How the Gig Economy Profits off Desperation

by Paris Marx, via The Bold Italic, Oct 12, 2016

“Children are running the company [Homejoy] and they act like they are still in college. The poor cleaners are being treated like slaves; the children make fun of them behind their backs; this company is a tax-evader and a moral concern to the working class.”

—anonymous former employee of house-cleaning startup Homejoy

While the gig economy promises to free workers from the traditional, drab 9-to-5 work environment, the reality is quite different. Many contractors employed in gig economy–type jobs lack health care and retirement benefits, are at the mercy of their employers’ scheduling needs, and — despite being promised so much freedom — find themselves little more than glorified service workers.

While the term “gig economy” is sometimes vaguely defined, the Bureau of Labor Statistics describes it as a workforce characterized by “single project[s] or task[s] for which a worker is hired, often through a digital marketplace, to work on demand.”

You’re not just imagining all those Ubers trolling Market Street on any given day: the gig economy has gotten big, fast. One recent study revealed that 20 to 30 percent of the U.S. labor force is now made up of contractors and self-employed workers. And those numbers are expected to grow significantly in the coming years. This presents some very real problems for the workers who depend on such gigs to make their living — which soon may encompass almost all of us.

Wave goodbye to benefits

Most workers in the gig economy have no minimum wage, no unemployment benefits, no paid sick days, no pensions, and even no maximum or minimum working hours. They live at the whim of the platform(s) they’ve chosen to affiliate themselves with.

One great way to have job security is to be in a union. That said, unionized workers tend to be more expensive for corporations than non-union ones — which is why most gig-economy companies loathe unions.

While unions in the United States remain weak (and increasingly rare) compared to those in Western Europe, they’re still incredibly important in protecting workers from being exploited. But to be in a union in the first place, you usually have to be an “employee” — and the people who work for the various gig-economy platforms are considered independent contractors, not employees. As a result, they’re robbed of the protections and rights that unions and workers’ movements have spent more than a century fighting to achieve.

Most workers in the gig economy have no minimum wage, no unemployment benefits, no paid sick days, no pensions, and even no maximum or minimum working hours. They’re not free to make their path in this new sector but are at the whim of the platform(s) they’ve chosen to affiliate themselves with.

So, for instance, when car-sharing service Uber decided to cut its rates, drivers had no recourse or input on the decision — even though it meant that their hourly wage dropped suddenly and precipitously. Though Uber claims rate cuts bring more people to the service (allowing drivers to accept more rides), drivers report they need to work longer hours to earn the same amount — and taking more rides means more wear on their vehicles, which the drivers (as independent contractors) have to pay for themselves.

“I have an accounting background and I lost my professional job. Out of desperation, I became a driver for UBER/LYFT. I keep precise records of all income and expense. The bottom line statistics are not at all promising to be a driver… [I make] an hourly wage (before taxes) of $9.12 per HOUR!”— anonymous, via UberDiaries

Despite Uber’s claims that their drivers make between $25 and $30 per hour, this figure has been shown to be realistic only in New York City, the company’s largest market. Drivers in San Francisco are likely to earn closer to $14 per hour, while in other cities the rate is closer to $11 per hour. Worse, these are gross earnings and don’t account for fees paid to Uber and vehicle maintenance costs, which would make the real hourly rate for San Francisco drivers below $12 — and even this is possible only if drivers schedule themselves strategically.

False promises of autonomy

In 2014, Fast Company reporter Sarah Kessler spent a month working in the gig economy, and her experience didn’t reflect the rosy image of the sharing economy that companies like Uber, TaskRabbit, and Homejoy promote.

Kessler had a difficult time even getting accepted by the various platforms she applied to join, and once she did start offering her services, she had little control over her schedule and no chance of earning any more than she needed to scrape by. After attending an orientation for bicycle delivery–startup Postmates, Kessler remarked how the business model of the gig economy places all the risk on its “contractors,” so the apps and platforms never have to accommodate the people who make their profits possible.

If you work for Postmates and you don’t beat your coworker to accept deliveries that might fill your shift, you — not Postmates — are out of luck. If you get a flat tire, you — not Postmates — are out of luck. And if there aren’t enough jobs to go around, you — not Postmates — are out of luck.“

I’ve worked for Postmates for over three months because I lost my job unexpectedly…But [the job] pays less than minimum wage… Most deliveries you earn around five bucks and they take any where from half an hour to an hour… Many people don’t tip… [I am] being paid less than minimum wage and destroying [my] vehicle in the process. It’s often dangerous, exhausting and ultimately unprofitable.”— anonymous former employee

Kessler’s experience confirmed many of the criticisms that have been made about worker treatment in the gig economy. She concluded, rather damningly, that the gig economy relies on the very people who are suffering in the post-recession job market: young people experiencing high levels of unemployment and underemployment, and all those being forcing into part-time and low-paying work because they can’t find full-time jobs that make use of their skills.

This observation makes it impossible to ignore how the gig economy benefits from current economic trends, most notably the pressure automation is placing on certain workers and the rising levels of inequality — both of which have accelerated since the recession.

The first stage of a larger transformation

Automation is already changing the way we work, though so far it has impacted only certain segments of the labor market. In 2011, the New York Times reported that since the beginning of the recovery, companies were spending only 2 percent more on employees, yet 26 percent more on new software and equipment. Clearly, companies are much more interested in minimizing labor costs, even if that means spending more on equipment.

While technology allows for the elimination of repetitive labor, that doesn’t mean it isn’t impacting other work as well. The apps that have emerged to “disrupt” industries as diverse as taxi driving, delivery services, house cleaning, and other trades are evidence of this.

Technology hasn’t progressed to a point where such workers can be fully replaced by AI or robots, but that doesn’t mean it can’t completely upend those industries in preparation for further automation.

Uber and Lyft have been transparent about this reality. Both companies’ CEOs have professed their desire to automate their drivers once self-driving cars are ready — a point that could be reached in less than five years. Uber is so bullish on the technology that its even begun testing self-driving cars in Pittsburgh.

While this automation presents many potential social benefits, it also endangers the people who previously worked in those sectors. In 2015, 23 percent of workers were worried their hours would be reduced, and 24 percent thought the same could happen to their wages — up from numbers in mid-teens before the recession.

There’s been little talk about how to assist those who lose their jobs because of automation, but these numbers will only get worse the longer political leaders spend ignoring the issue to focus on border walls and outsourcing.

The gig economy isn’t about sharing; it’s about service.

Benefiting from inequality

The near-unprecedented levels of inequality in the United States — which are particularly exacerbated in the Bay Area given the housing crisis and inflated tech sector salaries — are drawing a distinct line between those who benefit from the system and those who don’t. This division is exploited by the gig economy, if not furthered by it.

In a story for Matter, Lauren Smiley investigated the new social dynamics being created by the gig economy, which she terms the “shut-in economy.” She visited an apartment building in San Francisco where the units rent for as much as $5,000 but the residents rarely even use their kitchens. They rely almost exclusively on the gig economy for food, cleaning services, and various other forms of pampering.

Smiley asserts that the gig economy isn’t about sharing; it’s about service, and it clearly demarcates the served and the servants. While those who are benefiting from the current economic model can pay people to do their errands, many of those on the other side are being pushed into the gig economy by a job market that doesn’t offer fair pay or dependable hours. Workers are faced with an employment outlook that is more precarious than it’s been in decades. The difference is that the gig economy, generally, has a lower barrier to entry.

So if the gig economy is characterized by low pay, a lack of benefits, and a predatory relationship where the business risks are burdened by the worker, why aren’t workers aren’t abandoning it? Simple: they have no other options. The gig economy isn’t about helping people who are being left behind; it’s about exploiting them because they have to accept whatever work they can find.

Companies operating in the gig economy may use positive slogans and present hopeful yet misleading statistics about their operating practices, but they benefit from the dire economic circumstances that their workers experience — and as a result, these companies have no incentive to rectify the situation.

The dark future of gig work

The gig economy has created an employment model that robs workers of the rights they’ve earned over more than a century of fighting. It uses automation not to make a better world for everyone, but to put the risks of doing business on the backs of workers without providing them fair compensation. Though it doesn’t abhor inequality, its business model is well suited to take advantage of the growing divide.

Doug Henwood perfectly encapsulates the worldview of the gig economy when he writes that it “sees us all as micro-entrepreneurs fending for ourselves in a hostile world.”

That’s not the kind of economy that is inviting to the vast majority of people and that is committed to improving their quality of life. Instead, it sounds like the fantasy of techno-libertarians brought to fruition, where we’re all forced to compete against one another for increasingly atomized work that provides little pay and no benefits, while facing a lack of job security when much of that work becomes automated.

If the gig economy is going to continue its growth, we need to seriously examine how it’s regulated — to ensure it’s not ripping off workers while delivering services to the rich. A world characterized by the gig economy does not sound like a better world, but a far worse one, where distributed exploitation of workers is taken to a new extreme and we all have to suffer the consequences.


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Shrey Srivastava
Shrey Srivastava
Oct 25, 2016 8:53 AM

Thanks for this blog post regarding today’s “gig economy” as you put it; I really enjoyed it and am definitely recommending this blog to my friends and family. I’m a 16 year old with a blog on finance and economics at shreysfinanceblog.com, and would really appreciate it if you could read and comment on some of my articles, and perhaps follow, reblog and share some of my posts on social media. Thanks again for this fantastic post.

Oct 25, 2016 3:41 AM

This is a good and detailed article but I would have liked to know how companies like Uber and AirBnB that rely so much on contractors and which established the gig economy were founded, what their financial structures are, where and how they got their start-up funding, and how they continue to raise funds to expand their operations overseas.
AirBnB got their start-up funding piggybacking on Barack Obama’s 2008 presidential campaign:
and Uber got started with crowdfunding. But what about other companies in the gig economy? What ultimately sustains it and is it self-sustaining? – because if it isn’t self-sustaining, where ultimately does the money come from to keep it going?

Brian Burgess
Brian Burgess
Oct 24, 2016 11:19 PM

Ehen I studied economics 101 it was taught that the vast riches often accumulated by enttepreneurs off the labours of othets were justified as a reward for the risk which was taken by the entrepreneur. As outined in this excellent article the ‘gig economy’ shifts all of this risk back onto the workers themselves whilst denying them the opportunity to be rewarded with so much as a secure income stream let alone the chance to become rich as a result of their risk taking. What then is the justification for the huge riches being earned by ‘entrepreneurs’ off the back of the efforts of others if these so-called ‘entrepreneurs’ have shifted all the risk to those others? Sounds very close to the definition of ‘exploitation’ rather than to the definition of ‘entrepreneurship’ to me. The ‘gig economy’ may be of benefit to workers eho are lucky enough to have a… Read more »

Oct 24, 2016 8:48 PM

I agree with Norman Pilon, capitalism is just bad all the way around and needs to be replaced. The profit motive pits everyone against everybody else, and we lose our humanity in the process. Gig websites like Uber drive wages down while cost of living keeps increasing. Temp agencies were the first phase in eliminating permanent jobs with benefits such as healthcare, dental, paid sick leave, etc. But in USA such jobs are extremely difficult to get, even rare. Wonder what happens when all the gig jobs are eliminated? LOL!

Dave Hansell
Dave Hansell
Oct 24, 2016 7:52 PM

As implied part way through the article many of the areas mentioned are likely to be a half way house towards full automation of the tasks/employment position. With estimates suggesting up to 40% or more of existing jobs/employment sectors amenable to automated AI systems, based on the current state of the art (that’s not taking into account further technological development) a number of key questions arise. Firstly, given the track record of those driven by the profit motive it is not a question of if anything up to half of existing employment sectors and associated jobs will be replaced by automated AI but when and how fast. No one is going refuse to take such an opportunity to cut costs even further. Secondly, this is part of the drive using new AI automotive technology towards reducing production and services ice costs to as close to zero as possible. Third, there… Read more »

Norman Pilon
Norman Pilon
Oct 24, 2016 6:18 PM

The answer isn’t “regulation” as the article insinuates. Automation, like ‘offshoring’ jobs, is about leveraging profit margins. The problem is therefore ‘profit seeking’ or ‘capitalism,’ tout court. In this context, rationalized production always leads to job losses and by implication to reductions in earnings for labor as the competition for employment is thereby intensified, diminishing the overall quality of life for everyone both inside and outside the workplace. I’m no Luddite. Technology should indeed be introduced into the workplace, but to reduce the workday and the drudgery of work itself, and certainly not to further leverage the profit margins of the already obscenely rich. This, however, will never happen in a capitalist economy, even under a ‘regulated’ if dominant capitalism. Where profit seeking is the paramount economic motive, profit is always at the expense of wage earners and it cannot be otherwise. Consequently, there can only be one solution: to… Read more »

Oct 24, 2016 5:51 PM

..err Socialism or Barbarism, anyone?

Rhisiart Gwilym
Rhisiart Gwilym
Oct 25, 2016 7:38 AM
Reply to  bevin

I have a similar comparison, b: Scarcity-socialism or neo-feudalism; the scarcity springing from the continuing closure of the jaws of The Limits To Growth. Socialism still remains possible though, as we go into this new era of the end of economic growthforever, leading inexorably to a long period of economic shrinkage. Once ‘our leaders’ get up to speed on the end of growth, they’re going to have to face these hard choices about how to re-organise for the new era. Pretty obviously, they’ve not going to choose the socialism option unless enough terminally-angered common citizens insist obdurately.