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Gig Economy in crosshairs after decades of free-help growth

Technical setbacks have occurred for the gaming economy.

The California bill passed this week that threatens to make drivers of ride-hailing companies into employees instead of independent contractors is the latest move by regulators and courts across the globe that could restrict companies that

Uber Technologies

UBER 0.21%



LIFT 0.99%

and food delivery companies such as DoorDash Inc.

New York City earlier this year introduced a $ 1

7.22 driver-hour minimum wage, including expenses other regulations, the first in the country. Work is underway in several countries in Europe to reclassify drivers as employees, including the United Kingdom, where a court of appeal ruled in favor of employment status, pushing the final statement to the Supreme Court.

Overall, the traits show that a decade After companies like Uber gained popularity by offering low-cost, on-demand services, governments are pushing back and demanding many of the same labor protections and other governmental requirements that the companies avoided in designing their business models .

When Uber and other concert-based companies like TaskRabbit started, consumers were initially delighted with the convenience and the news. Their hiring model – independent contractors are not necessarily paid per hour and do not have benefits such as health insurance or unemployment insurance – helped the companies become nimble and undercut sitting employees as taxis that can be charged by the city's pay rules. Workers could drop in and out as they wished, including squeezing work between other jobs. But as services have grown and become ubiquitous, complaints have spread.

For a growing number of Americans, a patchwork of gaming jobs is the norm. But almost everyone faces the challenges of inconsistent income and access to benefits.

As soon as Big Tech began to lose its luster in Washington, the news factor for companies began to rage. Although services continue to enjoy widespread popularity with consumers, constituent complaints in cities and states began to pile up on some of their effects such as congested streets and low driver wages.

"A lot of that brilliance has worn off," said Meera Joshi, who heads the agency that regulates ride-hailing and taxis in New York City and oversaw the minimum wage requirement for Uber and Lyft.

"You see the same identical recurring problems around the world – they're around congestion, driver wages, environmental impact," she added. "In New York, much of this happened faster."

Given the sector's growth – Lift alone has said that more than two million people ran for it at some point in 2018, or more than 1% of the US workforce — Other cities and states are expected to follow.

"California doesn't happen in a vacuum," Bradley Tusk said , a political consultant and venture capitalist if Tusk Ventures was an early investor in Uber. "State government policies right now tend to be left," a problem for companies given that Democrats have been pushing for more tech-savvy regulations, he said. [19659016] SHARE YOUR TAKES

How should concentrated companies respond to growing setbacks from governments? Join the conversation below.

Movements threaten to add significant cost to gaming economist one, which extends beyond Uber and Lyft to a number of delivery companies such as DoorDash and Instacart, whose delivery bikes and cars now dot urban streets across the globe. Almost none of these companies are profitable, and Uber and Lyft in particular have not identified clear paths to profitability.

Their shares have struggled since the market debut this spring. Uber has fallen almost 25% since the IPO, and Lyft is down around 35%. Analysts at Morgan Stanley estimate Uber and Lyft driver costs in California in California could rise by 35%.

The companies have said that measures like California's are not what most drivers want. Economics will force them to change business models and reduce flexibility for employees whose drivers are classified as employees, they say.

Both companies continue to say that they will continue to work with governments in the future. A Lyft spokesman said the company has long "worked with regulators to find solutions that benefit drivers and riders and support innovation."

New York regulations differ from those discussed in California. Drivers are still independent contractors in New York, but earn minimum wages, and the number of cars is curtailed. As a result, the number of trips in the city recently began to fall, and companies have increased prices – bringing them closer to taxi costs.

California's bill, known as Assembly Bill 5, seeks to require workers who meet a variety of conditions, including not setting their own pay, to be classified as employees rather than independent contractors.

"People who work in these fields must be protected," he said

Anthony Rendon,

the Democratic speaker for the state assembly. "If it affects their business model, it's probably because they have to pay their employees more."

With strong technical support, the bill passed the legislature, and

Govin Newsom,

a Democrat said he would sign it.

Uber, Lyft and other companies including DoorDash are still pushing for a deal that will exempt them – one where they will offer concessions as a benefit fund and a measure that allows drivers to negotiate collectively with multiple employers.

Should that fail, they plan to look to the electorate. Earlier this month, the three companies pledged to spend at least $ 90 million together to fund a ballot to reverse the effect of the bill.

The effects of the bill when it becomes law are unclear. Lyft says far fewer drivers will be able to drive in California, as it will need to have planned shifts to control driver supply. Drivers may not be able to switch between apps – a common practice – and will instead make a minimum wage every hour tied to one.

Both Lyft and Uber have said that prices will go up for riders and wait times will increase.

After the bill was passed on Wednesday, Uber immediately signaled defiance, saying it had no plans to change practices because it believes the measure does not apply to drivers – a position it is likely to fight in court. Tony West, Uber's general counsel, said Tuesday that the company will "continue to defend our ability to enable independent work on demand."

Alejandro Lazo

contributed to this article.

Write to Eliot Brown at eliot.brown@wsj.com

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