Hustle and Gig

by Alexandrea J Ravenelle

  While $25 an hour is slightly more than the $22.92 per hour earned by workers in transportation and warehousing in December 2015, the Uber rate doesn’t take into account the need to pay for gas, insurance, and vehicle maintenance, and to account for depreciation. The Internal Revenue Service’s standard mileage rate is a commonly accepted tool for calculating the cost of owning and operating a vehicle. The rate is often used when calculating the cost of miles driven when seeking reimbursement on an expense report or accounting for travel costs. The mileage rate was 54 cents per mile in 2016, before dropping to 53.5 in 2017. After accounting for the platform’s cut, more than half of every dollar earned by a driver goes to expenses. When vehicle costs are factored in, the actual amount of money earned by a driver decreases precipitously.

  Uber seems to know the financial implications of driving for the service. “According to an internal slide deck on driver income levels viewed by The New York Times, Uber considered Lyft and McDonald’s its main competition for attracting new drivers.”56

  There are stories of super successful drivers, but their high incomes are not the result of just driving. In 2015, Forbes magazine highlighted an Uber driver who made $252,000 a year by turning his car into a jewelry showroom and using his profits to purchase a fleet of cars and hire additional drivers. Yet even this “Uberpreneur” made the majority of his money ($18,000 in transactions a month) in jewelry sales. His monthly gross earnings from Uber, in 2014—before the platform began implementing a series of rate cuts—was just $3,000, or $36,000 a year.57

  TaskRabbit has promoted the idea that Taskers who work full time on the platform can earn $78,000 a year. Jamie Viggiano, a spokeswoman for TaskRabbit, explains, “Some 15% of workers on TaskRabbit work full-time and, of those, many earn $6,000 to $7,000 a month after the commission is deducted.58 Even at just $6,000 a month, a Tasker would need to work forty hours a week at $45/hour or twenty hours a week at $90. Since client messaging, travel time, and transportation costs are unpaid, a Tasker seeking a premium income would likely need to be working for many more hours. After the platform’s most recent service pivot—which increased commissions from 20 percent to 30 percent for first-time tasks—workers would need to work even more hours.

  While some tasks do command a price premium, most tasks are one-offs and don’t result in the type of steady employment that workers would need to obtain high five-figure incomes. Additionally, earning a high wage for a gig or two doesn’t take into account the costs of benefits—sick leave, paid time off, unemployment or health insurance—that commonly equal 20 to 30 percent of compensation.

  As a result, the gig economy also raises issues related to inequality and stratification. Even though services market their platforms as bringing entrepreneurship to the masses, the real winners are individuals with capital to spare. In Race against the Machine, Erik Brynjolfsson and Andrew McAfee note that rapid technological change is destroying jobs faster than they are created, resulting in a “great decoupling” as productivity increases but employment decreases.59 Fellow economist David Autor disagrees with Brynjolfsson and McAfee about the robust increase in productivity but acknowledges that not all technological changes have been good. The movement of bank tellers into higher skill sales jobs is an illustration of the “polarization” and “hollowing out” of the middle class as growth occurs with low-level service jobs and high-paying jobs that focus on creativity and problem-solving skills.60

  The old model of the labor market—whereby workers sell scarce labor to employers over the course of their career—is eroding. As David Autor explains, “It doesn’t mean there’s no money around, but it’s just accruing to the owners of capital, to the owners of ideas. And capital is less equitably distributed than labor. Everyone is born with some labor, but not everyone is born with capital.”61 In the gig economy, the workers who are most likely to succeed are those who have social and financial capital.

  This work also has implications for the informal economy, defined as “those actions of economic agents that fail to adhere to the established institutional rules or are denied their protection.”62 Most informal-economy research is focused on illegal markets or examines developing or emerging economies.63 The concept of the informal economy originates with Keith Hart’s study of urban markets in Africa.64 Other researchers have studied informal work among the middle class, but with a focus on removing activities from economic exchange—for instance, individuals choosing to repair their own machines or mow their own grass in an effort to “maximize the efficient allocation of time.”65 Just like participants in the underground economy, workers in the gig economy—especially when paid as 1099 workers—are engaged in “informal economic activities [that] bypass the existing laws and regulatory agencies of the state.”66 Workers must trust that they will be paid and won’t be harassed or get injured on the job.

  As this research shows, not all gig work is created equal. When workers in insecure jobs have benefits and workplace protections, worker insecurity and experience of material hardship can be reduced. As Dan Zuberi notes in his study of hotel workers in Seattle and Vancouver, “There is nothing inevitable about the globalization of the economy and rising levels of inequality and poverty.”67

  The gig economy does not have to be the end of stable work or the employment-social-safety net. The sharing economy was born out of an idealism of sharing and community—not gig-based or hourly work. Fortunately, some on-demand platforms on the cutting edge of app-based work still treat their workers as employees and provide access to a basic social-safety net of workers’ compensation, health insurance, and unemployment protections.

  WORKING AS AN EMPLOYEE—IN THE SHARING ECONOMY

  Hello Alfred’s Manhattan office fits the stereotype of a tech-enabled start-up. Straddling the border between Union Square and the Flatiron Building, the office is surrounded by expensive exercise studios and upscale home-goods shops. In the center of the brick-walled space, a handful of attractive twentysomethings work on scheduling software, chatting back and forth about changes in worker availability. A copy of their Harvard Business School case study, signatures dotting the margins, is hung in the entry, and a bulletin board features a collection of handwritten notes from clients to their Alfreds, thanking them for cleaning an apartment, making life happier, and generally saving the day.

  While the company’s physical office fits a stereotype, that’s where the similarities between it and other tech-enabled start-ups end. Even the creation story for Hello Alfred is very different from those of Uber or Airbnb. Instead of looking for a way to pay their rent or party more cheaply, cofounders Jessica Beck and Marcela Sapone, while enrolled in Harvard Business School, were thinking about how to balance careers with life. “I just didn’t have enough time, and that’s the theme that really underlies everything, there’s not enough time to do things that you feel like you really want to do,” Sapone said.

  Their solution, Hello Alfred, is more than an errand-running service. Alfreds are assigned to a client and are tasked with developing the intuition needed to anticipate the client’s needs. For instance, an Alfred might note that certain cereals are usually in the cabinet and ensure that they don’t run out. Or she may notice that a client has a well-outfitted kitchen but never any food in the fridge, and offer to buy twenty-dollars’ worth of fresh vegetables at the farmers’ market so that the client can cook.

  “The concept of on demand is pretty suboptimal. It means you haven’t planned it out. . . . [T]o get to a place beyond demand, where you feel like your mind is being read and your needs anticipated, is actually the same thing as having someone plan for you,” Sapone said. “We had to create a relationship with a customer where they trusted that you would be able to do something as well as they would, if not better, and that we were trustworthy people and could be in their home unsupervised.”

  This “intuitive detective work” isn’t easy, but the cofounders have firsthand experience in the challenge—they took a semester of
f from Harvard to run time trials and work as the company’s first Alfreds. Members of the senior management team go out into the field on a regular basis in order to stay informed about the challenges experienced by Alfreds.

  Unlike other services that focus on flooding the marketplace with potential workers, Alfred doesn’t hire workers until they have sufficient demand in an area to ensure that they can offer at least steady part-time employment. Alfreds are paid sixteen dollars an hour during their two-week training, which is then increased to eighteen dollars an hour. The average pay is roughly twenty-two dollars an hour, and the goal is to get workers to thirty dollars an hour. All workers are W-2 employees, and full-time Alfreds get the same benefits as full-time corporate workers—a standard Monday to Friday work week, health insurance (including dental and vision), disability coverage, and paid time off. There’s no 401k yet, but that’s company-wide.

  Paying workers as W-2 employees hasn’t been challenge-free. The company has an added human-resources and legal burden and obviously spends more for labor. They’ve also received pushback from potential investors who have declined to support their company because they weren’t classifying workers as independent contractors. “There was this whole trend at the time because of Uber. ‘Uber for anything . . .’ It was like heroin for VC [venture capitalists]. . . . [T]hey were all going on to Uber’s model, where you put a lot of cash up front to acquire your customers and figure out the economics later,” Sapone explained. “All of this stuff about flexibility and extra work, it’s all kind of B.S., because what happens is you end up not making enough money or being able to plan for anything or have any benefits.”

  Sapone admits that their company could have gone either way in terms of hiring workers as employees or independent contractors. But Sapone and her cofounder disliked the high level of customer and worker churn found in the 1099 model, and they were concerned about the quality of the jobs they were creating. In an essay written for Quartz, she explains,

  While technology can increase access to new goods and services, it also risks increasing the distance between groups of people being served and serving. . . . There should not be a disconnect between the success of a company and the success of its workers. We believe treating our employees as our primary customer is how we can best satisfy our end users. It can become difficult to achieve this with the 1099 classification, because it inherently distances the worker from the company. There is no onus to provide meaningful work, training, or career advancement. . . . For us, breaking the rules means making people the center of our tech business. It means taking on responsibility to provide good jobs. The relationship companies have with workers is not just about cost, it is about principles. It turns out those principles are good for business anyway.68

  MyClean, a home-cleaning service started in 2009 by Michael Scharf, Mike Russell and Justin Geller, has also discovered how principles can impact profit. As noted in chapter 4, MyClean began with an outsourced workforce, but then found that the company’s lack of commitment to workers led to an equally mercenary attitude among cleaners. Cleaning quality and dependability was spotty, and the customer turnover was high, which was problematic given the service’s customer acquisition costs. Additionally, the company couldn’t legally require certain things like uniforms or specific work hours.

  MyClean now treats workers as W-2 employees. As their mission statement notes, “We employ our cleaners, affording them the rights and benefits that come with that, including paid travel time, paid overtime, payroll taxes, disability insurance, workers’ compensation, FLSA protections, health insurance, 401k matching, etc.” The expectations of both MyClean and its employees are clarified under the W-2 model—workers and the company know what expectations must be met to achieve success and how workers will be remunerated; and workers can expect regular paychecks. Treating workers as employees has come with an additional, unexpected perk—the company’s recruitment costs have greatly decreased, and most of their hires now come as a result of word of mouth, which has its own added benefit of quality control. Few workers want to jeopardize their standing in the company by recommending subpar employees, and as a result those who are referred tend to be carefully vetted in advance.69

  Treating workers as employees goes beyond the basics of Social Security contributions. It means offering hourly workers access to the same perks and privileges of their salaried colleagues. When I met MyClean cofounder and CEO Michael Scharf, the company had recently hosted a holiday party for staff and their families at a local barbeque joint as a way to thank them for another year of hard work.

  MyClean isn’t the only company fighting the rise of an independent workforce where hustling rules the day. Makespace, the personal storage service; Munchery, a food delivery start-up; and Managed by Q, an office management service, all treat their workers as employees. Instacart, a grocery service, classifies part-time workers (29 hours or less) as employees.

  To be fair, the impetus for treating workers as employees is not generally philanthropic. For instance, the office service Managed by Q views its rejection of the independent contractor model as a business strategy. Shortly before creating the service, the founder, Dan Teran, read Zeynep Ton’s book, The Good Jobs Strategy. The book, which harkens back to the “happy worker model” of increasing productivity by keeping workers happy, uses case studies of Zappos and Trader Joe’s as proof that investing in a workforce can make a company more profitable in the long run. As a result, Managed by Q offers benefits that match, or even exceed, those offered by more traditional companies, including company-paid health insurance, a 401K with match, and paid family leave.70

  Similar views were echoed by Juno, a “kinder version of Uber” that marketed itself as treating drivers better so that “drivers treat you better.” The company viewed drivers as true partners and offered stock options and charged a lower commission (10 percent, versus 25 percent, guaranteed for twenty-four months) than Uber.71 Drivers were also offered access to 24/7 telephone support with a person, as opposed to Uber’s notorious email-based system.72

  What keeps other companies from also classifying their workers as employees or offering their workers stock options and full company involvement? For one, the cost savings from classifying a worker as an independent contractor can be considerable: after factoring in unemployment insurance, workers compensation premiums, Social Security and Medicare contributions, health insurance, and any additional benefits, the savings can total around 30 percent.73 Companies that outsource workplace risk to their workers are able to offer much lower prices than companies that commit to paying an actual wage.

  The cost savings of deeming workers to be independent contractors creates a perverse incentive for companies to save money on the backs of their workers. It also makes it harder for companies that are classifying their workers as employees to compete equally. “In a world without laws, it would be great to be able to hand someone supplies, train them, and give them 30 bucks under the table,” says Ken Schultz, MyClean’s chief operating officer. “But we’re compliant, and the result is employees who have rights. We’d like to have a level playing field.”74

  “PAY NO ATTENTION TO THAT MAN BEHIND THE CURTAIN”

  How did we end up with so few companies playing by the rules and so many companies treating workers like expendable cogs? Why are the platforms and their supporters dominating the public discourse? Part of the issue comes back to the hijacking of language by these companies and the sharing economy. Calling something “sharing” hides a number of sins. Likewise, calling these platforms “technology companies” is a way to brush off the social contract. Describing a company as part of the technology field means that no one can be expected to understand—it gives it the imprimatur of the flashing 12:00 on an old VCR. It’s too complicated. It doesn’t make sense. There are a lot of buttons, and they’re not intuitive. And it’s just going to need to be changed again, so why bother?

  “I think there’s a mistake that happened wi
thin the technology community: [the idea] that you could just put technology around anything and it could be a unicorn. And trying to take [a] real-world business like a home-cleaning service and add a tech component, and to just assume that naturally that’s going to be a billion-dollar business,” said MyClean CEO Michael Scharf. “This is not a social media platform, it’s not software, it’s a service platform. It’s not just a technology business; as a matter of fact, technology is a secondary component. It’s a real-world business, and real-world businesses that involve people don’t scale at the same pace that true technology businesses do; your growth comes from people, not software.”

  Sharing economy platforms seem to get a free pass when they identify as technology companies or online marketplaces. Given that technology changes so fast, of course it makes sense that a company will need to shed workers at a moment’s notice. Except, this free pass ignores the fact that the argument about being able to shed workers was also commonly used during the massive layoffs of the 1980s and 1990s.

  Additionally, because Strivers and Success Stories have other work or interests, they’re able to brush off problems within the sharing economy. It’s not really who they are. It’s not what they really do. Joshua, the corporate attorney with multiple Airbnb listings, sums this up beautifully:

  So, when I was first doing it, I was spending a lot more time on it. . . . [W]here I was, I did everything. I went and cleaned the apartment. . . . It was weirdly fun to sort of do manual labor instead of being an attorney. So, it’s like it was strangely enjoyable to sort of leave the office at one in the afternoon and go down to some apartment and clean it up and welcome a guest, which is so different from the general cerebral work that I do on a day-to-day basis.