Is the Gig Up or Down?

New Orleans      With statistical unemployment below 4% for the first time in years, economists, policy makers, politicians, and self-interested hucksters have found something new to throw statistics at each other backwards and forwards:  is the gig economy growing or slowing?  At many levels one might say it depends on who you ask.  At another level one has to worry about why it matters to the drum beaters.

So, just to review the field of battle for a minute.  The respected Economic Policy Institute in Washington weighed in recently that the gig economy was so marginal it was basically only worth a side room in an academic convention amounting to less than 1% of the jobs in the economy.  The federal Bureau of Labor Statistics trying to update its figures put the number higher than that but way less than double figures and cast doubt on whether the level of such employment was rising or falling.  Others argued that the BLS statistics were an undercount citing the almost 70% of Uber drivers who are not counted by BLS because they have payroll jobs, and Uber is their side gig, so to speak.  Gig promoters claim that more than one-third of the USA labor force is involved in some form of contract or freelance work.  No one disputes the fact that contingent, subcontract and temporary labor is huge, but sorting it out is guaranteed a migraine.

Let’s look at why it matters, big or small.

There’s a continuing push by the giggers to get changes in labor law protections, and that’s not good news for anyone but the giggers themselves who are trying to compete with more established employers in the same industries by sweating the labor of their workers.  Not having to pay social security, unemployment, health benefits and the rest of the package and instead pushing the costs over to the workers themselves saves a ton of money, if you are allowed to get away with it.  The whole point of Uber-kind businesses is in fact to get away with it, which is why they continue to fight here and abroad against any finding that they are responsible for their workforce and not simply an internet application.

It also matters when the bean counters determine how big the number is of fulltime gig workers, because these are workers who represent a long-term time bomb on society if they lack sufficient Social Security benefits to support themselves when they outlive their gigs.  A significant change in the composition of the workforce creates a burden that companies want to shed by passing their responsibility over to the rest of us.

Some good news came from an unexpected front in a southern California ruling against the Cheesecake Factory restaurant chain when they were hit along with their janitorial subcontractor for over $4 million on wage theft claims because workers were denied breaks and forced to work unpaid overtime hours before being released from the shift by Cheesecake managers.  Having employing companies held responsible for subcontractor violations could set precedents that protect contingent and temporary workers as well as gig workers.

We need a lot more victories along the Cheesecake lines because whether the number is huge or small we need to force these kinds of business in another direction where protection of workers’ rights and benefits is still part of the business model.

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Please enjoy Fionn’s Magazine Face.

Thanks to KABF.

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The Achilles Heel of the Gig Economy is that Workers Can’t Make Enough Money

New Orleans   Uber is the canary in the coal mine. After years of listening to the reports that held up Uber as the herald of the future, creating a new business model where an application would substitute for an employer, the accounting is finally coming due. Its drivers were touted as the vanguard of the gig economy, complete with claims that this was what the “new” worker really wanted from employment. Now it turns out Uber may be the canary dying in that coal mine because the Achilles heel of the gig economy is increasingly revealed: it’s not sustainable. No matter what Uber and others want to call them, they depend on workers, and workers are voting with their feet that they can’t make it on temporary work, so they have to keep moving, and that means working for another company. The gig economy doesn’t work when people can’t make a living on Uber and similar gigs.

Uber has lost $4 billion over the past 18 months for lots of reasons, but largely because it can’t make its workforce either happy or stable. They are like a bait-and-switch operation offering incentives, prizes, tips, and extra bonuses, but increasingly hitting the brick wall where their drivers are realizing they still are barely making minimum wages per hour. In fact the Wall Street Journal reported that Uber cooperated with a study done by a New York University professor that,

“found that no matter which directions fares go, drivers invariably take home about the same earnings over time…[because] When there is a fare cut, drivers’ pay per trip falls but riders flood the service, offering more business. A price rise eventually lures more drivers than Uber needs and scares away riders. The changes are short-lived as an equilibrium is reached after about eight weeks, and drivers’ average pay comes out the same.”

This means that Uber, the harbinger of the future, “must lean heavily on pricey incentive payments – cash for completely a certain number of rides a week, say – to bring driver earnings above what typically amounts to around minimum wage.”

Wow! I’ll guarantee you, because I know many once upon a time Uber and Lyft drivers that join on the promise of higher wages, and they leave when they finally realize that paying for gas, their car, insurance, and then looking at their pay, it just doesn’t add up. Uber is stuck on a business model that is based on exploitation of workers, that business model, like most of the vaunted “gig economy” is unsustainable, because workers fooled at first, are not fooled forever when it comes to the empty pay envelope.

Uber and the rest of these companies are not a new model, but an old one. They are labor contractors trying to sweat workers with a new tool, but an old scam. This is a piece rate scheme. Some workers can make it, but most can’t. Worse, all of these companies are pushing off their responsibilities as employers to provide social security, unemployment and even bare bones benefits, but making the workers who are their lifeblood into subcontract labor. In Europe and some US cities, that part of the hustle is also falling apart as Uber is increasingly declared an employer.

Workers are being gigged by this model. The canary is dying in red ink. A business model that depends on exploiting workers is doomed, even if it takes some time to die.

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