Is the Sharing Economy Due for Extinction?
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Whenever I take an Uber or Lyft these days, I always ask what the drivers think about the issue, and the uniform response so far (obviously this is anecdotal and not at all scientific) is that they like the flexibility of being able to choose when to drive. For many, this is their second job they do on weekends, nights, or early mornings. They are worried that they'll lose this flexible source of income that are helping, for example, save for their children's college education or pay their way through night school.
I'm not saying that this represents the majority view, or that the legal issue should come out any differently, but I do worry that some of these workers, happily employed as contractors, will lose out on this opportunity.
The reason a lot of Uber drivers don't mind being contractors is because they already have full-time jobs that provide health insurance. But ask drivers who drive during regular business hours (they will be more likely to not have any other job) and they will probably tell you that they would rather be employees.
I guess one other way these things are exclusive is that they drive up costs for sharing economy companies. Some of these companies are pricing so low that they are barely making a profit as it is. If their costs are even higher, they will have to drive up prices, and at least part of their appeal immediately vanishes. At least a few of the companies will die if that happens.
I wish people would realize this is a morally neutral outcome. Like, oh no, another company down the drain. It's not like they're a limited resource. We should be willing to sacrifice a thousand companies if they can't succeed on the profit metric under the rules we've set.
"Sharing economy" type companies are a good idea. They'll succeed, or better ones will. They don't need coddling.
If you want a libertarian paradise where government doesn't interfere, move to Somalia.
This _is_ a very new form of employment that is a mixture of two older forms. There's way too much momentum to kill it. New legislation will be enacted to cover this 3rd type of worker which will please no one except that it'll remove uncertainty so the businesses will support it.
The rate won't differ much from what the driver will be quoted on an ACA exchange if he were to buy it himself (and might actually be worse, because individuals are eligible for subsidies, while companies aren't).
Then you have all sorts of issues of vacation time and coverage meanwhile. If the driver doesn't sign into the network for X amount of days, is he still eligible? Or automatically dropped from employee status and subsequent coverage?
Asking for forgiveness, not permission works sometimes but eventually you do have to deal with the legalities.
After a while, Uber is going to lose on the "independent contractor" thing. Uber will end up owning the cars and hiring drivers as employees, at least until the CMU crowd they hired makes automatic driving good enough. It will still be a profitable business.
[1] https://pando.com/2015/07/06/lets-face-it-uber-sharing-econo...
That's the real problem. The lack of a social safety net without being an Employee of BigCorp.
I know the author is an attorney and thus interested in the law as it currently exists rather than how it might be, but these articles about reclassifying contractors always seem to treat the issue like the laws are stone. The sharing economy is mutually appreciated by most of its contractors and most of its customers, it creates value for society, and the solution is that Congress and the California legislature need to revise these outdated 20th century labor laws to reflect current realities. We don't have to fit Uber into the classifications we currently have -- the law should change with the times. And they don't have to cave entirely to the demands of Uber et al -- there is a world in which state and federal laws are rewritten to recognize these contractor jobs while adding protections and job guarantees (like being able to charge your own price) without declaring all employees are FTE like someone with a desk job.
Once you're at the point of a jury, which is the context of your quoted segment, then the law is set in stone. Yes, I'm sure there are many politicians contemplating changes. But the bottom line is that until that happens, the current laws need to be treated as, well, law.
Homejoy is a bit special in that they sell something that you really only need once, and that's if you know nobody who will recommend you a cleaner. (Why don't they pivot, for instance into a moving company? Pays good money for college kids if they happen to be free, cheap for people who need to move. Location services lets you identify people who are near the opportunity.)
But the idea of a service where both buyers and sellers can find each other on a casual basis is sound. It's just that we need to sort out what the terms are. Should full-time Uber drivers get different protections from part-timers? Needs a trip through the social/political grinder for an answer.
Society desires the ability to offer and purchase services from individuals on demand. These workers work for other individuals. The fact that there are companies involved is a historical quirk that we shouldn't focus our policies on. We need policies that support individuals offering their services to other individuals, so employer-oriented policies are a distraction.
Uber is currently grabbing about 30% of the revenue stream that passes through it, and experimenting with ever-higher cuts.
I would also point out that the modern corporation evolved to fill a demonstrated need, and there's no evidence that the need (ability to command and control large groups of people to work together to reach a goal) has dissipated.
Funding the creation of a such a system is an interesting problem that I think will be solved.
Uber and the like seem to be in a grey area - a middle ground. We'd be foolish to throw away the gains and opportunities that have been created but we also need to have a debate about what the "employees" role is in these types of positions, what is owed to them from the company and how society most benefits from these arrangements. We need to define a lot of things and determine how they should work in a civilized society.
I don't have the answers but I believe it is clear something fair on all sides needs to be considered.
It privatizes wealth while socializes risk.
And the risk to the employee is always covered up or misdirected. With Uber, the big cost is insurance. However they count on people not to know. There's also the issue that Uber sets your price for you, and none that you can negotiate. Better yet, with less than 5 approval means you are "given" even a lower rate.
With Fiverr eLance and oDesk, at least I can set my prices and negotiate with potential clients. Yes, I pay the host company a cut, but that's well stated and fair.
oDesk isn't selling you out to X company and saying if you don't, they're going to lower your rates. They simply provide the portal in which to make the deal.
Uber relies on skirting regulation, as well as misdirecting their employees of what the risks truly are. If I'm hurt on the job, workmans comp takes care of it. What if I'm hit while running an uber run? What if a customer sues for getting hit while in the car? What if it's illegal to run as a cab in my state without a chauffeurs license?
Uber counts on you not knowing the logical and legal landscape, as well as skirts employee protections.
All to make a buck.
Really?
> Correct. Freelance sites' negotiation shows that there is due consideration and discussion, along with a meeting of the minds.
Yes, so what? That's the nature of freelance marketplaces. So those types of businesses don't even belong in a discussion about Uber. They involve different business transactions. I'm not signing NDAs with my passengers.
> They simply provide the portal in which to make the deal.
These sites aren't just invisible portals with no QA or control over who uses them. There are ratings and I'm sure there are consequences to putting out crappy work or scamming people. I remember signing up with eLance and I had to go through an interview process to get the verified badge. I mean it sounds like your idea of a freelance site is an open chat room where anything goes. How is that adding value?
I find it somewhat humorous that you don't realize that this is the entire point. "Contractors" are supposed to have these freedoms, however Uber workers do not. The differences exactly like these are why their workers are being force-reclassified to "employees".
Being an employee is strictly better because you are protected many ways. You get workers comp for on the job injuries, overtime law, OSHA compliance, unemployment compensation, along with not paying the employers' tax yourself.
The gig economy is the starting of stratifying out undesirable people to a less-than-minimum-wage employee. And this is disgusting and wrong. We as a citizenry deserve better.
Lead-generation services like ThumbTack, RedBeacon or any "home warranty" outfits solicit professonals such as electricians and plumbers at their own pre-determined prices, yet at no point an independent electrician is confused with a RedBeacon employee.
If someone posts a Craigslist ad asking for two movers with a truck and mentions a specific budget, they're not automatically entered into a W-2 relationship.
Ditto Craigslist; you may mention your budget, but the movers will quote you a price, and there may be some negotiating back and forth until you find a price that's mutually acceptable.
IIUC, Uber gives drivers a set rate per fare, and it's take-it-or-leave-it.
(And no, they're not "automatically entered" into a W-2 relationship - it's not as cut and dried as that. But "ability to set prices" and "ability to control how the work is done" are 2 of ~5 criteria used to determine whether a contractor is really an employee, and they are two of the most important criteria.)
By the same token an Uber driver can choose to "chase the surge" and only tune in during high-demand time in a high-demand area.
Right.
Anyway, this is a pretty interesting case historically, legally, and economically. The reason we have labor laws is because way back in the 1800s, the pendulum swung the other way. Early merchants paid their suppliers by piece-work, and negotiated each shipment individually. During the industrial revolution, corporations found it more economical to dictate exactly how employees performed their jobs, with set hours and assembly-line processes, and gradually this contracting turned to employment, under terrible terms (because workers had no bargaining power for their newly-unskilled jobs). Over time, we got the organized labor movement, which managed to say that "If you're going to dictate how we do our jobs, what's in it for us? You might as well provide us with security and decent wages," which is how we got employee benefits.
Every regulation creates a dead-weight loss: that's the share of transactions that would have occurred in a free market, but which don't because either party now finds it too much of a hassle with the regulations. Uber and other sharing economy companies have stepped into the dead-weight loss created by labor laws: they fill the share of transactions that would have occurred if companies in these industries were not required to provide employee benefits. All well and good for Uber & its drivers, and not so good for competitors.
The problem comes down the road, where Uber etc. have outcompeted everyone else in the industry, and all the jobs are independent contractor ones with prices set by the app. Then you're pretty much forced to accept whatever bargain they provide - and without legal protections, it probably won't be a good one. So no, Uber drivers don't really get a choice. Hope they're happy with the one Uber provides.
(This is all just analysis, and I don't really have a personal position one way or another. I've generally found it a lot more fruitful to work on things lots of people want and not many people can do, because then you have negotiating leverage and can demand flexible hours regardless of what your employer wants. I think that many of the sharing-economy contractors are working against their own long-term interests, but I'm not one of them, so it doesn't personally affect me.)
You've been lucky then. I have that now, but previously, it was pretty rigid.
> The problem comes down the road, where Uber etc. have outcompeted everyone else in the industry, and all the jobs are independent contractor ones with prices set by the app.
I see what you're saying, and we don't want to repeat history. I just find it hard to believe with the agility of startups and ever-decreasing technological barriers that Uber won't have serious competition in the next few years.
Anyway, I appreciate the history of labor law and explanation of dead-weight loss.
The fact that they can be found easily enough is also interesting, and I suspect that what is going on here, at least to some extent, is that the "early adopter" contractors who are more independent and seek fewer controls are soon augmented as the business grows by people who are attracted to the good things they hear about, but at the same time really aren't lone-wolf risk takers, and really don't want to provide for themselves.
It's not the sharing economy. It's the sharecropper economy.
These kinds of companies encourage the "micropreneur" - the micro-sized entrepreneur. I personally really like this concept as it frees some of us from cubicle-land.
We should consider what are the "benefits" of full-time, W-2 salaried work vs "everything else" (1099, etc.)?
Benefits of W-2 work (for a good benefit package):
- presumed "stable", regular income at an agreed upon rate
- regularly scheduled work hours (usually)
- generally defined work role (position, title, responsibilities)
- paid vacation time - retirement plans, pensions, etc. (sometimes)
- health insurance
- life insurance
- dental insurance
- disability insurance
- different tax classification
Those benefits are very nice, but in an "at-will" employment state like California, they can go poof and disappear quickly. And they are expensive to pay for, for companies/organizations.
Here are a few points to consider:
- If people have their own individual health, life, disability and liability insurance, they can work as an individual with "benefits" independent of an organization.
- The benefits of "sharing economy" jobs have costs, but allow different lifestyles. Controlling work hours, sharing of personal assets in exchange for financial compensation on a micro-scale, feeling "self-employed", making a living with diverse pursuits.
- In my last job, the HR function was outsourced to a third party company (Trinet) that pooled risk for all of the benefits above across all the companies that outsourced HR to them. If it works for companies, why can't that work for individuals too (aside from the obvious $$ concerns)?
The Health Insurance Exchange (US, e.g. "Obamacare"), for as many problems as it has, tries to help address getting health insurance more affordably as an individual vs. getting it through a company by pooling risk across the population. I don't know of an insurance exchange for liability, disability, dental, etc. insurances to try to help drive prices down in those areas. Should there be one?
Cost sharing and enabling independent individuals, small business owners, micropreneurs, etc. is one way to defeat this weakness. Cheating to avoid cost does not work, but finding strong fundamental ways to innovate the system can lower cost. If enough people band together to enable this way of doing it, then they are the risk pool, and they can share costs. Somebody just needs to help put together this system for them.
It just surprises me that so many people have no problem undermining the unions and essentially creating an economy with no benefits/regular pay.