Yves here. I wish we’d spent more time on Prop 22, but we have more impact taking on gig economy companies as investment frauds, as well as documenting how poor their pay levels are. This phase of the information revolution bears an uncomfortable resemblance to the first generation (or by some measures, a full two generations) of the Industrial Revolution in England, where real worker wages fell markedly.
By Juliet B. Schor, Professor of Sociology, Boston College. Originally published at The Conversation
Voters in California will decide in November whether Uber drivers and other gig economy workers should be considered employees or contractors – a question that’s been debated and litigated for many years now.
On the surface, the issue pits the flexibility that comes with being independent against the higher incomes and benefits that employees tend to get. Uber, Doordash and others say the proposition they put on the ballot in California would split the difference by keeping them contractors – “with benefits.”
I’ve been studying gig labor for nearly a decade. Since 2013, I’ve led teams that have interviewed more than 200 workers on platforms such as TaskRabbit, Postmates, Uber and other apps to learn about their experiences, earning patterns, desires and constraints.
I believe there is a better way to marry flexibility with a livable wage.
What Workers Want
It’s true that gig workers want flexibility, autonomy and life without a boss. But my team and I also found that the lack of benefits and available work mean it’s almost impossible to earn a reliable primary income on these platforms.
Those who tried to earn a full-time living on the platforms typically made less than the official poverty line, even when their hourly wages were decent. A separate 2020 San Francisco study found that ride-hail drivers were earning US$360 per week, after expenses. That’s $9 an hour for a 40-hour work week – and even less for the majority who work more than that. Almost half of the ride-hail and delivery workers in that study could not cover a $400 expense without borrowing.
These poor conditions support our conclusion that succeeding on these platforms generally requires having at least one other job, often a conventional one that includes some benefits. In other words, the platforms seem to be free-riding on the backs of conventional employers.
But we also saw how good this kind of work could be – under the right circumstances.
Reluctant Employees
To protect gig workers, California enacted a law last year that properly reclassified them from independent contractors to employees. It went into effect in January 2020.
Employment status makes the job more remunerative and less precarious by guaranteeing a minimum wage and numerous benefits. But the gig companies warn that it will eliminate the flexibility that workers like about gig work. Legal scholar Veena Dubal found that many workers came to support this reclassification as employees reluctantly, and only because conditions had become so dire.
In response, Uber and Lyft threatened to leave the state unless voters enact Proposition 22. If it passes, the proposition would exempt ride-hail and delivery workers from the California gig economy law but would also offer some benefits. It claims to guarantee pay equal to 120% of the California minimum wage, which is currently $13 an hour.
But independent researchers at the University of California at Berkeley have calculated that Proposition 22 would likely guarantee a wage of only $5.64 an hour, and many workers would be excluded from the various insurance benefits the proposition would provide.
Worker Cooperatives
My own research points to a different approach that retains worker flexibility but also gives workers a say in how the business operates – not to mention a real financial stake in its success: the platform cooperative.
Like any cooperative, a platform co-op is an enterprise jointly owned and controlled by its workers. Platform means the workers use an app or website to connect with one another and organize services for users.
Sociology doctoral student Samantha Eddy and I conducted a study of a platform cooperative in Canada called Stocksy United. It’s a stock photography company in which the contributing photographers are considered independent contractors but also own shares in the cooperative. There’s a small management team, but major decisions are voted on by the artists.
Members told us they are far happier than when they worked for the “Uber” of their industry, Getty Images, and earn much more for each photo sold. One reason for their satisfaction is that, like many platforms, Stocksy hosts a wide range of collaboration styles, from hobbyists who contribute the occasional photograph to professionals who invest large sums in shoots. This gives members the freedom that many seek from platform work.
All members get a say in the company’s governance, though in practice only a few hundred of its roughly 1,000 members are active in the company’s forums, where issues are discussed and voted on.
A key component of Stocksy’s success is that its founders already had extensive industry experience and knew the platform model and its technology. Another element was that it began with a $1.3 million loan from the founders. Lack of financing is a chronic impediment to the establishment of cooperatives, whatever the industry.
Another chronic problem in the gig economy is that too many workers chase too little work, a phenomenon that has been particularly acute among ride-hailing services. It arises in part because most platforms allow almost anyone to join. Our ongoing but unpublished interviews with gig shoppers and delivery workers find that this imbalance has intensified during the pandemic.
To avoid this problem, many co-ops, especially in driving, delivery and cleaning, limit membership and only expand with the market. That’s a major boon for workers who depend on their app-based incomes for rent, food and other basic expenses.
Platform cooperatives are a bit younger than the gig economy, which began around 2009. So there aren’t many yet. But there are examples in bicycle delivery, ride-hail services, cleaning and health care.
There’s no reason to expect the likes of Uber and Lyft to ever convert to a worker cooperative. But if they were to go that route, our interviews suggest workers would be better off.
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While cooperatives are great, they are not always viable when deep-pocketed corporate incumbents control a market like ride-sharing, and there needs to be an answer to the needs of those who work for the latter as well, not just utopian calls to self-organize into a platform coop. As for the prescription to organize into a closed shop and restrict membership, that sounds all too much like a medieval guild, and those were organized for the benefit of their leadership, not the rank-and-file members.
Interesting approach to the gig conundrum. I’m an independent research sci-engineer and am able to demand a higher wage than a ride-sharing driver so I don’t suffer from many of the challenges described here, at least not yet. As “zoom-towns” and remote working becomes more and more prevalent I see the arbitrage of geography dissipating for many “knowledge” workers who consider themselves immune to international competition today. The result will be downward wage pressure on many like myself who currently enjoy both the high wages of the traditional knowledge job and the flexibility of a gig worker. In such a situation a coop might make sense, sort of a union for the modern era, as long as the ugly corruption of unions past can be avoided. Anyone else in a similar situation?
I would like to see a coop approach for corporations as well, where the employees own and direct the company and its profits rather than a small group at the top who maximize and benefit from short term “shareholder value” to the detriment of the environment, society and their employees. If we’re going to move past traditional capitalism and respond to the challenges of climate change, altering what is viewed as “success” and holding companies accountable for the currently ignored external costs of their business (carbon, end-of-life, pollution, etc) we are going to need companies that give a shit and the current corporate structure does not lend itself to giving a shit.
Here’s a co-op to emulate:
https://www.unioncab.com/
I first heard about the Mondragon Cooperatives in Spain (the Basque region in particular) when I read Kim Stanley Robinson’s ‘Mars’ books in the 1990s.
The cooperative was founded in the 1950s when employees took over a disused factory, using hand tools and sheet metal to make oil-fired heating and cooking stoves. It became a massive conglomerate of hundreds of manufacturing, retail, financial, agricultural, civil engineering and support co-operatives and associated entities, with jobs for thousands of people.
If anyone is interested, as I would hope new cooperatives in North America are already familiar with the corporation, you can read more here. Of course there are downsides as there will always be but Mondragon is an excellent template.
Great to see Platform co-ops making an appearance on NC!
In the “ridesharing” market, Arcade City’s experience in Austin is, I think, instructive. There, the two major companies we all know and hate exited the city after some “unfriendly” safety regulations were adopted. The combination of regulatory pressure by the city and a cooperative model ready to replace the capitalists has been very successful and is something that can be replicated other places
Sounded really good until you got to the “limited membership to keep wages higher” part. When businesses do that it’s called “restraint of trade” and it is illegal.
There are a lot of things that are illegal. Business can do as it wishes, but your point stands if there are laws such as this that can be leveraged by business to protect itself from being out-competed by the coop model under discussion. Something to consider.
No it’s not illegal and it’s not restraint of trade. It’s equivalent to a business only hiring more workers when they need them. They’re not restraining entry into the market only to their business.
I think many gig company business models are best understood as trying to become a lowest-cost producer by removing the labor protections of their workers, while making these workers pay for most of its overhead. They classify most of their workers as ‘contractors’ instead of ’employees’, which is a cost-saving maneuver that is designed to transfer legal protections from labor to management. This is because a ‘contractor’ has virtually no employee protections that prevent them from being exploited, while management has breach of contract protections which are enforceable against this contractor workforce. It is a contradiction in worker classification that allows them to sidestep over a century of laws enacted to stabilize and to protect our society. Since these ‘contractors’ are usually prohibited from billing the gig companies for expenses, as other types of contractors do, this means these workers are responsible for paying much of the gig companies overhead. In this way specific business costs are transferred to gig workers, in order to lower a gig companies overall costs as well as insulate them related cost increases.
Thankfully companies like Uber have demonstrated, quite unmistakably, that this idea is actually unprofitable.
Incidentally, the gig company Uber has over 22,000 employees who are not drivers. Some of these are lawyers and lobbyists who are hired to enforce Ubers interpretation of existing employee protection laws. They probably don’t hire too many administrators because their business ignores most taxi regulations, and their 2.9 million drivers have almost no labor protections. I suppose most of the remaining 22,000 are technologists who are hired maintain their smartphone app. And that number seems a bit high to maintain a smartphone app that basically prices and bills taxi fares. For comparison, Blackrock oversees $6.3 trillion in assets (its the worlds largest investment manager) with 14,900 employees, Visa runs one of the world’s largest retail electronic payments network with 19,500 employees, and Netflix streams round the clock TV and movies to 183 million subscribers with only 8,600 employees.
Yet another reason that Uber’s business model makes no sense.