The honeymoon might be over for the gig economy

Services like Uber are cheap and convenient, but debate is heating up whether they are fair to workers and need to be regulated

Gigs used to be for musicians, while the rest of us got "real" jobs with a steady paycheck. No more: Today the gig, or on-demand, economy is thought to employ 80 million and is projected to grow to $335 billion in 10 years. But a backlash is growing, and Uber in particular is being set up as the poster child for unfairness to workers and competitors.

Is the on-demand economy fated to become the next guilty pleasure, like shopping at Walmart or wearing inexpensive clothes sewn in sweatshops?

Of course it's not only ride services like Uber that are under attack. Last month food-delivery platforms GrubHub, Caviar, and DoorDash were all sued by delivery drivers who say they should be classified as employees, not independent contractors. The suits were filed in San Francisco mere days after a California agency ruled that an Uber driver was indeed an employee.

Housecleaning service Handy faces similar claims, and rival on-demand cleaning service Homejoy closed down this summer over workers' lawsuits. Crowdsourcing company CrowdFlower, sued for allegedly paying less than minimum wage to workers misclassified as contractors, agreed to settle.

Of course the gig economy -- Uber in particular -- has plenty of boosters, who love its flexibility, entrepreneurial spirit, and the opportunity to be one's own boss. But others -- like "The Daily Show" host Trevor Noah -- struggle with the juxtaposition of convenience versus low workers' pay and lack of benefits.

A U.S. House subcommittee last week held hearings on the sharing economy to explore whether new regulations are needed. Dean Baker, co-director of the Center for Economic and Policy Research, told the committee:

It makes little sense to require traditional employers to meet minimum wage standards and pay overtime premiums if we don't apply comparable rules to sharing economy competitors. Not only does this put law-abiding firms at a disadvantage, it is basically giving them a back-door way around rules they choose not to follow.

Rep. Jan Schakowsky (D-Ill.) agreed: "All of these issues must be addressed if we are to insure that the sharing economy is as much about improving the lives of working Americans as it is about improving the market cap of gig economy companies." But Rep. Michael Burgess (R-Texas) said, "I for one am more concerned about existing regulations hurting new jobs than I am about the need for new regulations."

But what kinds of jobs? Sara Horowitz, founder of the Brooklyn-based Freelancers Union, touts independent contracting as a way of "establishing a new way to work -- and in the process, cultivating a new way of life." Yet 29 percent of its New York members earn less than $25,000 a year, and in 2010, 12 percent of its members nationwide received public assistance.

When announcing its new Flex crowdsourced delivery program, an Amazon exec said, "There is a tremendous population of people who want to work in an on-demand fashion." But Gawker responded: 

There is not a "tremendous population of people who want to work in an on-demand fashion." There is a tremendous population of people who want to work. On-demand jobs, which offer companies all the benefits of employees without any of the costs of paying benefits for them, are just the best work that desperate people can find.

The risk of the gig economy, Arun Sundararajan, professor at New York University's School of Business writes, is that "we might devolve into a society in which the on-demand many end up serving the privileged few."

Given the rapid growth of the gig economy, it's critical to address how on-demand workers are treated. "I don't mean to cheer on Uber, pat them on the back, or give them pass on their obligations, but these companies are producing labor opportunities. They are the wave of the future," MIT research professor Andrew McAfee told Huffington Post. The solution, he believes, is to rethink the social safety net and decouple it from employment status. "Every country redistributes wealth. It's a question of how much and how you go about it."

Sen. Mark Warner (D-Va.) is the main voice in Washington calling for reform to separate benefits from employers, but he has yet to introduce legislation on the topic.

Of course the gig economy could become a quaint footnote in economic history if, as Gartner predicts, autonomous software agents and self-driving cars take over more and more of these kinds of jobs. Perhaps that's when the debate over the social safety net will get real.


Copyright © 2015 IDG Communications, Inc.

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