‘Shar­ing econ­omy’ surge cre­ates la­bor co­nun­drum

The China Post - - BUSINESS - BY ROB LEVER

They drive for Uber, de­liver gro­ceries for In­stacart, run er­rands for TaskRab­bit, and rent spare rooms on Airbnb.

Are these the new, em­pow­ered par­tic­i­pants in the “shar­ing econ­omy,” or work­ers be­ing ex­ploited by well-funded tech­nol­ogy com­pa­nies?

That is an open ques­tion as mil­lions of peo­ple shift from tra­di­tional em­ploy­ment to free­lance “gig” work, giv­ing them more in­de­pen­dence, but with­out the so­cial safety net of em­ploy­ees.

Some 18 mil­lion U.S. work­ers now earn a sig­nif­i­cant por­tion or all of their in­come out­side of tra­di­tional em­ploy­ment, and another 12.5 mil­lion took on part-time in­de­pen­dent work, ac­cord­ing to MBO Part­ners, a firm which providers ser­vices for in­de­pen­dent con­trac­tors.

A sep­a­rate study by fi­nan­cial soft­ware group In­tuit found 25 to 30 per­cent of the U.S. work­force is “con­tin­gent” and that 80 per­cent of large cor­po­ra­tions plan to in­crease their use of a “flex­i­ble work­force” in com­ing years.

Inuit said that by 2020, more than 40 per­cent of the la­bor force will be “con­tin­gent.”

But cracks have be­gun to ap­pear in the model de­vel­oped by Uber and other peer-topeer ser­vices. Law­suits in sev­eral ju­ris­dic­tions ar­gue that on-de­mand work­ers are not in­de­pen­dent con­trac­tors, but em­ploy­ees en­ti­tled to un­em­ploy­ment in­sur­ance, work­ers com­pen­sa­tion and other ben­e­fits.

“These firms have ig­nored the is­sue be­cause they view them­selves as a mar­ket­place, not as an em­ployer, and now it is bit­ing them in the back,” said MBO founder and chief ex­ec­u­tive Gene Zaino.

Politi­cians are tak­ing no­tice. Demo­cratic pres­i­den­tial front-run­ner Hil­lary Clin­ton said re­cently she would “crack down on bosses who ex­ploit em­ploy­ees by mis­clas­si­fy­ing them as con­trac­tors.”

“This on-de­mand, or so-called gig econ­omy is cre­at­ing ex­cit­ing economies and un­leash­ing in­no­va­tion,” she said in June. “But it is also rais­ing hard ques­tions about work­place pro­tec­tions and what a good job will look like in the fu­ture.”

Yet with­out a flex­i­ble work­force of inde- pen­dent con­trac­tors, “the shar­ing econ­omy could be stopped in its tracks,” said Christo­pher Koop­man, a re­search fel­low at Ge­orge Ma­son Univer­sity’s Mer­ca­tus Cen­ter.

“We would not see the dy­namic, in­no­va­tive en­vi­ron­ment we have to­day.”

A ‘ton of flex­i­bil­ity’

Koop­man said those choos­ing to work on these plat­forms “are get­ting a ton of flex­i­bil­ity, so there are trade­offs. They can work when they want and how they want.”

But he ac­knowl­edged that pol­i­cy­mak­ers need to set clear rules to avoid dis­putes and un­cer­tainty.

This un­cer­tainty led to the shut­down in July of Home­joy, an online plat­form for home clean­ing ser­vices which faced lit­i­ga­tion from work­ers claim­ing they should be clas­si­fied as em­ploy­ees.

Some an­a­lysts say cur­rent laws are not adapted to these new mod­els where peo­ple earn money through shop­ping ser­vices like Post­mates, meal prepa­ra­tion like Feastly and pet-sit­ting like DogVa­cay.

Si­mon Roth­man at ven­ture cap­i­tal firm Grey­lock Part­ners says a key to help­ing this thriv­ing sec­tor is “un­bundling” ben­e­fits such as health care, in­sur­ance and re­tire­ment from the work­place.

“Gone are the days of a so­cial con­tract with em­ploy­ers for life­time em­ploy­ment — it’s an old model it doesn’t ex­ist any­more. This is a sec­u­lar shift that will im­pact ev­ery­one,” Roth­man said in a blog post.

Roth­man said this new sec­tor is likely to be worth some US$10 bil­lion in the United States this year, and if al­lowed to grow, “of­fers a vi­able new path to sus­tain­ing the mid­dle class.”

‘Share the scraps’

But Robert Re­ich, a for­mer U.S. la­bor sec­re­tary who is now a Univer­sity of Cal­i­for­nia pro­fes­sor of public pol­icy, ar­gues the trend is tak­ing us back in time be­fore most coun­tries en­acted la­bor stan­dards.

“The new on-de­mand work shifts risks en­tirely onto work­ers, and elim­i­nates min­i­mal stan­dards com­pletely,” Re­ich said on his blog about the “share the scraps econ­omy.”

“In ef­fect, on-de­mand work is a re­ver­sion to the piece work of the 19th cen­tury — when work­ers had no power and no le­gal rights, took all the risks, and worked all hours for al­most noth­ing.”

MBO Part­ners founder Gene Zaino said how­ever that his firm’s re­search shows most peo­ple who be­come in­de­pen­dent are happy they did so.

“It’s con­sis­tently about con­trol and flex­i­bil­ity” of work, Zaino told AFP.

Zaino said that “it’s not so much about the money,” but noted that “the fastest grow­ing seg­ment is peo­ple earn­ing over US$100,000 a year.”

This US$100,000-plus group has grown 45 per­cent over the last five years, to­tal­ing 2.9 mil­lion peo­ple, ac­cord­ing to MBO.

‘De­cou­pling’ Ben­e­fits

Arun Sun­darara­jan, who heads New York Univer­sity’s So­cial Cities Ini­tia­tive, said pol­i­cy­mak­ers should seek to “de­cou­ple” tra­di­tional ben­e­fits from the work­place to help gig work­ers.

“What they are look­ing for is not to be a full-time em­ployee,” Sun­darara­jan told AFP.

“They want the nice things of be­ing a full-time em­ployee — in­come sta­bil­ity, in­sur­ance ben­e­fits, which have been tied to em­ploy­ment.”

One so­lu­tion is a model en­acted in the United States for re­tire­ment, which al­lowed most em­ploy­ers to elim­i­nate de­fined-ben­e­fit pen­sion plans in fa­vor of por­ta­ble sav­ings, known as 401k plans, with tax in­cen­tives and con­tri­bu­tions from em­ploy­ers and work­ers.

“This good be a good tem­plate,” the NYU pro­fes­sor said. “We have to think about sim­i­lar struc­tures for the other as­pects of the so­cial safety net.”

Sun­darara­jan said find­ing so­lu­tions is key to un­lock­ing the po­ten­tial for a vi­brant new eco­nomic sec­tor.

“There are dif­fer­ent kinds of work that are pro­duc­tive, but we are still think­ing in a 20th cen­tury mind­set,” he said.

Zaino said it will take time for new poli­cies “be­cause there are so many com­pet­ing in­ter­ests” and that the pri­vate sec­tor will have to sort out the is­sues, prob­a­bly by adding money to gig work­ers to al­low them to get ben­e­fits.

“A whole new in­dus­try is be­ing born where we are help­ing peo­ple get those types of ben­e­fits and ser­vices in­di­vid­u­ally and have them por­ta­ble,” he said.


This March 25 file photo shows an Uber ap­pli­ca­tion viewed as cars drive by in Washington, D.C.

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