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The ‘Uber Economy’ Needs Guardrails
Wingham Rowan wants to “remake the modern [labor] market,” while Neil Chilson wants “freedom from [labor] market frictions.” Yet neither seems to understand these markets from the perspective of the many freelancers and so-called “independent” contractors whom they purport to advocate for.
Not all freelancers and contractors are the same. Depending on the occupation and industry, one freelancer’s experience may be very different from another’s. If you are a freelancer like a lawyer or a doctor with a private practice, your experience is very different from a freelancer or contractor accessing work through online labor platforms like Upwork, Clickworker, Uber, or Amazon’s Mechanical Turk.
I’ve experienced the vagaries of this “new economy” working life myself. Like Chilson and Rowan, I worked for many years in the think tank world in what is known as a “good” job—generous salary, health and retirement benefits, and more—until the program that I directed lost its funding and was shut down. I then began freelancing as a journalist. Suddenly, the costs for my health care premiums zoomed out of sight because I was no longer part of a large health care pool that could negotiate favorable rates. I had to pay the employer’s half of Social Security and Medicare payroll taxes—nearly an extra 8% deducted from every dollar I earned. I no longer had paid vacations, sick days, holidays, nor could I benefit from unemployment or injured workers’ compensation. Instead of receiving a paycheck from a single employer, I now had to track my many and varied sources of income, making sure that unscrupulous editors didn’t stiff me (one study found that the average unpaid freelancer loses almost $6,000 annually—13% of their total income—because some businesses refuse to pay).
But that’s not all. Rest and bathroom breaks, staff meetings, training and upskilling, even time at the water cooler with fellow workers: all are paid time in a regular job. Suddenly, the revitalizing downtimes of the workday are eliminated as employment is turned into “micro-gigs”—small jobs of short duration. That reduces a worker’s labor value to only those exact minutes she is writing the article, or transporting the passenger, or designing the logo. It’s as if Tampa Bay Buccaneers quarterback Tom Brady only got paid when he threw a touchdown pass, or a restaurant chef got paid by the meal, and all of the in-between times, including their preparation and training, were unpaid work. While so many “new economy” advocates extol the virtues of this kind of freelancing piecework and speak glowingly of this hyper-efficiency, we have to ask: efficient for whom? How do we define inefficiency in an economy in which online labor platforms with global reach arbitrarily define the new rules for a huge reserve labor pool? These platforms have unleashed a profound existential crisis in how we define work.
Certainly, some people are cut out for this type of hustling and juggling lifestyle. But many other intelligent, talented, experienced workers are not. The miracle of the post-World War II economy was that it had many different types of occupations and industries, and if someone was willing to work hard, they could find their way through the maze of the working world and eventually find a “good” job. That’s the reality being threatened right now.
Chilson says that “[s]ome of these concerns are paternalistic judgments of the choices made by the real people who work in the gig economy.” Well, I’m one of those “real people.” His viewpoint ignores the fact that the gig economy arose following the Great Recession of 2008. Many of the jobs lost were what used to be considered “good” jobs—with decent pay, job security, health care, and retirement. Nearly half of the new jobs created in the so-called recovery paid only a bit more than minimum wage and had no safety net at all. By hiring freelancers and contractors, businesses know they save 30% of their labor costs because they don’t have to provide a safety net for these workers. Still today, there are millions fewer jobs in mid- and higher-wage industries than before the recession and millions more jobs in lower-wage industries. Indeed, a report from the U.S. Conference of Mayors found that the average annual wage for the new jobs was 23% less than the jobs lost during the Recession. These are the gig and freelancer and contractor jobs. Chilson implies that these workers are taking these jobs by choice, but in fact, many workers are taking these jobs because of a lack of choice. Many good jobs have disappeared, and these are the crumbs that are left.
Yes, if you ask some of these workers, they will say, “Sure, I like it.” Having flexibility in one’s job is certainly desirable. At least initially. I interviewed many gig workers as research for my book Raw Deal: How the Uber Economy and Runaway Capitalism Are Screwing American Workers. I found that if you checked back in with many of these workers 3–6 months later, they were no longer so enamored with the wonders of flexibility. No, they wanted higher wages, health care, retirement, and a few days of paid vacation and unemployment compensation when work dried up. Doesn’t every hard-working American deserve that?
Under current conditions, what kind of market power can these workers realistically command against an online labor platform like Uber? Or how about Upwork, which is an eBay for jobs, employing a mere 250 regular employees who use the latest digital technologies to oversee an estimated 10 million freelancers and contractors all over the world. Workers from the U.S. and Europe bid for jobs in an online labor auction alongside workers from India, Thailand, China, Romania, and the Philippines, resulting in a global race to the bottom of lower wages and work conditions.
These kinds of workers need a lot more than Chilson’s simple romantic bromides: “Independent work…is as American as Mark Twain and the small farm.” If you truly believe that the freelancing life should be accommodated in the labor markets, here are a few important regulatory guardrails that these workers badly need:
1) Portable safety net. For freelancers working for multiple businesses, a portable safety net requires each of those businesses to contribute a prorated amount based on the number of hours worked or income earned by that worker into an Individual Security Account. Those funds can then be used by the worker to pay for any safety-net needs. A portable safety net would provide those workers with more economic security and keep them from having to pay the employer’s half of payroll contributions. It would also move us beyond some of the legal wrangling over who’s in and out of the system (i.e., worker classification) because everyone would be in the system. This proposal has been endorsed by 40 business, government, labor, and NGO leaders from the right and left, including R Street Institute, Lyft, Handy, Instacart, Care.com, and eBay, who agree that a portable safety net is a necessary foundation for the 21st-century economy. President Barack Obama endorsed portable benefits in his 2016 State of the Union address, and bills have been introduced in several state legislatures. Wingham Rowan’s intriguing proposal for a public sector labor platform “built around protections, control, stability, and progression for work-seekers” would be extremely complementary to a portable safety net, I would think.
2) Vocational training and reskilling. Freelancers and contractors are expected to assume more of the responsibility for their own constant training and reskilling. Another guardrail would be the creation of public-private partnerships to facilitate this so that workers are not alone in this responsibility. It’s expensive for workers to tackle alone and creates disproportionate impacts along the usual demographic lines of class, race, and gender. The productivity of the U.S. workforce will decline if training and reskilling are neglected. Much more is needed to create a solid training and reskilling foundation for the “distributed workers” of the future.
3) Affordable Internet access and faster speeds. As more workers access employment through online gigs, it is increasingly imperative that they have access to affordable and fast Internet. The fact that the U.S. trails France, Singapore, and South Korea in Internet quality is an embarrassment. It also undermines our economy because, in a global marketplace, American workers are competing against workers who have faster and more affordable Internet connections. Those countries may be the ones coming up with new innovations, not American workers. So America needs to invest seriously in upgrading its Internet infrastructure.
4) Better training for freelancers and contractors to run a “business.” There is virtually no training for freelancers and contractors about how to run their own business-of-one. Many advocates apparently expect people to just jump into this freelancing sea and figure out how to swim. But it would be enormously helpful for new freelancers to have some classes at a community college or online about the “nuts and bolts,” such as how to track and deduct expenses and how to use the tax system to one’s advantage. I have met so many Uber drivers who really have no idea how much money they are earning, not only because Uber is not very transparent but because they don’t know how to track their expenses and subtract them from gross earnings. This would also benefit states and cities, because if freelancers are more adept at deductions and pay fewer federal taxes, that’s more money in their pockets that they will spend supporting local businesses. If this is going to be the direction of the workforce, why not provide training for freelancers?
5) Organizing among “distributed” workers. Freelancers and contractors tend to be fairly isolated and anonymous, especially when dispersed across regions or even countries. That makes it nearly impossible for them to organize together for better conditions and wages. Another guardrail would be to provide the data to workers or their representatives so that they know how to contact each other for those who want to co-organize. That “worker network” would act as a counterbalance to the isolationist tendencies of remote work and platforms’ dominance. Who controls the data—the business or the workers or their representatives—is going to be even more crucial in the future of work. We must revise our freedom-of-association rules and definitions, and allow for meaningful opportunities for workers to co-communicate and organize, such as through digital meeting spaces like Facebook Groups.
In short, the invisible hand now has a robotic arm, and it’s not always in a sharing mood. The benign view that new jobs will somehow magically appear and all will be well is ahistorical and seems blindly faith-based, rather than based on hard evidence. And remember: my spending is your income, and vice versa, so if millions of workers have crummy jobs it will eventually boomerang against aggregate demand, broadly shared prosperity, and a robust economy.Return to the Commons
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