How a coronavirus recession could be disastrous for Uber and Lyft drivers
Christian Perea, a San Francisco Uber driver with diabetes, stopped driving as a precaution at the end of February. William Smith, a Lyft driver in San Francisco, didn’t think he could stop because, until Tuesday, he was expected to perform a minimum number of rides in order to keep the car he rents through the ride-hail company. Kimberly James, who delivers for several on-demand apps and works for Uber and Lyft in Georgia, hasn’t picked up passengers since March 10 because she has an autoimmune disease that could make her more vulnerable to a viral infection.
In an increasingly uncertain economic and social environment brought on by the spread of the novel coronavirus, contingent and contract workers around the world are being forced to grapple with how to stay healthy while maintaining an income. Among them are gig workers, some of whom continue to work for on-demand delivery services like Postmates, DoorDash and Instacart or ride-hail services like Uber and Lyft.
With few labor protections or benefits afforded to them by the companies, the choice to stop working as a preventative measure may be untenable for those relying on these companies for a large share of income. But demand is expected to decrease in markets hit hard by the virus and the slowing of the economy, which UCLA Anderson School of Business economists said on Monday has entered a recession. Some say these gigs may soon not be worth the risk, especially in the Bay Area, where residents are under an order to shelter in place. (The order exempts workers in essential categories, which includes transportation.)
The last time the U.S. economy entered recession, in 2008, the on-demand sector didn’t exist. How it will respond to a slump is a matter for speculation. The low-barrier to access for gig work may make it a refuge for laid-off workers from other sectors, softening the blow of widespread unemployment. But that’s cause for concern to those who rely on these platforms to make a living, as an influx of labor could drive down wages. Add to all this the specter of the novel coronavirus, which is already influencing consumer behavior and may change how they view the act of accepting a ride or a takeout delivery from a stranger.
Even economists can only guess how all this will play out, according to Beacon Economics director of research Adam Fowler. “The nature of this kind of disruption is truly unprecedented,” Fowler said. In his view, it’s likely much consumer spending has been delayed rather than lost entirely due to artificial constraints states and cities are placing to avoid the spread of coronavirus. “We’re freezing most of our consumption right now,” Fowler said. “Under short shocks, there’s a percentage of that consumption that’s going to bounce back.”
But the rapid rise of the on-demand economy makes it hard to forecast, with previous shocks like the financial crash and 9/11 offering no guide, he said.
“Given that ride-sharing came of age at the same time California was under a period of record expansion in the economy we don’t know if those two things that are kind of ridden along together have been correlated,” he said. “When the growth stops, we’re not sure how much of the explanation around the growth in gig work will be related to broader economic growth.”
Making a living off of ride-share and other platforms was hard enough in a strong economy, according to Perea, the San Francisco driver with diabetes, who also blogs about being a ride-share driver. That would be made worse if the pandemic causes major job losses, sparking an influx of new drivers to turn to the gig economy to make ends meet, according to Perea. “What you’ll get is a lot of extra supply of drivers or delivery people without the demand to really meet it,” he said.
On Wednesday, Lyft announced that it was temporarily halting adding new drivers in places hit hardest by the outbreak “in order to strengthen earning opportunities” for current drivers.
“This is a service that is predicated on a strong economy,” he said. “So when the recession comes the amount of people spending money on conventions, on businesses and hotels and traveling and going out to eat and sort of doing all of these things where calling an Uber or Lyft makes sense actually drops very fast.”
Drivers were feeling the fallout even before Los Angeles Mayor Eric Garcetti ordered the closure of all bars, restaurants, gyms, theaters and in-person dining in restaurants on Sunday and the Bay Area implemented its orders on Monday.
Perea said he observed a slackening of business before he stopped driving last month. On a Saturday at the end of February, he said, he only performed eight rides in total; a typical Saturday for him brings three fares per hour. On the morning of March 13, as Los Angeles began shutting down schools, theme parks, and limiting large gatherings, Jeff Danzer said he only did three rides in two hours and made a little more than $28. Typically, he averages 8 rides in the morning, making around $70. Between March 9 and March 15, Smith made $519 after working about 30 hours. He usually makes between $900 and $1,000 in that time.
“Seventy percent of the U.S. economy is based on consumer confidence and as everyone retrenches, you’re going to see a general downsizing of our discretionary spending,” said Jon Garon, a law professor and director of the intellectual property, cybersecurity and technology program at Nova Southeastern University in Florida. “Uber, Lyft and the Airbnbs of the world are going to collapse because the entire travel industry is going to be dramatically affected.”
The downturn comes at an awkward moment for Uber, Lyft and other large on-demand firms. Even before the market crash, Uber and Lyft shares were trading below the IPO prices as the companies’ losses mounted. Though the companies moved up the expected timeline for profitability, both have had to make cuts, including laying off dozens of employees. DoorDash had filed paperwork to go public this year, and Airbnb was reported to be close to moving ahead with IPO plans, although now both seem likely to postpone.
A decline in rides made it particularly difficult for those like Danzer and Smith, both of whom rent a car through Lyft’s Express Drive program and must meet a minimum of 20 rides per week. Concerned about a drop in demand, Danzer reached out to Lyft’s customer support on March 12 asking if the minimum would be waived during the pandemic. The company told him it was reviewing such appeals “on a case by case basis,” according to messages The Times reviewed.
Initially, Lyft spokesperson Adrian Durbin said the company was only waiving the minimum ride requirements in some markets, and if workers can’t make the rent “participating drivers may return their rental cars at any time at no additional charge.” On Tuesday, the company told drivers that it was waiving the 20-ride weekly requirement in all markets but reminded drivers they can return the car if they want to avoid being charged for rent, according to an email The Times reviewed.
“Additionally, we will provide funds to drivers should they be diagnosed with COVID-19 or put under individual quarantine by a public health agency, and waive any applicable rental fees,” Durbin said in a statement.
For Smith, covering the rent may still be an issue. The car he rents through Lyft is his only vehicle and a major source of income. It costs him $250 a week and, like other drivers who rent through the program, he earns slightly less per mile than drivers who use their own cars, as The Times previously reported. “I could return the vehicle and not accrue more costs,” he said. “But I couldn’t get to my second job.”
A recession and consequently a decline in ride-share demand, Garon argued, would deliver a significant blow to on-demand gig workers who lack traditional employee protections.
“Particularly during a pandemic, they have no access to health care,” he said. “These companies that are built on the gig economy are going to suffer significantly, and there’s no safety net for those employees at all. So they’re going to be the first to struggle through this economy and they’re going to be the last back into the workforce.”
Current national efforts to offer relief to workers during the current outbreak, including a coronavirus relief bill making its way through Congress, stop short of mandating paid sick leave for independent contractors.
In response to concerns over coronavirus, many of the gig companies have offered two weeks paid sick leave for contractors who have contracted COVID-19 or have been directed to self-quarantine. This does not cover those who choose not to drive or work as a preventative measure. Some companies, like Postmates, have gone a step further by creating a health fund in 22 markets in the U.S. that would help cover the costs of doctors appointments and medical expenses related to the outbreak. On Tuesday, Lyft and Uber suspended shared rides to reduce passenger-to-passenger spread.
In California, the dual threat of pandemic and recession has lent a new sense of urgency to efforts to reduce the precarity of gig work. Lawyers and labor groups are turning to a newly enacted state law, AB 5, to attempt to secure long-sought-after protections for contractors in the gig economy. The law, which the gig companies have waged a $110 million ballot campaign against, makes it harder to treat workers as contractors. Shannon Liss-Riordan, a plaintiff’s attorney who has filed several employee misclassification lawsuits against Uber, Lyft, and other tech companies, filed two injunctions on March 11 asking the courts to force the ride-hailing companies to comply with AB 5 and begin treating drivers as employees in order to give them access to employer-provided paid sick leave.
One hopeful development for on-demand workers is that some on-demand delivery companies are seeing an increase in business. Instacart said it saw its single highest day of demand for grocery deliveries on March 12 as customers seek to avoid long lines and leaving their homes or get ahold of hard-to-find items such as hand sanitizer. Some workers see delivery as a better option than ride-hail, given the increase in volume and the lesser degree of interpersonal contact. Doordash, Postmates, and Instacart have all made it possible for customers to request that couriers drop off packages instead of handing them off. In a blog post, Perea recommended that drivers avoid carting around passengers and switch to delivery to avoid direct and prolonged contact with other people. Switching to delivery is “the lessor of two bad options,” he said. HyreCar, which rents out cars to gig workers, sent an email referring drivers to the other services the company partners with such as Postmates and Doordash.
“For those that will continue to drive, if you wish to explore other options besides rideshare we encourage alternative gig options such as food or package delivery,” the email reads.
But James, the driver with autoimmune illness, said delivering for these apps is not much safer, partly because couriers aren’t given enough information about their destination to decide whether to accept delivery requests. Before she stopped driving, James said she delivered meals to an emergency room and was forced to go inside. The companies, which maintain their workers are independent contractors, are limited in their ability to control how couriers and drivers perform their jobs without crossing lines that distinguish them from traditional employees. This could make it harder to force or mandate workers take extra safety measures.
“I strongly feel that it’s going to be gig economy workers that are going to spread this,” James, who is now looking for online work, said. “We’re touching doors, we’re going in and out of ERs. We’re touching everything. The last time I went into Taco Bell, they had me make the customer’s drink and put my hands on his lid.”