We’ve been hearing the phrase for years now, it’s what all News Outlets, Tech Blogs, Wall Street speculators, and VC firms spew out to describe the future of work.
Its utterance was that of early promises of liberating people from the 9-to-5 grind to its current known colloquial of getting your “side hustle” on. If you haven’t guessed it yet, that polished-turd of a phrase is “The Gig Economy.”
It might not be the perfect list that resonates with everyone, but my hopes are to at least open up a converstion that I feel is needed.
Today we will go over the top 10 reasons the Gig Economy is broken and really not all that it’s cracked up to be.
1. Work when you want, but there are no guarantees
In the day and age of the digital world and global economy, we are seeing people simply create an account online and start working with the help of their laptop or cell phone as their tool for the job.
Companies like Uber, Lyft, Doordash, TaskRabbit, mTurk, Amazon Flex, and many other on-demand platforms have been carving out their existence of letting people make cash at their leisure, or at least that’s what they hope you believe.
All of these companies claim to say there is money to be had when you want it, but when you dig in just a nanometer into the excrement you’ll see that’s far from the truth.
Although you do choose your hours to work, the majority of productivity and cash to be made is based on peak-hours of when work is available and how flooded your market is. The reality is you are working on their schedule not your own.
Since the inception of on-demand-work has started around 8 years ago, there is more competition between independent contractors than there ever has been in the rideshare space.
With the most stringent regulations on rideshare companies, NYC is a great example where taxis and rideshare drivers have to compete with each other. In total there are close 70K to 100K cars all vying for the same fares to where net hourly wages are ranging from $7 to $10 an hour (my number are closer to $7, but keep reading you’ll learn why).
“If you’re looking for the devil, don’t look too far…” Abraham – Uber Driver NYC
When you are trying to get your “hustle” on for pennies on the dollar and your productivity is being destroyed by platforms that see you as a stepping stone for their profits, who’s really winning?
In the end, yeah you can work when you want but the reality is you’re a slave to competition and a cog in a machine that is forcing people to work longer hours for less money.
Justify it however you want, be it your just making a couple of extra dollars after your normal job, or you’re a full-time freelancer, their system is designed for them to win as you take on all of the expenses.
2. The pay does not reflect the cost of the gig
When you do a little research there is no surprise to realize that the pay is not worth your time. Silicon Valley companies started out by enticing their labor force with fair pay. In the past, a rideshare driver could easily make a $100k in densely populated cities like NYC or SF.
This is not the case anymore as rideshare driver’s attrition rate is around 96%. The first report that touches a nerve on the subject of driver wages was from MIT.
MIT’s report claimed drivers were netting $3.37 an hour until Uber’s CEO Dara Khosrowshahi quickly took to social media claiming the calculations were off (he is trying to also convince the public on an IPO in 2019, but we’ll see if Uber can make it that far).
MIT = Mathematically Incompetent Theories (at least as it pertains to ride-sharing). @techreview report differs markedly from other academic studies and @TheRideshareGuy recent survey. Our analysis: https://t.co/S2aAqCuDR0
— dara khosrowshahi (@dkhos) March 3, 2018
Although these hourly wages seemed low, the best findings on the subject have been by Lawrence Mishel of the Economic Policy Institute. Their findings have the lowest range of hourly pay pegged at $9.21 an hour after expenses.
In my humble opinion and having worked in the private transportation sector for over 7 years they are not accounting for labor and losses that are still produced when the app is turned off. They call these empty legs “Dead Miles”, a mix of miles driven or time idle where a driver has no passenger paying a fare.
Although I don’t question the intelligence of MIT’s and EPI’s methods and research, it seemed to play into Uber and Lyft’s favor (no surprise for private companies to manipulate data) to conveniently leave out the total costs to operate a vehicle.
Both reports tend to only count on factoring numbers when the app is in turned “On”, but completely miss the target when the app is not engaged, even though operating costs don’t simply stop when the app is turned off.
Work is work, is work!
Any fleet manager will tell you losses are accruing until the vehicles is done for the day and parked at home. Off-the-clock losses need to also be factored in when calculating margins of a transportation business model. Don’t let Silicon Valley trick you into thinking otherwise, your losses continue until you get back to home base, whether the app is “on” or “off”.
Without getting into a full debate on the cost of operating a car since it’s very subjective, I will explain my numbers with the aid of the EPI’s report that the cost to operate a vehicle is calculated at $0.32 per mile with an hourly average of 20 miles an hour. That breaks down to $6.40 per hour of loss.
Here is the breakdown of 3 scenarios that a driver incurs on a daily basis that lowers their earnings at any given time:
- Driving to a productive area to begin operation, i.e. Airport, or major city you live near
- Having to reset back to your productive area when a ride takes you out of your normal operating zone
- Having to commute back to Homebase
On the average, you will find that most drivers have an additional loss of at least 25% (based on over 3k rides I’ve driven, living 30 miles from San Francisco).
In other words, a driver’s true hourly wage needs to reflect this additional 25% loss to be tact onto $9.21 to show a realistic hourly wage of $6.90 (there is also no reflection of paying drivers more as gas prices go up).
When you truly know your numbers do you begin to Rethink How You are Driven (RHYD, get it)? Because these companies are hoping your not, while they are also selling you this overhyped scam of the “side hustle.”
3. The “Side Hustle” is a band-aid to a much bigger problem
The “side hustle”… is it a new catchy slang term hip millennials use to sound cool while drowning in tuition debt, or is it just a way to describe a darker problem in a free market economy?
Uber was caught poking around into other sectors where they sent out surveys asking how little they could pay their labor force for tasks outside of driving. Jobs in nursing, clerical, and other borderline white collar tasks seemed to make the list.
It seems there is no area where a software company will try to destroy any financial stability when they can turn a quick profit at the expense of the free market (it really should be called free labor at this point).
Amazon seems to be at the forefront of minimal pay in the clerical sector through their mTurk platform. The pay is as little as a penny per task that could take at minimum 5 minutes to complete, most workers are making $5 or less an hour, but hey that “side hustle” is running strong.
Although there has been an update that Amazon has given their 250k warehouse employees a $15 raise, it was at the cost of over $3k in bonuses and restricted stocks. It seems like a great gesture in the long run, but yet again Amazon was just trying to play an interesting game of flimflam while their stocks soared they pivoted to instead give their employees the shorter end of the stick.
Compound this with rising income inequality since the 1980’s in the white collar sector, along with staggering tuition debt, it seems that the gig economy can justify their own low wages having found a convenient predatory feedback loop between on-demand and the traditional workforce.
Something to think about the next time you’re looking at your pay stub and realize you’re going to have to “hustle” up more cash that your current job is not willing to pay you.
4. By clicking a button you’re saying “Bye Bye” to safety
People would not believe it unless it was true, but we live in a world where a reality-show star is now the President of the United States of America. He goes by the name of Donald Trump, a.k.a. The Orange Clown.
Trump was helped into office with the aid of Russian government support to hack the 2016 US elections. In addition the illegal theft of the Presidency, Trump has now stolen the Supreme Court as well by appointing extreme corporatists and alt-right conservatives in Neil Gorsuch and the disastrous confirmation of Brett Kavanaugh.
The SCOTUS recently ruled that corporations can now force arbitration on employees and consumers. With this decision, the Supreme Court has basically destroyed the last option for the public to hold companies accountable against exploitive and unsafe practices.
Even before this disastrous administration, Silicon Valley has lived by the neo-liberal mantra that “it’s ok to ask for forgiveness than to ask for permission.” Now with the SCOTUS in the pockets of big business, will labor have any ability to protect themselves from exploitation?
We can see this today with data breaches by Equifax, Facebook, Uber, and Lyft. These apps are built to know as much about you while the corporations take little to no responsibility of your data or safety.
Simply by turning on the app or hailing a ride, independent contractors and customers alike are now losing the power to really hold corporations accountable.
Uber has now over 100+ cases of sexual abuse by their drivers. It seems that their background checks and vetting of drivers are completely a roll of the dice at the expense of the rider.
Although Uber claims they will not force victims into arbitration, there is high likelihood with the protection of the new Supreme Court ruling there will be no guarantees it will last.
Just to set the record straight since most people feel riders are the only victims; drivers have their share of safety concerns while working the job. You would think otherwise, but the majority of incidents are in fact riders abusing drivers.
So the next time you click that button, you are also clicking away any rights for holding these companies accountable for your safety.
5. Your rides are so cheap because of subsidies, so is there a loser in the end?
Have you ever thought “how do Uber and Lyft charge only $5 for my ride?” I know that question might have crossed your mind, or maybe it hasn’t… since there are some people that tend to not give a shit.
Nevertheless; it’s really quite simple, they are trying to destroy all competition in the transportation sector.
Companies like Uber and Lyft on average take anywhere from 50% to 80% of the fare, which is why they can charge so little for rides at times. In the end, this is always at the expense of the driver and the true cost to operate their vehicle.
To date, rideshare backed investors subsidies around 50% of the fare, while forcing the drivers to take on the majority of the cost to operate their vehicle. Remember, they love to use that term “side hustle”, but in reality, the driver is the one getting “hustled” here.
Between Uber and Lyft with close to 8 years of operation, neither company has seen a profit to date. With the increase of predatory pricing to kill off the competition, and trying to con the public into an affordable option the clock is ticking on how long these subsidies will last.
This is a classic model of a bait-and-switch so that people will only have one option at some point, and that tipping point will be if both private and public transportation goes away. Once they do, I can guarantee you so will those subsidies.
“Tic, Toc”, when will the bell toll before the subsidies drop?
6. When privatization of public works is not in the interest of the people
If Uber or Lyft can control the market their main goal is to privatize transportation. But is this the best solution for everyone?
Some would argue that it would free up government inefficiencies, money, and time, but you must understand that in most cases privatization of any industry is only a winning solution for investors and not the public if they can cut out government controls.
If you haven’t been living under a rock all these years you would have seen the clear failures of privatization in our education, and prison systems by marginalizing US citizens as a cash commodity rather than a human being that should be paid a living wage and basic human rights. Now this threat is encroaching on our public transportation system.
With a privatized transportation system we will see failures, in fact, we are seeing them in real time today. Here is a list what those current and future threats are:
- Lack of accountability: Uber has to date 5 Federal Investigations
- Unfair pricing and antitrust predatory pricing at the driver’s expense
- No real safety measures for driver background checks
- With an avg median income of $30k or less 60% of commuters of color will be negatively affected if they lose out to affordable public transportation
- Rideshare is causing more harm to the environment than a benefit
- Traffic congestion is on the rise
The reality is subsidized fares in the rideshare industry is coming at the cost to drivers, people of color, and those with low incomes with around 51% of all Americans making less than $30k a year.
If a monopoly or duopoly can happen you will see a US infrastructure that could be held hostage by a handful of investors and their views on how much transportation should cost.
7. The Gig Economy is creating a new economic class for labor
Guy Standing an economics Ph.D. from Cambridge University has predicted the rise of Trump and our battle of income inequality. Standing is an advocate for independent contractors and the gig economy workforce by educating the public about a new economic class that he has penned as the “Precariat.”
The precariat is a class of people tends to be caught up in the task-based roles of on-demand labor, while taking on more risk than financial reward.
They are between being homeless and having wages that can increase ones current quality of life, yet lack any benefits of long-term career growth or security. In short, they are stuck on an endless cycle of catch up due to the economic marginalization of companies like Uber, Amazon,Walmart, and Lyft.
Guy sums it up quite nicely of the predatory nature of Silicon Valley and their platforms acting as power-labor-brokers. In most cases these companies take 20% or more commission per task (Uber and Lyft are taking at least 50% to date):
Power today lies not with those who control the means of production, but the ‘technological apparatus’
Mr.Standing clearly states of where the ‘power today lies’ and his concerns for the future of labor in regards to on-demand work in the current political climate. There is a need to address digital labor platforms that exploit income and basic labor-rights-issues in today’s free market system in a digital and global economy.
Today we are seeing this with the Trump administration, the GOP, and Supreme Court that does not have the intentions of most of Americans, but that of corporations. While the rideshare market as a labor force is less than 1% of all labor in the US workforce, independent contractors as a whole are to comprise 50% of the workforce by 2020.
The threat is that without any regulations, labor laws, or a safety net for contractors, you are seeing aggressive income inequality and exploitation at the cost of contractors pay by a small group of investors that see labor as a commodity and of no long-term value.
By ignoring the exploitation of businesses in the gig economy we are also ignoring future issues in other sectors of the contract labor market as we are seeing the rise of the precariat class.
8. With no backup plan, labor is treated as a stepping stone to AI and Automation
“The robots are coming…” at least that’s what most rideshare companies are hoping for. They claim to value their success on their drivers, yet are feverishly working to get their own fleets of autonomous cars onto the road to cut out the human factor and cost.
Lyft has their autonomous fleet date set as soon as 2021, where they will try to introduce autonomous vehicles to their platform. Uber has been on a short hiatus of autonomous testing since a tragic accident happened in Arizona where one of their self-driving vehicles struck and killed a pedestrian.
The end game for all companies is the sooner they can make their human drivers a footnote the sooner they can take 100% of the profit of the business.
As a consumer, you’re probably thinking there will be a cost-benefit of cheaper rides, but don’t believe the hype.
A research simulation (the report can be viewed below) by Ph.D. T. Donna Chen of the University of Virginia and Ph.D. Kara M. Kockelman of UT Austin have stated the lowest cost per mile would be no little than $1. Bear in mind that $1 per mile is justified if the fleet operated in the city of Austin, TX a place where costs of business operations are significantly lower than a larger metropolis.
The reality is autonomous cars will not cost less than current prices today, the per mile minute rate is on average $1 to $1.25 right now. Drivers make far below that, while Uber and Lyft are taking up to 80% of the fare at times.
When a company takes on 100% of the vehicle and operational costs there will be no savings to pass onto the customer when the robots come. They would now be liable for taking full ownership of all cost associated with operating a commercial fleet of cars; fleet insurance, state/local licenses, maintenance, gas, business expenses, etc. The majority of costs are currently taken out of drivers pay with an average per mile rate of $0.65, roughly half of each mile goes to expenses.
With companies that look at a driver as a stepping stone to automation, there is no timeline of when the bottom will fall out for contractors. This usually means that the government will have to deal with Uber and Lyft’s mess when millions of people lose work from their disruption (exploitation).
As a consumer you must realize you won’t see a cheaper ride than what is available in today’s market, so please explain to me why should people lose their jobs over to robots when there are no cost benefits?
Either way, you look at it large VC backed startups won’t care at all until consumers and/or drivers affect their bottom line.
As long as drivers are willing to work long hours for little pay, the big corporations will be able to fund their robot wet-dreams.
So which side of history will you be on? The side that is for robots and layoffs or where some can be employed and actually try to make a living?
9. When policies writers can be influenced, whose interest do they really have?
It’s no surprise that to be heard in government it’s good to have millions in the bank to spend on lobbying. It’s a legal form of bribery where politicians tend to care a little more about your situation when there are dollar signs backing up your “free speech.”
In this case, companies like Uber and Lyft have been hell bent on having their voices heard when it comes to regulators. Uber has spent up to $1.2M in New York State alone to show how much “free speech” they have. Unsurprisingly Uber has also been in trouble in keeping accurate records of their lobby efforts (no surprise).
Lyft, on the other hand, has been cozy with transportation officials as well, below you will see a twitter thread that seems to spell out perks that Susan Kennedy, the former head of the California Public Utilities commision (CPUC) was asking for in regards to approving safety regulations for Lyft.
Don’t let that little pink mustache and bubbly-rider-friendly exterior fool you, companies are always looking for politicians that can be influenced, and the problem is that influence can come at a cost of exploitation of safety and labor pay. Kennedy was eventually caught for illegal lobbying which steamrolled the majority rideshare regulations and exploitation of drivers we see today.
Just to put things into perspective of the lack of oversight of how regulatory agencies account for money collected from Rideshare companies, in January the San Francisco County Transportation Authority (SFCTA) considered suing the CPUC for lack of public record of the millions they have collected from Uber and Lyft.
We are talking about $64 million dollars over the past 4 to 5 years that is unaccounted for to date.
One quote as to why the CPUC won’t disclose this information to the public stands out as a major red flag to me when SFCTA chair, Aaron Peskin asked in inquiry meeting:
The PUC considers that to be highly classified information and won’t tell you how much money they have and what they’re spending it on?
When you have free-floating money being circulated that should go into either driver’s pockets or to funding projects that should be open to public scrutiny, there is an opportunity that this dark-money has an influence of corrupting publicly held agencies that think they can fly under the radar.
10. The Gig Economy and
Any time I hear the slogan “on-demand”, “get your side-hustle on”, or “be your own boss” what I am really hearing is a con-man trying to get their next victim of the gig economy.
The gig economy might not be going anywhere any time soon, but it has had its moment in the sun and it’s time for a change in how our governments allow for the corporate-capture of markets through preditory pricing and wages.
When businesses justify their low wages based on a “free market” economy, yet don’t pay a livable wage in the first place, it creates an endless cycle of labor trying to catch up without upward mobility, i.e. savings for a home, school tuition, childcare costs, etc. There’s only so many hours in a day to pick up that second or third job before there is no more room at the bottom.
While the white-collar consumer might feel shielded from the plight of what drivers are going through, they are still footing the bill by paying taxes where on average $6000 or 10% of people’s taxes go towards corporate welfare.
Corporations like the Ubers, Walmart, and Amazons have found a novel loophole of capturing markets through predatory and unsustainable pricing and having taxpayers foot the bill. What a great con-job of the white collar nature, where even the salariat is indoctrinated.
Uber’s race to figure out how to create a profit now has them desperately pitching cities and new investors of a future with flying cars where they claim will be cheaper than a traditional Uber today.
Nasa was approached to partner with Uber in their ambitious endeavor in creating a future of flying cars, reminiscent of the cartoon sitcom the Jetsons. Uber, a privately-held company is trying to leverage a tax-payer funded government body in Nasa to build a false sense of credibility for an IPO, they again go back to concepts of exploiting the pay of their labor:
Uber believes its concept (flying cars) will be safer and cheaper than what’s already available…
At some point, both consumers and labor must realize a company that is acting in a fashion of a Ponzi Scheme. Corporate welfare was designed by the “Free Market,” yet consumers and labor tend to not realize who designed the rules of the Free Market.
It’s quite simple. It’s the corporations that lobby for the laws to be written in their favor, while consumers are captured through pricing schemes to create monopolies.
This tends to then leverage a tax system where both consumers and labor pay yet again into corporate welfare. This is where the gig economy is a broken system, designed to pass on the essence of a free market, yet is truly a method for exploitation.
If you are still not convinced the gig economy is broken, maybe hearing it from a voice of a higher power will enlighten you. The Archbishop of Canterbury, Justin Welby talks of the gig economy and the ‘reincarnation of an ancient evil.’
"The gig economy, zero hours contract, is nothing new. It is simply the reincarnation of an ancient evil."The Archbishop of Canterbury, Justin Welby, tells the TUC that some people see the "oppression of the employed as a virtue".
Posted by Channel 4 News on Wednesday, September 12, 2018
The next time you get your Amazon Prime delivery or your Uber arrives to pick you up, just realize there is a cost for everything no matter how affordable it might seem.
One way or another the free market has found a convenient feedback loop where both the consumer and labor are taken advantage of by the gig economy.