In an effort to comply with a new California law that would make “gig-economy” workers employees, Uber is experimenting with letting drivers raise prices, according to The Wall Street Journal.
California’s gig-economy law, Assembly Bill 5 (AB5), went into effect on January 1 and has had profound impacts on Uber, Postmates, Lyft and others. Workers who were previously classified as contractors are now considered employees, requiring companies to provide them with benefits.
The pricing change is just the latest Uber is making in an effort to comply with AB5 and keeps its workers classified as employees. For a worker to be an independent contractor, they need a measure of independence, including the freedom to set their own prices rather than have them dictated by the company they work for.
According to the WSJ, “starting Tuesday morning, drivers who ferry passengers from airports in Santa Barbara, Palm Springs and Sacramento can charge up to five times the fare Uber sets on a ride.”
The move is not without challenges, however, as it could lead to price extremes. On the one hand, drivers may raise prices too high and hurt business. On the other hand, with freedom to change prices, drivers may engage in price wars with each other, driving the price down to the point that no one profits.
Whatever the outcome, Uber will no doubt do whatever is necessary to keep its drivers as contractors. Otherwise, especially if other states follow suit with similar laws, it could forever change the ride-sharing business.