Horberg Decter said. “It’s not about workers’ real lives and how they’re working. It’s about how much these companies are monetizing their work.”

The study examined three scenarios for drivers becoming employees: one in which there was no price hike for consumers, another that passed half of the cost increase on to consumers, and a third that passed all the costs on to consumers. In all three scenarios, drivers were assumed to be working 20, 29.5, or 40 hours a week. The findings incorporated estimates from other studies showing that demand decreases as prices increase.

The additional costs factored in include health insurance and other employee benefits — the study cites Bureau of Labor Statistics estimates that adding required federal benefits increases costs by 23 percent — in addition to the expense of hiring human resources staff and other administrative costs.

None of the scenarios examined what would happen if drivers were allowed to maintain flexible schedules. “All we’ve done here is try to replicate what an employment model looks like,” said study author Taner Osman. “I can’t think of too many employment models [in which] employees choose to work when they want.”

The labor advocates’ coalition pointed to historical examples of garment workers and taxi drivers who were employees and paid by the job. These tech companies make billions off drivers and can afford to make them employees while still preserving flexibility, they said. “There’s no legal limitation on these companies providing flexibility to workers,” Horberg Decter said. “There’s a legal imperative to them complying with the law.”

The switch to employee status would likely result in higher costs for consumers, according to the study, and could “disproportionately hurt” the many drivers who can’t work set schedules. Nearly 70 percent of gig workers are part time, according to Pew Research.

The majority of drivers who work for app-based platforms say they want to remain independent contractors, according to surveys conducted by the company-backed coalition. Last month, 81 percent of app-based drivers said they would support the ballot measure maintaining their status as independent contractors and providing some benefits.

Pam Bennett, a DoorDash driver who recently moved to Pittsfield, said becoming an employee would “ruin everything.” Bennett, 58, who has taken the last few months off to move and deal with a broken arm, finds the ability to work around her needs invaluable.

Even if she could maintain some of her flexibility as an employee, Bennett said, she’s not interested in being told what to do. The companies would also suffer because they’d have fewer drivers interested in working for them, she noted.

“There’s no other job that I can say, ‘Oh, it’s snowing out, I’m not coming in,’” she said. “I can basically go to work when I want.”

Matt Stout of the Globe staff contributed to this report.