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SAN FRANCISCO — Lyft’s initial public offering is the gig economy’s Wall Street debut. But even as the company hits this key milestone today, its policy headaches are far from over.
Lyft's big day is the first test of how its approach to the future of work appeals to public investors -- as other companies that rely on independent contractors to run their businesses also line up to IPO.
“This is an important IPO because it will open the floodgates for Uber, DoorDash, Postmates and Airbnb,” said Semil Shah, a venture capitalist whose portfolio includes several gig economy companies, such as DoorDash and Wag. “All these things have used mobile labor networks and mobile phones to reorient how people work.”
As these companies start publicly trading, the flexible work arrangements that spurred their fast growth could also prove to be their Achilles' heel. There will be more political scrutiny over the lack of protections for drivers and other independent contractors.
Already, policymakers at the city, state and federal level are grappling with questions about how to protect gig economy workers' wages or how contractors access healthcare or save for retirement in an economy where benefits may no longer be tied to employment. If Lyft's stock is impacted at all by these concerns, it could be a bigger deal for future IPOs.
After years of struggling to keep pace with the start-ups' brash political strategy of asking for forgiveness rather than permission, some policymakers are signaling they're not going to sit on the sidelines any longer — at least at the city level. Last year, New York City created a minimum wage for on-demand drivers, the first law of its kind that could become a model for other cities.
As Wall Street investors for the first time grapple with the policy risks facing gig economy companies, Shah warns that they shouldn't underestimate the influence cities can have over these businesses. Both Uber and Lyft hiked up their prices in New York earlier this year, citing the new wage law.
“Cities around the world are mini superpowers,” he told me. “A New York City or a Paris can definitely clip the wings of an Airbnb or an Uber and can make life difficult.”
For companies operating in cities across the country or even world, these types of decisions made one-by-one at the local level can add up.
“It would be like death by 1000 cuts,” Shah said.
Drivers' protests in Los Angeles and San Francisco this week demanding higher wages indicate that the drivers are becoming savvier in organizing and could be gaining a louder voice to influence these debates. These efforts have even attracted the support of politicians at the national level, including 2020 candidate Bernie Sanders (I-Vt.), who has positioned himself as an advocate for workers. From Sanders' Twitter:
I stand with Uber and Lyft drivers striking in LA. One job should be enough to make a decent living in America, especially for those working for multibillion-dollar companies. Drivers must be paid the wages they deserve. #StrikeUberLyft https://t.co/uyp8E0VkyR— Bernie Sanders (@BernieSanders) March 25, 2019
Uber and Lyft, though, are both losing money. And the companies are under deep pressure to tame their losses. But as they slash drivers' wages, the businesses aren't just creating new political headaches for themselves. They could be creating new recruiting and retainment problems. After all, drivers who aren't tied to companies with traditional benefits have less of an incentive to stay than a full-time employee would.
Gig economy companies are increasingly experimenting with perks they can offer drivers while not crossing any legal lines that would result in the workers being classified as full-time employees. Uber and Lyft are offering some longtime drivers cash to buy stock in the companies as the IPO, a move other gig economy companies are likely to consider. Postmates has offered workers in its fleet resources to navigate healthcare options or state retirement savings plans. Thumbtack partnered with Alia to give independent contractors benefits like paid time off or life insurance.
Some say it's time for bolder solutions. Roy Bahat, the head of the venture capital firm Bloomberg Beta, wrote an op-ed this week where he called Silicon Valley companies to partner with government to "lift the floor for working people." He called for the companies to use their bully pulpit to advocate for government and workers to strike a new bargain that provides workers security in an era when companies are unable to provide workers benefits. He proposed that could look like the companies lobbying for government to finance healthcare and joining the "Medicare for All" debate.
"Despite the avalanche of investor money that blanketed Uber and Lyft, they barely earn enough revenue to pay their costs. It’s hard to imagine them paying more for driver healthcare," Bahat wrote. "So a 'Treaty of Silicon Valley' would need government to both level and raise the playing field."
BITS: 2020 presidential candidate Cory Booker (D-N.J.) is calling for legislation to protect civil rights online after the Department of Housing and Urban Development charged Facebook with housing discrimination.
Booker, who has close ties to the technology industry, slammed Facebook -- saying the social giant can't encourage and enable discrimination on its platform.
We clearly need legislation to protect our civil rights online. Social media giants like Facebook (the largest advertising platform in the nation) can NOT be allowed to encourage & enable discrimination on their platforms. https://t.co/1lpC7lNbOt— Sen. Cory Booker (@SenBooker) March 28, 2019
The HUD suit marks the first time the Trump administration delivered a sanction to tech giant, my colleagues Tracy Jan and Elizabeth Dwoskin report.
“In a sign that more technology companies could be ensnared in the probe, HUD alerted Twitter and Google last year that it is scrutinizing their practices for similar violations, according to three people with direct knowledge of the agency’s actions,” my colleagues wrote.
The move was a surprise to many civil rights advocates who saw the Trump administration as hostile to civil rights, my colleagues noted.
NIBBLES: The Federal Trade Commission said it has fined robocallers $208 million since 2015. But it’s only collected $6,790, according to the Wall Street Journal’s Sarah Krouse.
The Wall Street Journal obtained the figures through a Freedom of Information Act request. Since 2004, the agency has secured $1.5 billion through court judgment in cases involving civil penalties for automated calls or National Do Not Call Registry violations, plus the sum requested for consumer redress in fraud-related cases. The agency has collected $121 million of that total – or about 8%.
“That number stands on its own. We’re proud of it; we think our enforcement program is pretty strong,” said Ian Barlow, coordinator of the agency’s Do Not Call program.
BYTES: Google pulled a controversial "conversion therapy" app from its website following pressure from LGBTQ advocacy groups, according to Ina Fried of Axios. Apple, Amazon and Microsoft banned the app months ago.
Google initially said the app did not violate its app store rules, but it reversed its policy after Human Rights Campaign suspended Google's rating in its Corporate Equality Index.
"After consulting with outside advocacy groups, reviewing our policies, and making sure we had a thorough understanding of the app and its relation to conversion therapy, we’ve decided to remove it from the Play Store, consistent with other app stores," the company told Axios.