By Laura Fairman, SFS ’18
September 26, 2016
The past decade has seen a surge in the sharing economy, as entrepreneurs around the world capitalize on the potential of internet, information, and technology to add unique value to their ventures. From Airbnb’s marketplace for short-term home rental to Instacart’s grocery delivery platform, these companies are lauded as “innovative,” “competitive,” and “revolutionary” due to the range and accessibility of the services they provide consumers. Yet simultaneously, these developments are currently facing criticism for unfair labor practices and a culture of prioritizing consumer benefits over worker rights.
The on-demand economy is often referred to as the 1099 economy, which references the 1099-MISC form used by independent contractors in place of a W-2 income tax form that permanent employees file. This classification has consequences much greater than bureaucratic differences. Under this 1099-MISC form, employers are not required to provide independent contractors with health benefits, unemployment or injured workers compensation, retirement, overtime, disability, paid sick, holiday or vacation leave. In the same vein, free-lance workers are not covered by the union organizing rights or antidiscrimination statutes as those of a standard employee. So it matters significantly for the estimated 50 million freelancers in the US whether they are classified as employees or independent contractors.
As the growth of the gig economy has created a scalable workforce for startups and flexible employment opportunities, it has also left the task managers, artists, cable company installers, drivers, home care workers, cleaners, and even journalists powering the system while disenfranchised. These shifts lend to the greater commoditization of work as formal jobs are transforming, both conceptually and legally, to those of “gigs,” “services,” and “rides.” In 2015, Deputy Secretary of Labor Chris Lu spoke at the International Labor conference in Geneva and remarked that “these changes have the potential to fundamentally alter the rights, protections, and expectations of work, ultimately threatening the dignity of work.” The Department of Labor’s attention and response to dynamics of the on-demand economy will set the tone for its future development.
Pressure for change is also emerging from inside companies themselves, as workers voice their demands for just employment. Drivers for ridesharing services like Uber and Lyft are classified as such independent contractors, saving on labor costs for companies with respective valuations of $66 billion and $5.5 billion. Drivers in California and Massachusetts challenged their status as independent contractors in a class action lawsuit that Uber settled for $100 million this past April. In Seattle, courts made a historic ruling in December 2015 that will allow drivers to form unions and bargain collectively for wages, benefits, and working conditions. Across the US, workers of companies like these have spoken out, protested, and gone on strike over consistent instances of being underpaid and undervalued.
The legal battles and unrest surrounding Uber and Lyft are parts of the overall picture as workers respond to the economic reality they face; current labor protections have proven themselves inadequate in breaking the silos of the gig economy from the labor market at large. In a much-discussed proposal, economists Seth Harris and Alan Kreuger explore the creation of a third legal category of “independent workers.” Between “employees” and “independent contractors” in protections and benefits, this intermediary would account for the unique needs of the digital workforce. However, the lack of official data to capture the true size of the sector poses a significant barrier to policymakers and companies in crafting guidelines that meaningfully reflect workers’ experiences. This lack of data also means that, while independent contractors are not the only group that is experiencing growth in the gig economy, these other groups of workers cannot be accounted for. Contractors, sub-contractors, part-time and temporal workers are all increasing in numbers, as well, and any policy to come must also protect all of these forms of alternative work.
So how can we empower workforces directly to fight for their own policies? Academic institutions can take an active role in exactly this by leveraging their knowledge. For example, workers for Mechanical Turk, Amazon’s human intelligence task website with an international virtual workforce, found it difficult to organize themselves due to the lack of face-to-face interaction. To address this barrier, researchers at Stanford University collaborated with “Turkers,” as they call themselves, to build a platform akin to a virtual union hall called Dynamo. Dynamo has since served as a platform for brainstorming, mobilizing, and garnering media attention.
Collective action and policy changes on a municipal, state, and national level are potential routes to facilitate justice in employment practices, but we should also look to shifts in the free market as competitive startups evolve to prioritize workers. Shyp, Instacart, and Hello Alfred are among the startups voluntarily treating their workers as W-2 employees rather than independent contractors. Meanwhile, platform-based companies like Managed by Q and DoorDash have adopted the Good Work Code created by the National Domestic Workers Alliance (NDWA). The Good Work Code outlines best practices for online economy employers, such as paying a living wage, transparent business operations, and creating company networks for support and communication. In the ridesharing sector, the New York City-based startup Juno has recently received media attention for directly challenging the labor status-quo. Currently in beta mode, Juno offers drivers full employee status with all of the benefits and protections that come with it, including lower commission from fares while setting aside half of its stock for drivers to take partnership in the company through restricted stock units (RSUs). These companies exemplify a new norm that the startup industry as a whole should embrace. In addition to advocating solutions for the public good, social enterprises can also lead by example internally with fair labor practices.
Looking forward, the digital economy is projected to grow, and with $57.6 billion in spending per year in the United States, consumers are becoming more technology-ready as well as diverse in race, class, and age. Legal and moral questions of company responsibility and employee classification will continue to become more complex. As entrepreneurs, consumers, and academics, we are linked by the solidarity of being workers ourselves, and thus we each have a part to play and a responsibility to uphold in constructing a more inclusive and just economy.
The views, opinions, and positions expressed by the author of this article do not necessarily reflect the views, opinions, or positions of the Beeck Center for Social Impact + Innovation at Georgetown University or any employee thereof.