Study: Legislators Must Answer Key Questions Before Setting Policy for App-Based Rideshare/Delivery Workers

Share on Facebook
Share on Twitter
Share on

Big Data industries require data-driven policymaking

BOSTON – After Massachusetts’ Supreme Judicial Court declared an initiative that was to appear on the November ballot unconstitutional, the issue of how to classify app-based rideshare/delivery workers is back in the hands of the state Legislature.  A new study published by Pioneer Institute distills from the research literature eight questions legislators must answer before determining how to address this fast-growing industry.

“It may be surprising to many, but policy makers lack the most basic information about the gig workforce,” said Tom Ahn, author of “What We Do and Don’t Know about Online Platform Rideshare/Delivery Workers in Massachusetts.”  “It is not an exaggeration to say that they don’t know who or how big the gig workforce is, and they don’t know its motivations.”

The issues surrounding reclassification are well known. App firms would be required to provide employee benefits, pay increased taxes, and standardize or guarantee a minimum wage. They may have to take a more active role in maintenance and monitoring of vehicles, provide or subsidize access to insurance, and be required to set and manage shift schedules for drivers.

The app firms argue that reclassification would adversely impact their businesses, increasing financial, administrative, and legal overhead. They fear it would lead to the exodus of its workforce, which they see as having heterogeneous preferences, with many workers placing a high value on work schedule flexibility. Reduced flexibility could force out workers unable or unwilling to adhere to a fixed schedule, and the prospect of a predictable income and schedule may make the job more attractive to others.

The report urges legislators to answer eight basic questions, summarized below, before beginning to deliberate on legislation related to the app-based rideshare and delivery industry.  Most fundamentally, we must understand who is engaged in gig work and why.

Currently available data does not allow us to understand or provide a definitive description of the workforce. Firm surveys of workers often fail to collect basic socio-demographic characteristics, and the large amount of worker churn makes data accurate today less relevant tomorrow.

Policymakers do not know the size of the online platform rideshare/delivery workforce. The gig workforce is experiencing fast growth, such that almost 10 percent of the working population has engaged in some online gig work in the past, but research findings on the current size of the workforce range tremendously, from 1 to 15 percent of the labor force.

There is substantial evidence that people choose gig work as a supplementary source of financial stability. Worker surveys show that a majority of gig workers feel that firms have been fair with respect to pay and assignments, see themselves as independent contractors rather than employees, and rate their job experience favorably.

But there is no consensus on how much drivers earn. Because so much of the compensation depends on drivers’ own choices as well as the pricing set by the apps, researchers can arrive at very different numbers.

Finally, there have been few credible studies of gig workers in Massachusetts, seeking to understand whether there are differences between the workforce here and elsewhere.

“On issues where there are widely differing policy perspectives, it is best to start with the data—and that’s especially true with Big Data innovations, which disrupt the status quo,” said Jim Stergios, Pioneer Institute’s executive director. “Starting from good data, the legislature needs to develop smart policies to ensure and expand economic opportunity for the workforce.”

About the Author

Tom Ahn is an Assistant Professor in the Department of Defense Management at the Naval Postgraduate School (NPS). After serving in the South Korean army for three-years, he completed a two-year post-doctorate position at Duke University. He taught at the University of Kentucky for seven-years and has been at NPS since 2017. Ahn has pub­lished in Journal of Econometrics, Journal of Business and Economic Statistics, and Journal of Urban Economics.

About Pioneer

Pioneer Institute develops and communicates dynamic ideas that advance prosperity and a vibrant civic life in Massachusetts and beyond. Success for Pioneer is when the citizens of our state and nation prosper and our society thrives because we enjoy world-class options in education, healthcare, transportation and economic opportunity, and when our government is limited, accountable and transparent. Pioneer believes that America is at its best when our citizenry is well-educated, committed to liberty, personal responsibility, and free enterprise, and both willing and able to test their beliefs based on facts and the free exchange of ideas.

Get Updates on Our Economic Opportunity Research

Pioneer Institute Statement on Question 1

Yesterday, voters came closer than many expected to rejecting the largest tax increase in Massachusetts history, even though opponents were dramatically outspent by the unions that bankrolled the amendment to the state Constitution. 

Pioneer Institute Expects That Massachusetts Taxpayers Will Be Refunded $3.2B Due To State Revenue Cap

Pioneer Institute projects that the state will refund approximately $3.2 billion to taxpayers due to a state law sponsored by Citizens for Limited Taxation and voted on by taxpayers in 1986 that caps the amount of revenue the state can collect in any given year.

Survey of Business Sentiment: MA Income Tax Hike Would Lead to Employer Exodus

Nearly three quarters (73 percent) of Massachusetts business leaders think business associates will leave the state if a constitutional amendment appearing on the November ballot to hike taxes is successful, according to a survey conducted by Pioneer Institute.

As States Compete for Talent and Families, Massachusetts Experienced a Six-Fold Increase in Lost Wealth Compared to a Decade Earlier

With competition for businesses and talent heating up across the country, in 2020 Massachusetts shed taxpayers and wealth at a clip six times faster than even just a decade ago. Between 2010 to 2020, Massachusetts’ net loss of adjusted gross Income (AGI) to other states due to migration grew from $422 million to $2.6 billion, according to recently released IRS data now available on Pioneer Institute’s Massachusetts IRS Data Discovery website. Over 71 percent of the loss was to Florida and New Hampshire, both no income tax states.

Book Reveals How Tax Hike Amendment Would Damage Commonwealth’s Economic Competitiveness

If adopted, a constitutional amendment to hike state taxes that will appear on the ballot in November could erase the hard-earned progress Massachusetts has achieved toward economic competitiveness over the last 25 years and may not result in any additional education and transportation funding, according to a new book from Pioneer Institute, entitled Back to Taxachusetts?: How the proposed tax amendment would upend one of the nation’s best economies, which is a distillation of two dozen academic studies.

Study: Legislature Likely to Reduce Spending on Education and Transportation from Other Revenue Sources, Replace Cuts with Surtax Money

Revenue from a ballot initiative to amend the state Constitution and raise income taxes on households and businesses by adopting a graduated income tax structure would supposedly provide resources for transportation and public education, but a new study published by Pioneer Institute finds that, were the tax amendment to pass, the money would be fungible and much of it likely spent on general budget measures.   

Pioneer Supports Legal Challenge to Misleading Tax Ballot Language, Releases Video

Pioneer Institute supports the diverse and bipartisan group that filed a complaint with the Massachusetts Supreme Judicial Court (SJC) challenging the summary language meant to provide an accurate description of the tax hike amendment to voters. The language was approved by the Attorney General and Secretary of the Commonwealth when a similar amendment was proposed in 2018, and unless the lawsuit is successful, will likely appear on the Massachusetts ballot in November.

Study: Tax Up For A Vote In November Would Ensnare Over Three Times More Taxpayers Than Previously Estimated

Analyses from the Massachusetts Department of Revenue (MADOR, 2016) and Tufts University’s Center for State Policy Analysis (2022) dramatically underestimated the number of households and businesses impacted by the constitutionally-imposed tax hike that the legislature is putting before voters in November 2022, according to a new study from Pioneer Institute.