Uber Technologies (UBER -1.38%) and DoorDash (DASH 0.60%) are raising prices in California to pay for new driver benefits. The benefits will replace requirements that gig economy companies reclassify their drivers as employees, the result of a voter referendum earlier this year.
The ride-sharing company said the cost of getting a ride could rise anywhere from $0.30 to $1.50 depending upon the city, while food delivery costs could rise between $1 and $2 per order. DoorDash said its deliveries would cost a small percentage more, but Instacart and Lyft (LYFT 0.41%) have yet to commit to raising prices.
Better than the alternative
Proposition 22 was strongly supported by gig economy drivers and companies, as well as the customers who use them, after Uber and Lyft threatened to either close down or severely limit their operations in the state if they had to reclassify their drivers as workers.
The Competitive Enterprise Institute estimated the cost of the law the ballot initiative overturned would have raised prices and fares as much as 50% by imposing costs on companies that were 67% higher. Analysts estimated Uber, which generates around 9% of its revenue from the state, would see costs rise by approximately $500 million annually, while Lyft, which earns 14% of its revenue there, would see $290 million more in costs each year.
The ballot measure was resoundingly approved, receiving 58% of the vote. The gig companies believe the California measure can be replicated in other states that are considering adopting laws like those that Prop 22 overturned.
Beyond just ride-sharing and food delivery drivers, the new law applies to media publishers, trucking companies, and others that use freelancers and other, similar independent workers.