How Gig Economy Businesses Can Create Good Jobs–or Destroy Them
A congressional hearing Wednesday explored how the sharing economy must evolve to ensure fair wages and stability for workers.
PHOTO CREDIT: Getty Images
The evolution of work is becoming a battle between flexibility and stability. The sharing economy offers people unprecedented opportunities to work when, where, and as much as they want. But it also threatens a future in which stable, well-paying jobs cede to temporary gigs with few protections. Lawmakers wonder: How do we stoke new-economy industries without burning up old-economy security?
During a House Committee on Education and the Workforce hearing on the sharing economy Wednesday, no one disputed that companies like Uber, Thumbtack, and Upwork have benefited consumers, reduced inefficiencies, and improved lives. Such businesses add "tens of billions of dollars of real income to hardworking individuals," said Michael Beckerman, president and CEO of the Internet Association, which represents many of the largest online platforms.
On-demand workers average about $34 an hour, compared with $26 for payroll workers, Beckerman said. Also, most workers choose to use these platforms, either as their sole source of income or to supplement traditional jobs. Just 11 percent fetch up there for lack of better options.
The sharing economy's greatest gift to workers, though, is flexibility. "I can't think of another example where you can just decide one day if you are not going to show up to your job or pick your hours exactly or work simultaneously for competing companies," said Beckerman, who argued for minimizing regulation that might stifle sharing-economy innovation.
Entrepreneur Jonathan Johnson described how he used the local-services platform Thumbtack to launch SnapSeat, a business that rents photo booths. "Starting a project-based business has given me the flexibility to grow my business on my schedule and be home for my family," said Johnson, a new father of two sons. He said he has extended that flexibility to the five employees he hired as the company grew.
Ensuring good wages and security
Yes, flexibility is desirable. But it is no substitute for security, said Sharon Block, executive director of the Labor and Worklife Program at Harvard Law School. Most gig workers, of course, are classified as independent contractors and consequently not covered by laws related to minimum wage, workers' comp, overtime, and other employee benefits and protections. "Many workers in the online platform economy are low-wage workers. Drivers. Cleaners. Home-care workers," Block said. "They have little ability to shoulder the risks to their livelihoods and families that come with the loss of the basic social safety net."
Block pointed out that some sharing-economy companies--for example, the office-maintenance service Managed by Q and the chore platform Hello Alfred--have classified workers as employees and embraced the associated labor standards. She also said companies can develop technological solutions that will enable them to track hours in order to pay minimum wage.
"Online platform companies have a choice," Block said. "They can be innovative and flexible while creating good jobs, or while destroying good jobs."
The most expansive view of how the sharing economy may evolve came from Arun Sundararajan, a professor at the New York University's Stern School of Business. He also suggested the most intriguing ways to address work issues under the new model.
Sundararajan described a world in which "full-time jobs evolve into a dizzying array of non-employment work arrangements featuring a continuum of levels of time commitment, granularity, capital ownership, economic dependence, and entrepreneurship." As old-school salaried jobs disappear, he said, society will need to invent new partnerships among individuals, platforms, and government to guarantee basic levels of security.
Government policy, Sundararajan said, should favor business models that treat workers less as footloose labor and more as microbusinesses. "We should really encourage those platforms that are inducing the creation of tiny businesses, where people are making pricing decisions, they are making inventory decisions, they are merchandising, they are building a brand through the online reputation system," Sundararajan said.
Sundararajan also floated the creation of stock ownership programs that give workers a piece of the platforms they serve. Reducing economic inequality, he said, "requires that we guide our new entrepreneurial and freelance workforce toward having genuine capital ownership."