Some years ago, I was a panel speaker at an event in Sydney covering the topic of wage developments. I shared the podium with a young woman who was something like NSW Youth of the Year. It was at a time that employer groups were lobbying the conservative government to abandon penalty rates for workers in low-wage industries (hospitality, tourism, etc) and strip powers from trade unions. I spoke about how that agenda was designed to advance their class interests and fitted squarely with the neoliberal intent to redistribute real income away from workers towards profits. The young woman followed and announced that class was dead and that there was no such thing as a worker anymore – she said “we are all entrepreneurs now!”. Prior to that, as our national government was privatising our public companies such as Qantas and Telstra, our prime minister announced “we are all capitalists now” referring to the idiocy of people buying shares in the companies that we collectively ‘owned’ anyway while they were in public hands. The more recent manifestation of this delusion that class is dead and we are all entrepreneurs is the so-called ‘gig economy’. It seems that we now have millions of people (first young but increasingly older) who think that entrepreneurship is about buying a cheap scooter and tearing around streets delivering pizzas in all weather to earn a few dollars while the companies that ’employ’ them (or rather contract them) walk away with millions. These workers, sorry, entrepreneurs, face a bleak future. When there are no pizzas being ordered they have no shifts. When they are sick they have no pay. When they go on holidays they have no pay. And when they get old they will have no superannuation. Sounds like a plan to make someone rich.
Regular readers will know that I will not use services such as ‘Uber’.
I wrote about that choice in this blog post – Why Uber is not a progressive development (August 16, 2016).
But the spread of these ‘gig economy’ services is clearly increasing.
I often wonder when I am walking through city streets and a wave of cheap scooters buzz by with big boxes on the back whether these ‘workers’ have any thought to their future – when they get old or if they get sick.
There was a recent UK Guardian article about Uber drivers – The Uber drivers forced to sleep in parking lots to make a decent living (May 8, 2019).
It was in the context of Uber opening its shares to the public which the article noted would “turn some millionaires on the board into billionaires”.
The median wage of drivers is “$US8.55 an hour before taxes” while, for example, the Californian minimum wage is $US11 per hour and the New York minimum wage is $US15 per hour.
The article noted that some drivers “have to drive 70 or 80 hours per week” to make a bare living.
And Uber has been increasing “its cuts on trips”.
A study from the University of Chicago and Rice University of the link found that “its … [Uber] … introduction in a metropolitan area leads to an economically meaningful increase in overall motor vehicle fatalities” as drivers manically try to earn more while Uber takes more.
A New York Times article covering the Uber IPO – Strike All You Want. Uber Won’t Pay a Living Wage (May 10. 2019) – concluded that:
The problem for Uber — and everyone else — is that its very business model excludes a future of fair labor practices.
A July 2018 Report – An Earnings Standard for New York City’s App-based Drivers: Economic Analysis and Policy Assessment – studied the “critical public policy challenge facing the City of New York—the low pay of app-based drivers”.
It concluded that:
1. “The prevailing app-based business model in New York City relies on drivers bearing responsibility for all vehicle capital and operating costs.”
2. “pay for most drivers does not meet this standard” – a minimum wage of $US15 per hour.
3. App-based drivers in NYC, London, Paris and San Francisco are not supplementing “their pay from another job by using their otherwise idle cars”. Most drivers are working more than full-time and “work hours are not flexible”.
4. “The app business model relies upon very short wait times for passengers requesting rides, which in turn depends on a large supply of available but idle drivers and vehicles” – so there is excess supply which ensures pay and conditions will always be driven down.
5. “Forty percent of drivers have incomes so low they qualify for Medicaid and another 16 percent have no health insurance; 18 percent qualify for federal supplemental nutrition assistance (nearly twice the rate for New York City workers overall).”
And, while the ‘entrepreneurial’ dream might give succour to these workers striving to stay poor, the reality is that Uber is just using these people to establish a network and identity while they work on the technology (robots) to allow them to run their business using self-driving cars.
Whether it succeeds is another matter. But for now the workers, sorry, entrepreneur drivers, are the losers.
It is not just Uber though.
A recent New York Times article – Google’s Shadow Work Force: Temps Who Outnumber Full-Time Employees (May 28, 2019) – gave us some insights into the Google labour market.
It tells us that “Google’s many temps and contractors — a shadow work force … now outnumbers the company’s full-time employees.
The data shows that as at March 2019:
Google worked with roughly 121,000 temps and contractors around the world, compared with 102,000 full-time employees … Google temps are usually employed by outside agencies. They make less money, have different benefits plans and have no paid vacation time …
Economists claim they are puzzled by the flat wages growth in advanced nations given how low in some countries the unemployment rate has dropped (for example, Germany, the US and the UK).
But in Germany, the rise of the minijob has eroded the living standards of workers and created a pool of desperate workers.
In the UK, the app-based jobs and the zero-hour jobs have been on the increase.
And in the US, the same trend.
And all over really. This is neoliberalism at its most advanced – a myopic strategy to get as much real income into the hands of the few while the party lasts.
But there is also a storm brewing.
The mainstream economists keep claiming that fiscal deficits are undermining the future standards of living of workers – an erroneous claim at best.
What is really going to undermine future material living standards is the degradation of work – the lack of skill development, the short-term push for higher profits at the expense of workers rather than via significant capital investment, the low household saving rates combined with high debt exposures.
And has populations age and dependency ratios rise, what sort of old age will these ‘gig economy’ workers face – oh, sorry, I forgot, they will be have a UBI!
The UBI myth is part of the whole neoliberal charade that we are talking about here.
Like all these Uber drivers are being free and creative while the the corporations or their owners pocket huge returns.
The rise of the ‘gig economy’ is not about workers becoming freer within capitalism. It is being driven by the fact that profits are higher when you can get workers to supply their own capital, work for a pittance, fund their own vacation period, have no job security, and have no pension and other entitlements.
And somehow we have bought the nonsense that these workers are not ‘workers’. The companies engage them as independent contractors, and, despite the workers looking like workers (operate under direction, etc), regulative authorities have been reluctant to prosecute and force the companies to recognise the true status of their labour forces.
A perfect storm is brewing – again – and this one is probably more endemic and structural than the problems that created the GFC.
There was a reason in the late C19th that trade unions formed and demands for the welfare state and job protections became a dominant voice.
We are heading back to that sort of massive exploitation of workers.
The wheel will turn again.
The other problem for a researcher is that there is a fairly poor data availability on this growing segment in the labour market.
The US Bureau of Labor Statistics (BLS) published an interesting article in May 2006 – Working in a gig economy – which gave some sources of available data.
BLS data blurs the gig workers with others.
We read that “gig workers may be included in counts of workers who are part-time, self-employed, or hold multiple jobs. But these counts also include workers who are not part of the gig workforce.”
Gig workers in the US “could be in contingent or alternative employment arrangements, or both, as measured by BLS”.
The most recent BLS data release for these categories was on June 7, 2018 – Contingent and Alternative Employment Arrangements Summary. It was accompanied by ‘Spotlight on Statistics’ publication (September 2018) – A Look At Contingent Workers.
We learn that in May 2017:
1. “3.8 percent of workers–5.9 million persons–held contingent jobs” (that is those “who do not expect their jobs to last or who report that their jobs are temporary”).
2. In February 2005 (the “last time the survey was conducted”) there were 4.1 per cent of workers in contingent work.
3. As to the ‘alternative employment arrangements’, the survey found that in May 2017, there were “there were 10.6 million independent contractors (6.9 percent of total employment), 2.6 million on-call workers (1.7 percent of total employment), 1.4 million temporary help agency workers (0.9 percent of total employment), and 933,000 workers provided by contract firms (0.6 percent of total employment).”
Has the ‘gig economy’ taken over?
Although the data is less than convincing, I examined the trends since 2005.
The first list shows the changing proportion of the different types of contingent and alternative arrangement workers over the period of the two surveys.
The proportions have barely altered as the size of the employed labour force has expanded.
On the face of it though, using this data, it is not correct to claim that a higher proportion of jobs are becoming contingent or subject to alternative working arrangements in the US.
- Contingent: 2005 4.1 per cent, 2017 3.8 per cent.
- Independent Contractors: 2005 7.4 per cent, 6.9 per cent.
- On-call workers: 2005 1.76 per cent, 1.68 per cent.
- Temporary help agency workers: 2005 0.87 per cent, 0.88 per cent.
- Workers provided by contract firms: 2005 0.58 per cent, 0.61 per cent.
- Workers with traditional arrangements: 2005 89.1 per cent, 89.9 per cent.
The next list shows the growth in real median weekly earnings for the two categories between February 2005 and May 2017.
The evidence is mixed. Full-time independent contractors, where the ‘gig’ economy is likely to be concentrated as fallen sharply over this period (-6.8 per cent).
That group stands out in this dataset.
- Contingent: Full-time 10.1 per cent, Part-time 11.1 per cent.
- Independent Contractors: Full-time -6.7 per cent, Part-time 3.2 per cent.
- On-call workers: Full-time 20.4 per cent, Part-time 3.8 per cent.
- Temporary help agency workers: Full-time -1.28 per cent, Part-time -7.9 per cent.
- Workers provided by contract firms: Full-time 11.7 per cent, Part-time 23.8 per cent.
- All workers: Full-time 7.2 per cent, Part-time 1.5 per cent.
What about workers’ preferences?
The data shows that:
1. 55.1 per cent of contingent workers in 2017 wanted non-contingent work (32.8 per cent were happy as they were).
2. Only 8.8 per cent of independent contractors preferred traditional arrangements (79.1 per cent were happy as they were).
3. 44 per cent of On-call workers wanted traditional arrangements (43.8 per cent were happy as they were).
4. 46.4 per cent of Temporary help agency workers wanted traditional arrangements (38.5 per cent were happy as they were).
It may be true that since the last survey (May 2017) there has been rapid growth in ‘gig economy’ jobs. We will have to wait until the next data release and hopefully for some better (more comprehensive) data before we really know.
A Job Guarantee would alter the scene dramatically
There have been progressives calls for a guaranteed minimum income to be paid to help these precarious workers.
For example, in the UK Guardian article (June 2, 2019) – The gig is up: America’s booming economy is built on hollow promises – Robert Reich writes that gig economy workers will “need a guaranteed minimum basic income – a subsistence-level cushion against earnings downturns.”
He also notes they will need a range of other insurance protections against the precarious nature of their work.
And, he plays the ‘tax the rich’ (or variant) card – “All of this should be financed by higher corporate taxes, ideally in proportion to a corporation’s use of gig workers.”
Whether we want these corporations to pay higher taxes is one thing. But such a decision should never be justified or based on some erroneous notion that the government cannot provide services to precarious workers unless the ‘rich’ pay more taxes.
That is a baseless conflation and very damaging to the progressive argument.
Just as I oppose Robin Hood taxes, which progressives wheel out because they want the evil global financial markets they hate to pay for their evil in some way, I also oppose guaranteed minimum incomes as a solution to precarious conditions in the labour market.
If we do not like the labour market behaviour – low pay, low investment in training and skills, outsourcing of responsibility for tools provision (‘Uber cars’), lack of security, dangerous working conditions, lack of entitlements such as sick pay, holiday pay, and pension provisions etc- then as progressives we should not demand the government provide a pittance of UBI and leave the labour market to do its thing.
We should be working on policy interventions that wipe out the practices we dislike and consider damaging to well-being.
So, for example, New York has brought in regulations forcing Uber to pay workers a living minimum wage. Uber has stopped recruiting drivers there!
We should force gig economy employers that hide behind the independent contractor myth to bring all their workers into their employed workforce and subject them to standard entitlements. If they don’t like it, then they can cease to trade.
We lived just fine before Uber came along!
And we should demand the government introduce a Job Guarantee which would set all the minimum wage and non-wage benefits and wipe out employers who only provided precarious jobs which workers had no choice but to accept.
If there was a Job Guarantee that provided meaningful work contributing to society then the workers in contingent or alternative arrangements who were unhappy with their situation could just leave and take a full-time (or whatever fraction they chose) Job Guarantee job with a socially-inclusive wage and other non-wage benefits.
They would know it was secure and provided for their future via superannuation provisions etc.
It is hard to get a clear picture on the ‘gig economy’ from a data perspective. There are a lot of anecdotal horror stories but so far the data agencies have not yet caught up with the trends.
What appears to be the case is that a growing number of workers are becoming trapped in these go nowhere jobs which provide nothing for their future.
And, many of these jobs can be provided (and have been) by traditional arrangements. It is just that the employers don’t grab as much profit under these arrangements.
That is enough for today!
(c) Copyright 2019 William Mitchell. All Rights Reserved.