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.

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Gigging Gains Influence At Full Employment

Gig work is gaining credibility, according to Inc.com, and it is changing the expectations for regular full-time employees who see the flexibility of gig work as a benefit they would like to use, too. As I’ve written for Gig Economy Group, every company faces new demands from workers, ranging from workplace flexibility using excellent technical tools to moral and environmental alignment between the employee’s views and those of the company.

Customers set the stage for change in product and services when their expectations evolve and the same goes for workers and the shape of employment. Flexible, well-paid jobs will come, though it will take firm organizing on the part of labor to drive this change home.

“Now, with the economy in better shape and unemployment rates at a low, it’s an employee’s job market. Companies are starting to realize that to compete with non-traditional jobs, they have to start paying competitively, offering flexible schedules, and actually listening to what employees want. That puts employees in a position to be selective about the gigs they pick up, the hours they work, and the people they work with–and it’s an exciting time for companies to take advantage of that shift.”

Source: How the Rise of the Gig Economy Is Boosting the Social Status of Temp and Flex Workers | Inc.com

5 Tips for Keeping Remote Employees Engaged and Effective | CIO

Platform-based apps as work glue. The new new thing that’s coming.

…when teammates are spread across locations and time zones, work management apps that provide real-time insight into project status — and potential dependencies and blockers — can keep everyone on the same page. Remote workers can also use the platform’s mobile app to track and update the status of projects in real time.

Source: 5 Tips for Keeping Remote Employees Engaged and Effective | CIO

Giggers should think twice before jumping in

CNBC explores the “greased slide” created by the new tax law, which encourages independent workers to embrace freelance work.  Now those small businesses run by individuals can “pass-through” 20 percent of revenue untaxed to the business owner. It appears to be a great time to become a gig worker. However, the lost benefits that come with traditional employment more than offset the tax savings, Miguel Centeno of Shared Economy CPA told CNBC.

The article details the cost of going gig and demonstrates that contingent work is the source of all growth in the economy since the Crash. Besides lost health and life insurance benefits, the gigger gives up paid leave, sick days, and employer contributions to Social Security, among other valuable aspects of a regular job.

It is sobering reading for potential giggers. More importantly, it is a wake-up call for companies who have viewed the On-Demand Economy as a way of cutting costs and obligations to workers. The formulae for loyalty used to lie in the job benefits society seems to be abandoning. Worker retention and job performance excellence are still the keys to good customer experience and valuable products and services.

On-Demand companies must tackle the problem of portable benefits and the establishment of a meaningful relationship with workers that allows them to identify with the brand they currently represent happily. A worker may rep multiple brands during a single workday, but they still need to feel the pride and opportunity provided by a satisfying living wage with a path to retirement.

If companies treat On-Demand solely has a cost-saving strategy, they will drain the economy of consumers. That will backfire on everyone.

On-Demand Economy Notes, February 12, 2018

Although Uber and Waymo settled there intellectual property case last week, the status of workers as independent contractors took a new twist in a California court. Worker payment, training, retention, and earnings drove much of this week’s on-demand news. During 2018, worker retention will be a major issue for on-demand companies.

Wirecard, a German payment card vendor, is bringing pre-paid cards for on-demand work to the United States, Payment Source reports. As we noted recently, payment cards are a lever for bringing the unbanked out of the gray economy.  The technology avoids engaging with the payee’s bank account. Direct-deposits add costs to payments while prepaid cards are easily distributed, Wirecard argues. Kate Fitzgerald writes: “Wirecard’s ability to function as both an issuer and acquirer enables customized disbursement programs ranging from reimbursements to rebates and rewards, is a positive, but not entirely unique.”

Waymo-Uber Settlement: After months of tense preparation, an appearance by former Uber CEO Travis Kalanick, and a couple days of courtroom testimony, the Battle of Autonomous Cars Case came to a close. Uber has agreed to transfer slightly more than one-third-of-one-percent of its shares to Alphabet, Waymo’s parent company, and to submit to ongoing reviews by Waymo of its autonomous car developments. That stock, valued at $244 million, based on Uber’s largely fictitous $72 billion valuation, which was deeply diluted by SoftBank’s recent investment, Uber settled for about a quarter of the damages Waymo had been seeking.

We believe the significant move in the case came from new Uber CEO Dara Khosrowshahi, who has made apologizing for, and improvement of, Uber’s behavior the hallmark of his leadership.“While I cannot erase the past, I can commit, on behalf of every Uber employee, that we will learn from it, and it will inform our actions going forward,” Khosrowshahi wrote in a statement. Again, this is Uber growing up.

Women see Uber pay gaps, despite algorithmic work assignments. The wage gap persists in the on-demand economy, partly due to the duration of their Uber driving career. Forbes’ Erik Sherman reports that researchers at Stanford University and the University of Chicago found in separate reports that women consistently earn seven percent less than men. Part of the difference is accounted for in shorter driving engagements by women generally — female drivers churn out of the fleet faster than men, reducing their compensation over their Uber earnings lifetime. However, the culprit appears to be in the cost and time involved in training to become a driver, use the Uber apps, and build a consistent practice of driving.

Grubhub gets Yum-y. The holding company that operates Kentucky Fried Chicken and Taco Bell, Yum Brands, is investing $200 million in Grubhub, by buying the stock on the open market. The company will also sign an agreement with Grubhub to deliver KFC and Taco Bell food from 5,000 locations in the United States. Yum will take a board seat. Grubhub shares shot up 27 percent on the news., and have given back much of the gain in the market correction.

Quartzy says hairstyling is all about relationships. In a piece that details the rise and fall of several on-demand beauty companies, Noël Duan details the travails of hair care in the jet set, suggesting it does not translate to the consumer needs of the average person needing a “blow out” at work or home.  She concludes that customers want to go to salons because it is a special occasion and that the relationsjip with the stylist is central to the perceived value of a beauty experience. That last element, the personal relationship is the deciding factor in most home and on-demand services: People want to know their preferences are understood.

Duan conflates in-salon experience, like the free glass of champagne proferred to guests, with the intimacy of the experience. The edge of the network is made of human relationships, not just the details of the engagements that justify an on-demand hairstyling that is twice the price of a salon. On-demand is poised to deliver the same experience as the salon for the same or a lower price, because there is no overhead for the A-list location of a high-end salong. But Duan is right that if the human connection is missing, the industry will fail.

Grubhub case points to worker classification as independent contractors. The U.S. District Court for Northern California ruled in Lawson v. Grubhub that the company satisfied the state’s Borello common law test when it treated Raef Lawson, a Deliveroo rider in Southern California, an independent contractor. Lawson’s behavior, such as setting his phone to airplane mode during work time, drove the decision. It is not clear this case will build a solid foundation for gig companies to treat all workers as contractors.

Deliveroo faces union showdown. The Independent Workers’ Union of Great Britain has requested a review of a November ruling that denied its riders holiday pay, the national living wage, and the right to bargain as a collective.  The case now revolves around a clause in the Deliveroo contract relating to the rider’s obligation to provide a substitute if they cannot make a delivery, which the union says was misinterpreted by the court last year. The disputed clause makes the rider responsible to vet the replacement’s right to work and conformity with health and safety laws, a role traditionally relegated to the employer. The outcome, along with the results of other British, European, and U.S. cases, continues the debate about the nature of work and employment.

Amazon’s attack on grocery stores ramps up. Building on its Whole Foods acquisition last year, Amazon has tapped the Dallas and Austin, Texas, Virginia Beach, Virginia, and Cincinnati markets for free two-hour delivery of groceries. Bloomberg Technology reports the twist is that the Whole Foods locations will provide the inventory instead of relying on a regional warehouse. Known as Prime Now (apps are available on Apple and Google devices), the service is the first to combine Amazon’s Prime program with grocery delivery. Philadelphia grocers are preparing for the Amazon Prime onslaught with Instacart partnerships, The Inquirer reports.

Shipping By Amazon, for Amazon. The news that Amazon will build its own in-sourced shipping capability shocked the shares of United Parcel Service and FedEx last week. This makes sense from a local perspective, as much of the last-mile delivery traffic is outsourced to the United States Postal Service, FedEx, and UPS today. However, Amazon’s inventory systems will be the ultimate driver of shipping strategy, and most inventory needs to be near big cities. Amazon’s extensive regional warehousing system is in place to support Prime two-day and other shipping. Getting inventory to the warehouses, however, if an inter-modal shipping problem that requires multiple carriers and alternative routes if one mode of shipping is unavailable. This is not the death knell for traditional shipping, but it does place the focus in traditional shipping on the longest hops in the supply chain.

Instacart ramps up its funding, again. On the heels of 150 percent year-over-year revenue growth, Instacart closed a new $200 million round last week. Now valued at $4.2 billion, the company has raised $874.8 million, according to Crunchbase.

Instacart is slashing delivery fees. The Buffalo News reports that Instacart drivers and shoppers in the region are seeing their compensation cut by more than 50 percent. Just six months after launching with a $10 payment for each order delivered, shopper/drivers now average $4.75 a delivery plus $0.40 per item. It would require an order of 13 items to reach the previous $10/delivery level. Instacart offered a rich bonus for early delivery staff, but has failed to explain why its fees to drivers appear to be falling. The company is hoping repeat orders will include more items, and that may be an erroneous assumption.

Facebook doles out $5 million to community leaders. The story of local markets, which Facebook would like to support through improved storytelling and local advertising, will get a big boost from its selection of as many as five people to receive $1-million grants to “bring people closer together.” We recomnmend starting with local news and that Facebook refrain from seven-figure contributions to kick-start community engagement; Instead, find 200 journalists in local markets who will cover those markets closely and with real engagement with the citizens, business, and government issues. Pay them $50,000 a year to launch local Facebook-hosted communities and the results will be better.

Agency workers account for more of the British workforce, the Independent reports. The number of “agency workers,” or temps, has risen by 40 percent over the last decade to 800,000 people now serving permanently as temporary staff, according to a survey by the Resolution Foundation, a non-partisan think tank.

Solve the unbanked Americans problem at work, not at retail

Engadget today examined the question “Can Amazon Go help the unbanked go digital?” Writer Andrew Tarantola argues passionately that paper currency is on the way out:

As our economy embraces digital transactions while shunning cash, it’s the poor that will be most harmed.

Cash is not in retreat today. There is twice as much U.S. currency in circulation today than ten years ago. The St. Louis Federal Reserve bank tracks currency in circulation (see above). In fact, there is more cash in circulation now than at any time in U.S. history. Moreover, except for the months after the Web Bubble burst in 2000 and post-Financial Crash of 2008, the amount of money in circulation has not decreased at any time since the early 1980s. 

In the on-demand economy, cash transactions remain the primary challenger to home services marketplaces that offer to connect employer and worker. Homejoy, the defunct home cleaning service, for example, battled under-the-table arrangements between its maids and customers. Local maids willing to work for a few bucks less in cash payments often hijacked Homejoy’s national marketing to take the company’s customers away.

The unbanked — people without a bank account or credit cards — represent an important population whose participation in the economy will be someday be limited by digital-only currencies or a ban on cash at stores. We should all be thinking about their access to information, healthcare, or any purchase that is restricted to digital customers as an issue of economic growth and fairness. But cash is doing great. A total transition to digital transactions doesn’t appear to be imminent during the next decade (I could be wrong). As long as cash is accepted, it will be used. That will decide when and how the unbanked face a crisis.

There’s no doubt handling money digitally — in any form, not just the cryptocurrencies — is less expensive for banks and speeds many business processes. But consumers face ever-rising costs for digital banking services.  I imagine that if we asked an unbanked person to pay $2.90 in ATM fees to get $50 or $100 out of their bank that they would laugh at the suckers who cough up such fees. See what they think of the national average ATM fees for non-customer banks, which reached $4.57 in 2017, as an alternative to holding and using cash.

All an Amazon, Apple, Google, or Samsung can do is improve the perceived value of digital alternatives to cash. They cannot force anyone to use their payment systems. 

Treating cash as inherently less useful than digital money is a mistake because the anonymity of cash and the convenience of paying with money rather than by transferring bits remains attractive to ordinary people. We believe digital cash alternatives will rise with the adoption of on-demand work. An on-demand job will more than likely come with a digital payment solution. 

The unbanked consumer does face challenges, as Engadget concludes, pointing to the need to convert cash to use digital services as an inconvenience. The unbanked are also workers, and work is where the opportunity to bring them into the digital economy on fair terms lives. But marketers tend to drift to dreams of retail sales when they think about digital transactions because that is where marketers earn their pay. 

Think work-first to solve the unbanked Americans problem. On-demand companies can drive the adoption of digital payment systems more efficiently than Amazon because jobs pay people. On-demand workers should be studied as a subset of the economy to understand how to introduce digital payment models. Already, Uber, Lyft, and many other marketplaces are shifting to same-day payment via direct deposit or stored value card.

The workplace is where digital payments will rise to change the economy; then retail will benefit from its current investments in digital convenience. In the meantime, cash remains king.