The Unhappy Middle of the Gig Economy

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An eclectically decorated Uber ride in San Francisco. Credit: Travis Wise via Flickr/CC BY 2.0

Uber, Lyft, Postmates and Deliveroo. Words that are now part of our everyday lexicon.

We can’t deny that the gig economy has changed the world. In fact, I find it hard to remember when I didn’t see hundreds of delivery scooters zipping around the city near our office. Nor do I easily recall when it was unusual to see somebody happily getting into an unmarked car driven by someone they didn’t know. From Brighton to London to San Francisco, our cities are bisected twenty-four hours a day by the journeys of bicycle couriers, delivery mopeds and taxi drivers.

I previously wrote that the explosion of the gig economy over the last decade has been primarily fueled by the money of venture capitalists (VCs) and the software written by skilled and highly compensated software engineers. There is a notable dichotomy between the job security and income of those that are creating this new economy and that of the gig workers that are generating the revenue, one delivery and cab ride at a time.

In the race to rapidly grow and float the companies that supply gig work, huge net losses are generated, signifying high risk for future investors and workers. The gig economy platforms such as Lyft and Uber, in their sprint for market dominance, dramatically undercut traditional companies such as local taxi and courier firms.

However, this furious competition is excellent for the consumer, who gets cheaper, faster and more technologically advanced services. It also creates new unicorns that grow and become immensely valuable for their founders and staff. The VCs and investors that propelled their growth get significant return on their money.

But what becomes of the human beings that generate revenue by driving and biking day and night, come rain or shine? Are the workers an afterthought in this economy? One could argue that the drawbacks of gig work far outweigh the benefits. There is no job security. There is the stress of unpredictable income. There is a reliance on algorithms to get work. Ratings systems cast their judgement.

If labor laws change and these companies cannot operate like they currently do, or if cities and countries ban them altogether, gig workers may quickly find themselves out of a job with no safety net. Comparatively, the VCs expose themselves to little risk through their diverse portfolios. The software engineers can easily find high paying jobs elsewhere in today’s buoyant job market.

The winners at both ends of the socioeconomic spectrum

We all know that gig workers want better conditions. There have been protests and strikes around the world for many years. A common – and privileged – response to complaints from gig workers over their conditions is that if they didn’t like their jobs, then nobody is forcing them to do them. However, this misses important nuances about the diverse demographic that deliver your food and drive you to the airport.

We should partition those that are working in the gig economy into groups based on their motivation. A 2015 analysis published by Uber’s Head of Policy Research found that 51% of drivers work 1-15 hours a week, 30% work 16-34 hours, 12% work 35-49 hours and 7% work more than 50 hours. It could therefore be observed that a comparably small proportion of Uber drivers are responsible for a majority of rides.

Given that a worker chooses how many hours to drive, we can interpret that choice as an indicator of their needs. Considering the gig economy more broadly than cabs and deliveries, the Pew Research Center reported that 56% of surveyed workers were financially reliant on gig work versus 42% that could live comfortably without the income. Given that 57 million people in the U.S. alone are taking part in the gig economy, 23 million people are using it to earn supplemental income are clearly reaping the reward from the existence of additional, flexible work at the press of a button.

Additionally, there have been studies that show that, for some, gig work can be much better than the available alternatives. A 2018 study of Uber drivers in the United Kingdom showed that the vast majority of the UK’s drivers are male immigrants primarily drawn from the bottom half of the London income distribution. Most of these workers moved into the gig economy from permanent part- or full-time jobs and reported higher life satisfaction. Although the drivers are still in a lower income bracket, many are earning more money through Uber than they were before and were able to do so on their terms. A similar U.S-based study in 2017 reported that driving for Uber gave flexibility unmatched by other working arrangements and often greater pay.

One could posit that these two groups are at the higher end and lower end of the income distribution respectively. Those that are non-reliant and use it for supplemental income are comparatively well-off. Those that find it offers better flexibility and pay than other alternatives are presumably in a lower socioeconomic bracket and have less specialized and transferable skills, meaning that gig work is the best overall option for their income and happiness.

The unhappy middle

Anti-ridesharing protests in Portland, 2015. Credit: Aaron Parecki via Flickr/CC BY 2.0

But, regardless of those that benefit from being able to open an app, jump in their vehicle and immediately earn money, the rapid global proliferation of gig work has created widespread friction and controversy. From protests to sexual harassment to mental health issues to suicides, rarely a week has gone by without a media furore. Although our groups above may report some satisfaction with their arrangement, there are clearly many problems, and workers are starting to take action.

The reality of gig economy conditions – often giving workers less rights, equality and pay – has inspired grassroots action through organizations such as the Independent Workers Union of Great Britain (IWGB). Their stance on the gig economy is that it bogusly classes individuals as “independent contractors” in order to deprive them of employment rights. Local branches of the IWGB, such as the Bristol Couriers Network have organized targeted strikes against particular gig economy platforms such as Deliveroo, demanding minimum payment guarantees and a recruitment freeze to ensure that there is enough work for couriers to have a dependable income.

There is a parallel with the controversy over so-called zero-hours contracts in the UK. Also known as casual contracts, the employee is on call to work when the company needs them. They do not necessarily have to be given any work by the company, and do not have to work when asked. On the surface, this seems like a similar situation to those that are doing gig work: it is flexible work that is there for them to take or leave.

However, the Trades Union Congress argues that these contracts exploit workers, stating that the flexibility that they offer is only good for employers and not for the employees. Increasingly unstable economic conditions have seen workplaces replace traditional full-time or part-time staff with zero-hours contracts meaning that staff cannot guarantee their income. It is reported that 2.4% of the working population in the UK are working zero-hours contracts, but two-thirds of them would prefer fixed hours.

According to the UK Government, zero-hours contracts, despite offering unpredictable hours and therefore unpredictable income, do have to ensure that the National Minimum Wage is paid and that workers are entitled to statutory annual leave. In comparison, one could reason that gig work is even less secure, given that there is no guarantee of any income due to the casual nature of the arrangement, and that the pool of available work is regulated by two uncontrollable forces: the amount of demand for the services and the number of other workers competing for jobs at any particular time.

Have we seen this before?

There have been numerous times in history in which workers were flocking to jobs with poor conditions. One notable period was the Industrial Revolution. “Employers could set wages as low as they wanted because people were willing to work as long as they got paid,” notes Ankur Poddar. Poor conditions for workers led to backlash, protests and attempts at unionization.

“Labor Unions formed because workers finally wanted to put a stop to long hours with little pay. They demanded more pay and fairer treatment. They did not want children to work in factories because of the danger involved. Labor unions organized strikes and protests. However, as more immigrants came to the United States, more workers became available. These workers were willing to work, even if others were not because of unfair treatment. This lessened the effect of the labor unions since businesses had no shortage of workers. This is why most labor unions were unsuccessful.”

Does that sound familiar? Perhaps we find ourselves in another transformational period for our economy and the nature of work. The conditions during the Industrial Revolution gave birth to labor laws that underpin traditional employment today. The series of Factory Acts passed in the 1800s in the UK limited the minimum age of workers, the maximum amount of hours per day that they were legally allowed to work, and limited weekend working hours.

In Lee Fang’s article for The Intercept, he argues that the race for Lyft, Uber and their siblings to IPO is partly driven by investors and founders wanting to cash out at the highest possible valuation before labor laws catch up with them and break the model that has given them their multi billion dollar valuations. If Lyft really do lose $1.50 per ride, how much would they lose if they had to provide securities and benefits for their workers in line with those in permanent employment? In fact, when Uber filed for IPO this week their S-1 filing stated that “our business would be adversely affected if Drivers were classified as employees instead of independent contractors.”

The rise and fall of medallions

Licensed NYC yellow taxis. Credit: Jim Pennucci via Flickr/CC BY 2.0.

Despite our rebellious impulse to root for the underdog, our underdogs have now become the dominant players in the market. For all of our hatred of monopolies, the antiquated NYC taxi medallion system that Uber and Lyft has disrupted did hold a number of benefits for those that worked within it.

In 1937, NYC officials decided that owning or leasing a licensed taxi medallion – displayed on the hood of every working taxi – was legally required in order to operate as a driver in the city. The medallion system was installed in response to the chaotic unregulated taxi situation of the early 1930s. The city was flooded with cabs, congestion was rife, and driving was dangerous.

The number of medallions was capped, which in addition to reducing congestion, meant that medallions became very valuable: in 2013 a medallion sold for $1.3 million at auction. Although a taxi driver’s income is moderate, the medallion system ensured that there was predictable income, since people in NYC always want cabs. Purchasing a medallion was an investment, much in the same way that owning a property is. Upon reaching retirement, selling a taxi medallion meant a secure future. However, the disruption to NYC taxis by Uber and Lyft – these legal but unregulated and uncapped taxi companies – has driven down the price of taxi medallions from the 2013 high of $1.3 million to a recent low of $160,000.

A regulated system, despite its flaws, did provide worker security. Now that taxi medallions are not as valuable as they were in the past, yellow cab drivers will have to work out whether in the long term it remains financially viable to keep it, or whether they would be better off driving in the gig economy. According to Uber, the median wage for an UberX driver working a 40 hour week in NYC is $90,766 a year compared to around $30,000 for a yellow cab driver. Assuming medallions continue to decrease in value, then there may be no choice but to switch.

Similar patterns are repeated the world over. The surge and disruption of gig economy work forces those that are currently working in traditional regulated industries to join it. In doing so they subject themselves to less protection from their employer and open themselves up to high risk if they are unable to keep working. If a medallion-holding taxi driver became too sick to continue working ten years ago, selling the medallion would be a reasonable way to exit with dignity. In the present day, our gig driver will have to hope they can find some other means of income.

The potential for a fairer future

Although the outlook of this article could be considered dreary, I believe that within all disruption and chaos comes opportunity. Indeed, there has been a tremendous amount of opportunity for new economies to be created, for companies to thrive, and for millions of workers around the world to find new ways of making an income for themselves and their families. No new and disruptive thing is ever entirely good, but it will, I believe, in the long term, be better for everyone involved; from the customer to the gig worker to the companies themselves.

The question is how we decide to arrive at this better future. Change in the past has come through legislation, such as the Factory Acts of the Industrial Revolution in the 1800s and the NYC taxi medallion system in the 1930s. We see similar legislative progress today, albeit at a pace that is probably too slow to make a meaningful difference. I believe that the creators of the gig economy platforms have a choice that can become a differentiator in how they grow their businesses over the next ten years: how can they use their position of power to become a force for good? Rather than relying on legislation to curb and cap them, why can they not lead the way with changes that benefit society?

Gig economy platforms are technology giants employing some of the world’s smartest people. They have global reach and vast, deep data sets describing the world’s lifestyle habits. Given that consumers are happy with the services provided, how can companies begin to turn their minds towards creating the best possible experience for their workers?

Within the last year, major gig economy platforms such as Deliveroo have implemented insurance for their riders. Other platforms are following suit. But I believe there are more fundamental changes that could help workers thrive and thus attract customers to the services that have worker wellbeing in mind.

The EU recently published guidelines on creating trustworthy and ethical artificial intelligence (AI) systems. These guidelines seek to ensure that systems support human agency and fundamental rights, that they are be used to enhance positive social change, to increase sustainability and ecological responsibility, and that they should consider the whole range of human abilities in order to ensure non-discrimination and fairness. Gig economy platforms seem rife with opportunities to use AI for good. They could create work that supports families whilst also giving workers a better, safer and more flexible working experience that they could get anywhere else.

Allowing workers to identify as full-time and reliant on their income versus being part-time and earning a supplement could bias gig distribution in favor of those who need the money whilst still supporting the needs of both groups of workers. Additionally, the geographical data available within the system could prevent bicycle couriers from having to ride punishing delivery routes uphill or having to carry challenging and dangerous loads. Instead of fueling a subprime auto loan market, ride-hailing companies could offer better incentives to full-time workers to fund purchasing their own car with competitive loans, or perhaps partner with existing car rental networks to allow people to drive without needing to use their own vehicle.

Why should we wait for legislation to make things better? We as technologists should be trying to address these societal problems ourselves. I’d pay more per ride to ensure that I was properly supporting drivers that are reliant on the income. I’d wait longer for my meal to ensure that an appropriately suitable rider and calm route is chosen. Let’s get to it.

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