How Estimates of the Gig Economy Went Wrong
wsj.com
wsj.com
These companies provided very little as far as tech revolution. They mostly rely on cutting wages and offputting risk/liability/taxes/benefits onto the workers. That’s a business model that’s doomed to fail. The word we’re looking for is “greed”.
When nonprofits pop up to help gig workers determine if they are actually making any income, the business plans seems pretty obvious.
They don't have to be stupid to be exploitable. They just have to be in a desparate situation.
In England people who claim unemployment benefit (Universal Credit (UC)) will lose that benefit if they refuse to take gig economy jobs. They're forced into these jobs by the state.
And then, because of the way UC works they are forced to work as many hours as possible. The flexible bit doesn't work for them because UC doesn't work well for people doing variable hours part time.
https://publications.parliament.uk/pa/cm201719/cmselect/cmwo...
https://www.theguardian.com/society/2018/mar/25/universal-cr...
https://www.ftadviser.com/protection/2018/03/29/meeting-the-...
https://www.litrg.org.uk/sites/default/files/Gig%20economy%2...
Oh no!
While I'm not saying these gigs are exactly long term careers it's better for the state and for the person than not working.
This is a route back into employment for people who've spent years out of work. The intent is to provide a ramp from "no work, full benefits", though "some work, some benefits", to "full time paid employment, no benefits". (in fact, with tax credits, many people in full time (over 16 hours per week) work are also getting state benefits).
This ramp is broken by the gig economy because zero-hours contracts make it impossible for the state to know how much top-up benefit to pay month to month. This plunges people into debt and poverty.
The gig economy employers benefit because they don't have to pay a lving wage, they don't need to compete for workers by offering sensible wages.
This is an unintented distortion of the free-market. If you believe in free markets you should wish to see the end of this distortion.
Instead of blaming Uber for having work available for people who want to only do a few hours per week (or who can’t do more for whatever reason), why not blame the government for not updating their rules to better fit the actual reality on the ground?
US companies really need to understand the English concept of "taking the piss".
No-one expects companies to pay all their tax and obey the law all the time. What they do expect is that companies do not take the piss. Uber is taking the piss, and they're going to be regulated if they don't make changes.
> blame the government for not updating their rules
I'm doing that too.
> Four working single mothers have won a High Court challenge over the government's universal credit scheme.
> They argued a "fundamental problem" with the system meant their monthly payments varied "enormously", leaving them out of pocket and struggling financially
Note that these are working mothers.
It's not having to drive lyft or die.
It's about being forced to drive for lyft, and still lose your income, and lose your home.
It's not being able to predict your income from one month to the next, which puts you at risk of losing your home because you can't pay rent and the state keeps paying you weird amounts because of the way that benefit works.
We've seen huge rises in street homeless numbers. In 2007 we had about 500 people in the UK sleeping on the street. Today that's over 4,000 people.
In 2017 over 30,000 single parent families (the kind who should benefit most from the flexibility of zero hours and gig economy) were made homeless.
> indentured lower class that's barely surviving and has very little ability to lift itself up
Thriving poverty industry and a steady stream of immigrants who have to start from the bottom of the visa/stay permission hierarchy ensures that at any time, there exist a solid share of a society qualifying as such. It's trivial also to embitter these two groups (domestic and incoming) onto each other.
Not if your other palls in different industries and politics help deprive them of better options...
As an example: In Stockholm where there are no Taxi mediallions (anyone can be a taxi or car hire service in any way they want as long as they regiser and comply with insurance, standardized meters, and other regulations) and the competition alreay has new cars, app-based booking etc - there is precious little margin for Uber to cut from, compared to a city with medallions, cab shortages, ancient taxi companies that don't offer app hauling/prepayment etc.
So how can Uber make a killing in Stockholm? Answer: they find another regulation to work around. Tax regulation. Taxis are required to enter all fares into the meter and that's reported to tax authorities. Uber drivers are supposed to enter the rides themselves into the meter after completing. The kicker is: there is a huge incentive for the individual driver to under-report the fares, and that incentive also helps Uber. This being revealed will obviously now mean that Uber will be forced to pay an estimated and much higher tax, and the drivers won't be trusted to do this themselves in the fuuture. And this will only mean one thing: Uber will pack up and leave. There is no way they can be competitive (to the extent their investors will want) without breaking either Tax law or Labor laws.
Uber's statement was that the individual drivers are responsible for that sort of thing. Wink, wink.
What's worse 75% of them were receiving various types of government money for unemployed people (which are supposed to be decreased if are able to find a job).
Uber is planning to return to the Danish market -- the Danish spokesperson says they will return "with integrity".
AirBnb however has agreed to automated reporting of who receives rental income in Denmark. If you agree to automatic reporting as a landlord, you get a certain tax discount.
The new checks were based on information Denmark had received from the Dutch authorities, where Uber’s European headquarter is based.
Danish tax authorities said in a statement they had checked 1,195 Uber drivers’ tax reports and of those 1,192 have had their tax changed now.
The "market" rate is partially set based on those assumptions because employees wouldn't be able to live on what they are paid thus the labor force and thus the company would collapse without an increase in wages.
In both cases its a transfer of wealth from the middle class to relatively rich owners.
The extra cash helps for when business is slow and the server has to report they made the minimum wage to the employer anyway because the employer is responsible for ensuring that the server makes state minimum if the wage plus tips doesn't equal such. Basically the employer will just fire people who make the employer actually do this.
It also helps cover the foregone wages when the employee is working through breaks and lunches even though the half hour lunch is deducted from the employees pay.
In short employers sometimes pay as little as $2 an hour x 24 hours per week.
Since nobody on earth can live on $200 a month some combination of tips from you, government benefits paid for by you, and second or third jobs makes survival possible.
Most of us are not terribly concerned if the server is paying taxes properly and are concerned that the business is basically welfare for inefficient businesses who should probably go under.
Cash tips paid to the server are essentially invisible to the employer. This is an accepted trade-off in a system where restaurants can pay below minimum wage.
An Uber customer cannot pay cash. They pay Uber first (fare + optional tip) and Uber in turn pays the drivers. So they know with 100% certainty how much money is changing hands. For a company that is worth literally billions, having a basic financial reporting system that calculates the government's cut is not some kind of overbearing regulatory hassle.
As far as I know it's a completely different setup with Taxi companies and their hired drivers that work on comission, compared to Uber that works with private contractors.
Do you need a company to start earning money as a cab driver?
Simplest and cheapest with least risk (and least profit) would be working for an established company using a car owned by someone else.
Note that in Stockholm Uber is a regular licensed taxi company. Any taxi company can operate like Uber and vice versa.
So there are hundreds of taxi companies and Uber is just one and like all the others. Uber cars are registered with the vehicle authority as taxis and have regular meters.
Meaning that you can either:
1. Get taxi driver license and driver for a fleet for a certain % to take home. This basically means that Uber is just one of the systems you use to get customers.
2. Get a taxi driver license, a sole trader company (1 person company) and a taxi operating license. This means you are a contractor for Uber, and pay the 25% comission. --> You do not need a meter --> You do need a specific insurance for taxi business.
So basically if Uber runs a fleet of contractors, it's massively more important than having taxi companies that operate phone-based (as well as app-based) ordering systems. They have massively more overhead than the tiny operations office that Uber needs to operate in any certain city.
I think Airbnb could do a better job of working with cities to ensure that negative externalities don’t poison the well. But I don’t hold them responsible for the tsunami of demand on both sides of this market. It seems pretty clear that people really, really want this, and I don’t think the right answer is “too bad, stay in an overpriced chain hotel”
That's exactly what the article is saying, though. Informal work arrangements (the gig economy) take off when unemployment is high due to a big recession; but when labor markets are tight (and unemployment is really, really low right now) traditional, formalized work is a lot more attractive.
That's a really small demographic who would fit both criteria. Recently unemployed people and students come to mind.
Importantly - Uber knows this fact very well and are doing everything they can to survive until fully autonomous self driving cars reach mass production.
[0] https://www.chicagotribune.com/business/ct-biz-uber-driver-w...
All of which is to say that Uber is in trouble, and having been such a notoriously bad actor, will be kicked down the hill at every step.
If you're talking about investing in antisocial companies, then I guess investors' mentality might change if we somehow puncture the abstraction layer that separates the investors from the people their investees affect. For instance, if the investee breaks the law and gets fined, if there was a chance for that to flow back to the investors and take some extra money out of their pockets, I expect they'd put extra pressure on investees to behave.
I expect we're going to see more niche gig-economy businesses being built around more complex workflows with higher skilled labor. Lots of B2B and B2C potential when you break up services into smaller tasks that can be fulfilled. Success is providing the benefits of scale without the challenge of doing it yourself.
Now we'll have to have a 5-star rating to get a temp job, one that probably won't pay well.
Ah an it will be all be tied to your identity. Forever. That's awesome !
And who will rate us ? Our temporary boss. Hooray for the power dynamics !
Great!
What's wrong in a simple world where most people can be just mediocre and hold a stable job ?
Unless we're talking about "high risk" jobs, why make life harder than it already is ? for what ?
Why not aim there, collectively ?
Why not permanently employ them? Should be cheaper in the long run.
I have a friend who owns a small family business in France. He's doing well. He would have enough work to take on extra staff, except that he claims the local worker protection legislation mean that it's not worth it, particularly since he wouldn't be able to get rid of anyone if he hasn't got the work for them.
So, he'd rather work himself and family members extra hard, than employ anyone new.
>> Should be cheaper in the long run.
Except if the politicians in charge make sure it's not. See above.
In other words, the compensation for end-of-contract is just 2% of the salary of the worker per month. If the benefits of having a worker is more than 2% of their salary, it's worth it.
But to avoid deviating from the topic: the gig economy is not about small family businesses. Gig economy is a buzzword used by companies that could pay decent salaries and worker protections but are too dominated by greed to do it.
I presume French businesspeople aren’t fools and
their extreme reluctance to hire is rational.
You gotta learn what legislation applies to you now and start following it. Gotta pay people regularly, instead of when it's convenient for you. Gotta have policies for things like expenses and sick leave and holiday and car use and overtime and bribery and dress code. Gotta apply the policies consistently and fairly. Gotta get them work space and equipment and maybe parking. Maybe you need to provide training. Gotta to figure out how to put job ads into the newspaper or whatever your industry is doing these days. Gotta decide what sort of interview questions you're going to ask...
I can be fired with one month warning, and I have the same one month notice if I want to quit. That seems fair for both parties.
I always found the narration of Uber the Underdog going against the Evil Taxi Mafia to be funny. In reality, the only mafia-like player in this story is Uber - the multinational corporation that fights against multitude of small local players.
But yeah, I guess both your narrative and the one you counter are equally detached from the real reality
So? The fact that the business might by people using it as a front for money laundering is immaterial because it does not affect how they do business, how they treat customers or how they treat employees. Letting your money laundering workflow impact your business is how you get caught laundering money.
The "gig economy" relies on the jobs being simple and atomised. It relies on the quality being easy to collapse into a single number, and no tacit knowledge or ongoing relationship involved in the production. Managers keep assuming that these kind of internal transaction costs are unimportant, and that's how you get outsourcing disasters.
"Gig economy" startups pick at the low hanging fruit first. Taxi drivers who are already hired by the journey are much more easily "decentralised" than people who are supposed to be the face of their company or undertake jobs with learning curves. There's plenty of scope for online services to improve the hiring of the latter, but it's still going to entail longer term contracts and often more regular working hours, and often better comparative performance metrics than a skewed star rating system.
Thank god that back when I was babysitting for extra cash, there wasn't some faceless, soulless automated system judging my Identity and Merit.
What is it about technology that induces people to zoom straight toward dystopia? The gig economy has always been there; just because we now have the technology to turn it into an Orwellian hellscape doesn't mean there are suddenly safety concerns that demand we do so.
"Gig Economy" is a new label on an old practice. Take, for instance, nurse staffing in the United States. In unregulated, non-unionized states, nurses are staffed as-needed. Hospital administrators partner with nursing agencies, who manage relationships with nurses and contract short-term work. This market of nurses enables work-life flexibility and pays fairly well. Yet, the costs and risks continue to rise for nurses. If hospital census (# of patients) is low, shifts are cancelled up to minutes before work is scheduled to begin. Further, hospital administrators have dramatically increased the burden on nurses, increasing nurse-to-patient coverage and demanded more and more of them without assistance. Staffed nurses play the role of scapegoats, too, blaming them for mistakes and shifting risk from the hospital. There are more problems and risks for staffed nurses than ever.
Yet, despite its Gig-like behavior, nurse staffing seems to elude journalists and academics. This is only one example. There are others.
Again, the gig economy isn't a new phenomenon. It's just spreading to other sectors now because of technology innovation. We must learn what works well and what doesn't, for all involved parties. Academics and journalists are thus far failing to learn what works by ignoring legacy business activities.
That's why the Amazon iOS app lets you buy physical products but e.g. Kindle ebook purchases are not supported in the app.
Compared to the stories I have heard about US taxis (underqualified drivers, bad technical maintenance, general unreliability), I am not surprised. You can't have reliable and cheap.
In addition to the mentioned factors, of course Uber/Lyft can be less expensive in the US - they ditch the contributions to social security, healthcare and pension system that is required for German employees.
btw, I am Munich-based too... yes our taxis are expensive indeed but so are the living costs. Can't have no taxi drivers when they don't have a place to live in.
Well, the ones I've taken so far in the US have been fine.
> btw, I am Munich-based too... yes our taxis are expensive indeed but so are the living costs.
Much of my Uber using has been in the SF bay area, which is substantially more expensive to live in than Munich. It's still way cheaper.
The best example I've seen of the gig economy is jobs that were already contract based but where it was hard to find and connect contractors with customers.
Walking dogs, small home renovation, etc. I've seen these apps make a massive positive change in the market where people are able to find more work than they code before (at roughly the same rate) and customers can find contractors willing to do the work and they are rated by past customers rather than just word of mouth.
But they didn’t just want to compete with taxi. They wanted more. They wanted everyone to use their service. How do you do that? Offer it cheaper and pass the responsibility to the driver. If Uber and Lyft has stayed humble they could have had profit, happy workers and happy riders. Instead they wanted billions.
This was what Uber was. Then Lyft launched its product and, to Uber’s shock, didn’t get any regulatory pushback. (Most people in most American cities had horrible cab experiences. Also, the tech backlash hadn’t yet begun.)
Uber probably improved the pay laws for New York’s taxi drivers by bringing light to their plight. It also improved quality across the board.
This isn’t a simple “they got greedy” story.
I assume this is because otherwise every link would seem to be hosted (in the parenthetical trailer) by outline.com or other depaywaller instead of wsj.com, ft.com, et al.
Sometimes you don't need to be a math genius to see that major economic shifts incur cost restructuring that caps growth/penetration.
Becoming an Uber driver has comparatively much lower startup costs (buy a car). In the short-term, Uber drivers will have a much better cash flow, and potentially in the long-term too. Taxi drivers would see their cash flow significantly drop, but that's due to competition. Uber artificially has lower prices in most locations except when surge pricing kicks in. If their prices were not artificially low, I think you'd actually see a bit of parity. Yes, taxis would see lower cash flow, but it would not be a race to the bottom like it can be if Uber is artificially pricing lower.
Paywall, so I can't read the whole article and see if they address this.
In the case of the gig economy there is no company. The people doing the work are underpaid consultants. So, where does the money go, the money that would have been paid to employees in an healthy company? It remains at the gig company. There are all kinds of economic problems with this, particularly if the company is itself not profitable and not on track to become profitable. For example how can these people invest back into the company to further stimulate the company and thus their long term earning potential?
You can see they knew this by the lobbying effort that Uber did to even get where they did so they could ignore laws without immediate consequence.
In the US that worked (simply because US politicians can be bought off via Super PACs etc, which is absurd in itself), but in other markets (esp. Europe) they got quite a beating from regulatory agencies.
Not really, the British regulators and courts keep finding against them but there’s zero enforcement, Uber continue operating as normal. The Mayor Of London is weak.
[1] https://www.handelsblatt.com/unternehmen/handel-konsumgueter...
[2] https://www.rbb24.de/wirtschaft/beitrag/2018/12/bundesgerich...