The gig economy has been back in the news with Uber recently reporting a huge quarterly loss of over $5 billion and California passing landmark legislation that essentially classifies gig workers as employees in California. This legislation could have a big impact in other states, too.
Many people previously called “gig” work the future because it appeared to be growing and also had some worker appeal. It also had, and still does, some growth potential because of the increase of app based work such as Uber, Lyft, DoorDash and others.
At a conference in Columbus for county government officials across the U. S. in 2017, participants were told about the benefits of a gig economy and how it could help their counties make a transition from traditional work arrangements to gig work arrangements. The presenters said it was what workers were wanting particularly because of the alternative work arrangements. They wanted the freedom that gig employment offered such as flexible scheduling and the ability to have some control over their career path. Officials were encouraged to develop strategies that could help citizens become independent contractors or entrepreneurs so they could achieve this career goal and also get assistance to establish and expand their app-based companies. Presenters also told county officials gig work could help their county’s revenue since gig work was expanding so rapidly. They cited data that showed the number of people working in the gig economy over a ten-year span jumped over 5%. They also cited census information showing the income for gig workers grew over 20% for that same time period.
But never in that conference did they mention the problems gig workers faced. The ability to schedule your work is nice but the other side of that is sometimes work isn’t available to schedule so you have NO income. That also means there may not be a steady paycheck or a paycheck for food or for bills. Some gig workers do the jobs because they’re having to supplement incomes. The presenters at the conference cited a Pew Research poll from 2016 that they said showed the success of gig work but what the poll also revealed was many poll participants who did gig work had low-incomes to start with or had a need to be able to control what hours they worked. The poll also showed people had some real concerns about gig work such as worker exploitation, more financial emphasis on the employee and the erosion to improve work livelihood.
Another problem with the information from the presenters at the conference is that time frame they used to show all these great things happening with the gig economy was during the Great Recession. Jobs were few and far between for a long time. People were willing to do what they could to have a household income. They also cited that increase of 20% income growth over 10 years but when broken down it really isn’t very much and we don’t know if that income came in one year or two years or spread over the 10 years. Were there years of no growth?
There’s also some information from the U. S. Department of Labor, Bureau of Labor Statistics that confirms some of the conference information on gig work may not be what was presented. It’s been written the federal government has a difficulty determining what gig work actually is and this report states that but there are a few things that give some insight into this type of work and they’re important. One is there has been a downturn of contingent workers, those the government says don’t expect continuous employment or are temporary workers, from 2005 to 2017. The year 2005 is when BLS previously did a measure of contingent workers. Another important piece of information from this report says more than half of contingent workers wanted fixed employment, not gig work. Most were under the age of 25 and didn’t expect their gig work to last. One third of the workers were in professional roles such as educators or health care workers. It also said the “gig” workers earned considerably less than those considered non-contingent and that amount was 77% less or had median weekly earnings of $685. While that is the median, it is important to remember for gig or contingent workers there is no guarantee of that from week to week.
And that kind of leads us to what happened in California last week. Those gig or contingent workers who make 77% less also don’t have access to workers’ compensation if they become injured on the job and they are not eligible for unemployment benefits when their job is no longer available so they have no safety net. Now, with the passage of AB5, workers will have a safety net because they have workers’ compensation and unemployment plus are eligible to increase their pay and receive overtime. It also helps workers have a better opportunity to maintain their jobs as they will now be classified as employees which is something the BLS report said was important to most gig workers. As far as a more flexible schedule, workers still can have that, too. That doesn’t change as many profess it will. A driver for Uber can still determine when to drive and many workplaces have demonstrated flexible scheduling works for both the employer and the employee. The bill may not be perfect but it’s a step forward.
What this bill also does is scrutinizes employers who purposely mis-classify workers to save money. Wage theft has become a significant problem throughout the U.S. and the data that has been collected by Policy Matters Ohio just for Ohio provides a good picture how employers have abused the system. They highlight the industries in Columbus that are more prevalent to mis-classify workers. They include construction, janitorial, restaurants and residential care. More than 200,000 workers have been impacted and many are low-wage workers. Policy Matters says governments need to take action and they cite Cincinnati as a city that is trying to do something about it. Cincinnati says if a company wants some tax assistance they need to show they are good corporate citizens and not stealing from employees. Businesses are also required to post notices about wage theft and how to report if it happens. That appears to be working as wages have been paid back more quickly to workers than they were before the legislation.
But let’s go back to Uber losing more than $5 billion in a quarter. The CEO stated on CNBC that loss would probably not happen again and Uber’s revenue growth outside of a one-time bonus for drivers was around 25% and would probably be rapidly increasing. It’s also important to note that the salary for the CEO at Uber is $45 million and the COO is $47 million. With that staggering loss, the salaries of just those two executives, and the positive revenue projection, it kind of appears Uber shouldn’t have to worry about AB5 because it can definitely afford to pay the benefits under the legislation. Yet, there still remains a problem. Uber is fighting the legislation. They don’t want to pay for those things.
This creates a dilemma for what we determine to be acceptable. Are we willing to purchase the goods and services of businesses that continue to complain about wage and benefit reforms especially when they can afford it and will help to improve workers’ livelihood? Is it okay to have such extreme differences in wages where some people can barely make ends meet and others have more than enough several times over?
And as far as gig work is concerned, it will continue to exist just as it has for a long time. But it doesn’t appear to be the new way of life the conference presenters suggested. It is, though, another opportunity for people to make money so they can have food on the table and pay their bills. And maybe some can have a little extra so they can enjoy life. It’s what we all want including those that make $45 million.