Between Flexibility and Protection: Worker Classification in the Gig Economy and the Viability of Uber's Business Model

open_access
Open Access
Author:
Goldstein, Ryan
Area of Honors:
Interdisciplinary in Finance and Legal Environment of Business
Degree:
Bachelor of Science
Document Type:
Thesis
Thesis Supervisors:
Fiona Greaves, Thesis Supervisor
Brian Spangler Davis, Thesis Honors Advisor
Dan Cahoy, Faculty Reader
Keywords:
Gig Economy
Business Law
Finance
Abstract:
As the gig economy grows exponentially, the weight of proper employment classification looms heavier than ever. Attempts to change classification can be devastating to our public policy and economic landscape if not carefully considered. The distinction between employees and independent contractors determines access to benefits, labor protections, and corporate accountability. From an economic standpoint, this classification impacts personal finance, corporate finance, and contributes to broader economic implications. In addition to researching legal tests and case law, this study will evaluate Uber’s net income, and conduct different stress tests to explore the viability of reclassifying Uber drivers. The data and estimations gathered calculates the expected cost of guaranteed wages and benefits associated with employee classification, disproving the argument that all drivers can be reclassified as employees. The stress tests illustrate that reclassification would drive Uber out of business, creating a need to discover more conservative approaches to resolve the labor classification dispute in the gig economy. The final chapter examines these proposals, detailing legislative suggestions as well as amendments to Uber’s business model to balance the need for Uber as an essential service with gig workers’ protection. The findings illustrate that perhaps government subsidies for Uber drivers coupled with surge-pricing tied to gas price indexes are the best proposals for mitigating the risk drivers take on as independent contractors. Moreover, Uber should incentivize tipping culture and offer benefits to drivers reaching a certain threshold of business. These conclusions would maintain Uber drivers as independent contractors, securing Uber’s future in the gig space, while also expanding financial protection to gig workers.