The promises Silicon Valley makes about the gig economy can sound appealing. Its digital technology lets workers become entrepreneurs, we are told, freed from the drudgery of 9-to-5 jobs. Students, parents and others can make extra cash in their free time while pursuing their passions, maybe starting a thriving small business.
In reality, there is no utopia at companies like Uber, Lyft, Instacart and Handy, whose workers are often manipulated into working long hours for low wages while continually chasing the next ride or task. These companies have discovered they can harness advances in software and behavioral sciences to old-fashioned worker exploitation, according to a growing body of evidence, because employees lack the basic protections of American law.
A recent story vividly described how Uber and other companies use tactics developed by the video game industry to keep drivers on the road when they would prefer to call it a day, raising company revenue while lowering drivers’ per-hour earnings. One Florida driver told The Times he earned less than $20,000 a year before expenses like gas and maintenance. In New York City, an Uber drivers group affiliated with the machinists union said that more than one-fifth of its members earn less than $30,000 before expenses.
Gig economy workers tend to be poorer and are more likely to be minorities than the population at large, a survey by the Pew Research Center found last year. Compared with the population as a whole, almost twice as many of them earned under $30,000 a year, and 40 percent were black or Hispanic, compared with 27 percent of all American adults. Most said the money they earned from online platforms was essential or important to their families.
Since workers for most gig economy companies are considered independent contractors, not employees, they do not qualify for basic protections like overtime pay and minimum wages. This helped Uber, which started in 2009, quickly grow to 700,000 active drivers in the United States, nearly three times the number of taxi drivers and chauffeurs in the country in 2014.
The use of independent contractors is hardly an innovation. Traditional businesses like garment factories, construction companies and trucking have often misclassified employees as contractors to avoid offering benefits, paying payroll taxes and abiding by labor laws. What makes this different is that gig economy businesses are arguing that their use of the independent contractor model is in fact better for workers.
Increasingly workers, and government agencies are pushing back. Seattle passed an ordinance in 2015 allowing drivers for Uber, Lyft and other ride-hailing apps to unionize. A federal judge temporarily blocked that law on Tuesday after the U.S. Chamber of Commerce and some conservative groups filed lawsuits against the city. Workers have also sued various gig economy companies to seek overtime pay, reimbursement for expenses and other damages. Lyft recently agreed to pay $27 million to settle a class-action lawsuit brought by drivers in California.
Legislation and lawsuits might ensure that traditional labor laws are applied to the gig economy. But a few smaller companies, like Hello Alfred, which dispatches people to do household chores, and Managed by Q, which provides office maintenance and cleaning services, are taking steps on their own, by treating workers as employees. They say that this lowers turnover and improves the quality of their services. Over time even bigger companies like Uber, many of which lose money and rely on investors to keep pouring in billions of dollars of capital, might find that it pays to treat workers better and even make some of them employees.
But so far, experience with these companies shows that without the legal protections and ethical norms that once were widely accepted, workers will find the economy of the future an even more inhospitable place.