Most Benefits of the Gig Economy Are Completely Imaginary

By Rebecca Smith, Quartz

04 March 16

he on-demand economy is starting to show some cracks. In February, hundreds of Uber drivers rallied outside the company’s headquarters in Queens, New York, protesting the fare cuts that have been imposed in 100 cities in the United States and Canada. Meanwhile, The New York Times featured an article about Uber drivers banding together in Dallas and protesting rate cuts in San Francisco and Seattle. Back in New York, unions are coordinating a strategy aimed at organizing Uber drivers at LaGuardia Airport.

The month before, Lyft agreed to pay $12 million to drivers in order to settle a lawsuit that challenged the companies’ treatment of its workers. Lyft will also accept provisions intended to protect drivers from unfair terminations. And in December, Seattle became the first city in the country to pass an ordinance giving Uber, Lyft and taxi drivers a process for collective bargaining.

Clearly, change is the air. We should seize this moment to reflect on what America owes its workers—and how the new economy is failing them. Here are a few points to consider:

1. The “new economy” looks a lot like the old economy.

Companies like Uber, Lyft, Handy, Postmates, and Wonolo dispatch drivers, odd-job workers, cleaners, delivery people, shelf-stockers, and others for short-term “gigs.” Such convenience is great for many consumers. What’s not great is that these companies claim their business models are so innovative that they don’t need to treat the workers they rely upon as employees.

Unfortunately, this claim is nothing new. For decades, whole segments of industries, including janitorial, trucking, home care, and delivery services, have adopted a strategy of labeling their workers as self-employed independent contractors. In this way, businesses are able to push many of their costs onto the shoulders of the low-wage workers who do their bidding.

Companies in the same industries that want to treat their workers lawfully have to struggle to compete with companies that save money by paying no Social Security, Medicare, workers’ compensation or unemployment insurance taxes and abide by no labor laws. It’s a great get-rich scheme for those at the top, but a stay-poor scheme for the workers at the bottom.

2. You can do right by your workers and still do well as a company.

Uber has become the face of the on-demand economy. The driving service takes apparent delight in ignoring workplace laws, transportation laws, disability access laws and more. (It was sued 50 times in 2015, far more than its closest competitors.)

But many other companies are moving away from labeling workers as independent contractors. Honor, a startup that hires and places home-care workers, nannies, and housekeepers via an online platform, recently announced its switch to hiring workers as employees.

In June, the grocery delivery company Instacart switched over some of its in-store workers, making them employees as well. In July, the package delivery startup Shyp did the same for all of its workers. The valet service Luxe did so in the same month. Some Amazon PrimeNow workers are also being reclassified as employees, and senior care company HomeHero is reclassifying its workers.

Other on-demand startups, including Alfred, Munchery, Managed by Q, Bridj, and BlueCrew, treated their workers as employees from the get-go. Along with paying payroll taxes and complying with minimum wage laws and the Affordable Care Act, many of these startups offer paid vacation, stock options, and transitions from part-time to full-time schedules. Why? Because they know such a system is good for their workers. And that makes it good for their business.

3. Many on-demand workers aren’t in it for the flexibility.

Companies in the on-demand economy love to claim that workers enjoy the flexibility that comes with the job, and that they will happily sacrifice the benefits of employee status in order exchange for freedom to make their own schedules.

It’s certainly true that flexibility is a great thing. Too few American workers are able to take a paid, or even unpaid, days off when they are sick, have family obligations, or need some personal time. That’s what campaigns for fair scheduling, paid sick days and paid leave are about. We should strive to give all workers these options.

But the logic that on-demand companies use to justify their treatment of workers falls flat. For starters, there’s nothing about employee status that requires inflexibility. Companies get to decide how they structure jobs.

Moreover, the degree of flexibility that on-demand workers have is likely overblown. One company-distributed survey of more than 1,000 on-demand workers commissioned by the newsletter Request for Startups found that the much-vaunted flexibility is “illusory.” That’s because workers have to work during the hours when there is high demand.

Another survey of 4,600 workers, recently published by Intuit, found that the average on-demand worker relies on three different income streams. Their biggest worry is having enough work and a stable income. Finally, a JPMorgan Chase Institute study of bank records from 260,000 platform workers found that they use platforms to earn more money when their income dips or when they are between jobs. Gig economy jobs are often a last resort, not a first choice. That sounds a lot less like freedom and a lot more like part-time workers struggling to patch together a living wage from jobs with unpredictable schedules.

4. The on-demand economy has highlighted the need for a new social compact.

In the latter decades of the 20th century, the post-World War II paradigm of longterm, stable employment with a single employer gave way to an economy in which many individuals expected to move through several jobs over their careers. In the 21th century, even those expectations have been upended.

Millions today have given up the hope of attaining career-long security and support from steady jobs. Instead, they must deal with the reality of reality of one-off gigs, part-time work, and temporary employment, all while companies shirk accountability for wage standards and workplace benefits.

On-demand companies have rightly pointed out that simply being called an employee doesn’t ensure security or stability. Politically-motivated attacks on safety net programs have already diluted the reach and efficiency of employment-based programs such as workers’ compensation and unemployment insurance. A third of American families nearing retirement have no savings at all. And despite the successes of the Affordable Care Act, many face high health-insurance costs, and 10% of Americans (33 million) still don’t have health care at all, according to 2014 US Census data.

We need to rebuild and rethink the social compact of the 20th century. That means extending protections to those who have historically been without them, and ensuring that benefits follow workers from job to job.

The on-demand economy has given us an opportunity to talk about the gaps in the social compact for one segment of workers. But we should aim higher. We should ensure that all people—full-time, part-time, and freelance, regardless of the label businesses choose to place on them—can make a living from work and benefit from an expansive social safety net. And together with their co-workers, all workers should be able to bargain collectively with the company that calls the shots.