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

Study: “Millionaire’s Tax” Would Have Far-Reaching Effects on “Pass-Through” Businesses

A proposed graduated income tax that will appear on the statewide ballot in November 2022 will have much more far-reaching implications than most people realize because the surtax also extends to “pass-through” income from entities such as S and limited liability corporations, partnerships, and sole proprietorships that are taxed on individual tax returns, according to a new study published by Pioneer Institute.
Welcome to New Hampshire Sign: Live Free or Die

Study Warns that New Hampshire Tax Policies Would Exacerbate Impacts of a Graduated Income Tax

Drawing on migration patterns between Massachusetts and states like Rhode Island and Tennessee, Pioneer Institute is releasing a study showing a direct correlation between personal income tax rates and household domestic migration patterns between 2004 and 2019. The study suggests that instituting a graduated income tax will shrink the tax base and deter talented workers and innovative employers from coming to and staying in the Bay State.

Study Finds SALT Deduction Cap, Graduated Income Tax Will Combine to More Than Double Tax Burden on Some Households

A provision of the federal Tax Cuts and Jobs Act of 2017 strictly limiting deductions for state and local taxes (SALT) will greatly exacerbate the adverse effects of a proposal to create a constitutionally mandated graduated income tax, according to a new study published by Pioneer Institute.

This Is No Time for a Tax Increase

This is no time to threaten Massachusetts’ prospects for an immediate economic recovery and the long-term competitiveness of the Commonwealth’s businesses. As Massachusetts lawmakers prepare to vote on whether to send a proposed constitutional amendment that would impose a 4 percent surtax on residents who earn $1 million or more in a year to the statewide ballot in 2022, Pioneer Institute urges them to recognize that tax policy sizably impacts business and job location decisions and that jobs are more mobile than ever.
Are Massachusetts taxes regressive? Massachusetts State with Money Background

Study Finds Deep Flaws in Advocates’ Claims that the Massachusetts Tax Code is Regressive

Proponents of a state constitutional amendment to add a 4 percent surtax on all households with annual income above $1 million frequently cite 2015 data from the Institute on Taxation and Economic Policy, which argues that the Massachusetts tax code is regressive, but a new study published by Pioneer Institute debunks many of the underlying assumptions used in ITEP’s 2015 report.

Study Says Interstate Tax Competition, Relocation Subsidies Exacerbate Telecommuting Trends

A spate of new incentive and subsidy programs seeking to lure talented workers and innovative businesses away from their home states could constitute an additional challenge to Massachusetts’ economic and fiscal recovery from COVID-19, according to a new study published by Pioneer Institute.

Study Warns Massachusetts Tax Proposal Would Deter Investment, Stifling the “Innovation Economy”

A state constitutional amendment promoted by the Massachusetts Teachers Association and the Service Employees International Union adding a 4 percent surtax to all annual income above $1 million could devastate innovative startups dependent on Boston’s financial services industry for funding, ultimately hampering the region’s recovery from the COVID-19 economic recession, according to a new study published by Pioneer Institute.

Study Shows the Adverse Effects of Graduated Income Tax Proposal on Small Businesses

The state constitutional amendment promoted by the Massachusetts Teachers Association and the Service Employees International Union to add a 4 percent surtax to all annual income above $1 million will adversely impact a significant number of pass-through businesses, ultimately slowing the Commonwealth’s economic recovery from COVID-19, according to a new study published by Pioneer Institute.