Gigging Is Changing Work, And There’s Work Needed To Make Gigging Better

Sarah Kessler, author of  “Gigged: The end of the job and the Future of Work,” appeared on PBS’ NewsHour this weekend. She offered some interesting and cautionary words about the future of work that contrast and reinforce ideas expressed by  Louis Hyman in The New York Times on Saturday in a piece, “It’s Not Technology That’s Disrupting Our Jobs.”

Kessler told NPR’s Hari Sreenivasan: “…what I found is that there is a world in which like this story that startups pitch about this being like wonderful and independent and all you need. It really exists but it exists for people who have skills like programming computers versus some of the people who I followed who were trying to make ends meet on the lower end of things.”

The hyping of gig work is relentless. Yes, it can work. Yes, it is hard to make ends meet, but there is not sufficient connectivity to work, yet, to deliver on the promise of flexibility because too often gig workers are left hustling for low-pay alternatives to a good job.

What’s missing? Benefits and a commitment to shared prosperity, as well as greater scale to enable one person to conveniently move between earning from the skills they possess. We must organize our society so that people can thrive. That’s on all of us, employers and workers, to debate and codify, whether in contracts, regulations, or both.

Louis Hyman’s opinion article in the Times provides an apt answer: “The history of labor shows that technology does not usually drive social change. On the contrary, social change is typically driven by decisions we make about how to organize our world. Only later does technology swoop in, accelerating and consolidating those changes.”

Platform marketplaces, such as Uber, Airbnb, TaskRabbit, and others, have focused on their success relentlessly, forgetting about their workers’ prosperity and, in some cases, the worker’s humanity. This is why we need clearly articulate laws about the relationship between company and worker, regardless of the form that relationship takes. Kessler’s comment, that “there’s really no clear definition of what makes and employer or what makes an independent contractor” is emblematic of the ongoing evolution of work.

Hyman’s take is that we’re mistaking governance for technology, allowing startups to dominate the economic and legal debate because we are distracted by technology:

Internet technologies have certainly intensified this development (even though most freelancers remain offline). But services like Uber and online freelance markets like TaskRabbit were created to take advantage of an already independent work force; they are not creating it. Their technology is solving the business and consumer problems of an already insecure work world. Uber is a symptom, not a cause.

He’s suggesting, if I may interpret him broadly, that we are being gaslighted into thinking that technology is changing our lives while the real culprits get away with outlandish profits by defining unfair work relationships. And he is correct to the degree that contractual terms are changing labor power, but he is wrong that Uber is a symptom and not a cause. Uber is an organization that found an efficient way to drive more temporary work by implementing technology with built-in unfairness.

First-movers always set the new terms of a business in a nascent industry, yet they are almost always superceded by organizations that bring both quality or efficiency to market along with fairness for the consumer, worker, and society in which they operate.

Most analysts focus on the pace of technological change, but now we are at the cusp of a massive socioeconomic change based on the potential for completely new ways to organize using technology. Hyman is correct that it is corporate leadership and political pressure that actually shapes economic fairness. The overwhelming force that will change work is visible in the sometimes wild-sounding speculation by crypto-currency promoters and  blockchain experimenters, who have some of the answers.

Everyone needs to look past the technology to the people, who are our fellow humans and citizens, as well as the customers we count on to drive economic activity that supports business. They come before the business, and the businesses that become indispensible to people will thrive whatever we call these new work relationships.

 

Advertisements

Gig Fairness Is Critical To U.S. Economic Success

Information asymmetry has been the basis of the Gig Economy to date. Marketplace providers know so much that the worker cannot possibly negotiate a better deal. Consequently, we see that millions of people who earned far more as full-time employees are now scraping by on one-third or one-fifth the pay they used to earn when gigging in similar jobs.

Regulation could solve this, but so could a new business model in which platforms partner with workers to build sustainable independent businesses. That means they can earn enough to live and retire, take care of their healthcare costs, and have the flexibility that a full-time job cannot offer. Business would do better to lead than fight this evolution.

Gig and full-time jobs are converging on the question of compensation and benefits. We just have not seen the leverage needed for workers to differentiate their offerings and market them.

What is that leverage? The ability to differentiate services, which is primarily a sales and marketing issue. When platforms allow workers to differentiate what they do, treating them as unique local options instead of commodity-priced infinitely replaceable cogs, the opportunity for fairness will follow. And, I believe, the marketplaces will be poised to earn far higher revenues.

Creating a labor market that supports everyone who works requires extending the benefits and protections awarded to full-time employees to all workers. It’s a monumental undertaking, but a necessary one if we want to walk the talk of supporting entrepreneurs and if we want to maximize the potential of our increasingly self-employed and independent workforce.

Source: How U.S. Law Needs to Change to Support the Self-Employed and Gig Economy, Harvard Business Review, July 23, 2018.

MIT Paper Suggests the Gig Economy Is An Illusion

The Massachusetts Institute of Technology’s Center for Energy and Environmental Policy Research has released a paper that purportedly blows a hole in the ship of the gig economy. The findings are already much contested, and I’ll lay out in this posting where more research is needed, the flaws in the paper’s methodology, and the policy implications of the MIT CEEPR report.

Here is the damning summary of the paper’s findings:

Results show that per hour worked, median profit from driving is $3.37/hour before taxes, and 74% of drivers earn less than the minimum wage in their state. 30% of drivers are actually losing money once vehicle expenses are included. On a per-mile basis, median gross driver revenue is $0.59/mile but vehicle operating expenses reduce real driver profit to a median of $0.29/mile. For tax purposes the $0.54/mile standard mileage deduction in 2016 means that nearly half of drivers can declare a loss on their taxes. If drivers are fully able to capitalize on these losses for tax purposes, 73.5% of an estimated U.S. market $4.8B in annual ride-hailing driver profit is untaxed.

There are several underlying problems with these findings, ranging from the way that the researchers characterized the share of earnings from driving to the research team’s conclusion that because drivers can take the standard mileage deduction when calculating their taxes the on-demand mobility business goes mostly untaxed. Uber’s chief economist, Johnathan Hall, examined the report’s findings in a Medium posting on Sunday, suggesting the estimated earnings are deeply flawed.

The authors fail to note that every transportation provider, from a Lyft driver and local taxi to a long-haul trucker or local salesperson, may take a $0.54 cents-per-mile deduction on every mile they drive. By extension, the MIT research is arguing that all mileage deductions are a form of subsidy rather than a recognized cost of doing business. There is a substantial debate to be had about the mileage deduction’s sustainability, but these research judges that policy debate with an emphatic assessment of its own that is not supported by the data or current law.

The full research report will not be available for six months, as it has been distributed to CEEPR’s sponsors and remains inaccessible to the public. We think that’s counter-productive, as it prevents a full assessment of the data gathering and findings.

What stands out for us is CEEPR’s comparison of Driving Costs and Driving Revenue without regard for the number of hours driven in the available data. Uber’s critique of the research revolves around how drivers characterized the share of revenue they earn from driving. CEEPR’s methodology uses qualitative expressions, e.g., “very little” or “around half” of the respondent’s income attributed to the share of income earned from driving both with and without distinctions between all income from on-demand work or any questions about the specific number of hours driving.

We need to see the full data set and the research paper. However, it appears that based on these qualitative assessments by drivers, the MIT team used hard statistical categories to discount reported earnings, apparently by 50 percent or more from what drivers said. Uber argues that the methodology builds in a 58.5 percent discount on actual earnings. We understand this is a conservative statistical approach to take. However, it seems to have reduced the real income reported because the number of hours driven to earn any income isn’t factored in. MIT CEEPR should release the full report so that others can review the methodology.

Drivers in Las Vegas responded to the report in this ABC15 news report. Admittedly, this is anectdotal feedback, but it does reflect the fact that drivers who treat their on-demand work as a business appear to be earning more than minimum wage. Infrequent drivers, who cannot expense much of their automotive financing and care costs, certainly don’t make as much after deductions as full-time drivers.

In more than 100 conversations with Lyft and Uber drivers, I’ve found that the drivers typically earn more than $18 an hour, and those who drive full-time or near that level do report having an economically satisfying experience in most cases. More drivers report that ride-sharing is their primary job, as well. That said, a significant minority of these drivers reported that they commuted 100 miles or more to major cities to work for three-to-five days straight, while sleeping in their cars, to earn a viable living for their family back home.

Gigging isn’t perfect, there is plenty of room for improvement. This paper adds to the controversy and requires full disclosure of the data to support the discussion about how the economy can evolve for fairness and prosperity among workers.

Every driver should be treating their ride-sharing work as a business, taking the maximum appropriate tax benefits for mileage, writing off car payments and repair to the extent that they are attributable to ride-sharing revenue.