THE NEW ROBBER BARONS?
The so-called gig economy – pioneered by the likes of Uber and Airbnb – is the fastest growing business sector in modern history. But critics claim it is often exploitative, immoral and even dangerous. John Arlidge reports
Joseph Macdonald is an optimistic guy. His business card says: “Something beautiful is happening everywhere.” But even he has his limits. He reached his when he was lying on his back in an ambulance “with a pretty bad concussion”. A black 4x4 hit him and knocked him off his bicycle while he was working as a courier for Postmates, the on-demand delivery service. The 4x4 was being driven by another gig-economy worker – a ride-share driver. As he winced his way to hospital, Macdonald followed Postmates’ instructions on what to do after an accident. “I emailed head office, as you’re supposed to,” he tells me when we meet for coffee in his local café. “I was told that since I’d turned down a job – because of the accident – I would not be paid the $15 an hour you usually get if you accept one job an hour. I thought: ‘I couldn’t do the job because I was run over while working for you!’” He hardly needs to add: “That was it for me. I quit.”
Macdonald is part of the biggest trend in business: the gig or sharing economy – and the backlash against it. Even if you have not heard of the gig economy, you probably already use it. The apps that you tap to summon whatever you want, from a cab to a coffee, when you want it, are gig services. Uber, the click’n’go taxi operator, is the best known. Others include Deliveroo, Handy, Taskrabbit, Instacart and Airbnb, the home-share outfit that enables anyone with a spare room to become a hotelier, and anyone with the smartphone app to book in. Deliveroo is the most high-profile in Britain, thanks to its army of couriers, who weave between lines of traffic everywhere, sporting the firm’s kangaroo logo on their giant backpacks. The company provides home delivery from restaurants, such as Wagamama and Gourmet Burger Kitchen, that don’t normally do takeaway. “People shout ‘Deliveroo!’ as our drivers pass,” the firm’s founder, Will Shu, is fond of saying. He’ll need all that goodwill as Uber expands into food delivery with its Ubereats service, launched here in June.
This is the fastest-growing business sector the modern world has seen. Walk along Market Street, the main drag in San Francisco, and your stroll is bookended by Uber and Airbnb, two firms that did not exist a decade ago but are now worth, collectively, almost $100bn and attract more than 100 million customers a year. Deliveroo, which started in London as a two-person enterprise in 2013, now operates in 12 countries and has 5,000 couriers. Gig firms are growing so fast because the services they offer are often cheaper and easier to use than their traditional rivals. Take Uber. It’s so easy to click an icon on your phone and see your cab travelling towards you, rather than stand on the street in the rain waiting to hail one, that there are now 30,000 Uber drivers in London alone – 5,000 more than black cabbies.
Around the world there are at least 10,000 companies in the sharing economy, offering everything from no-strings sex to someone who will assemble your Ikea furniture. However, a lot of people are very uncomfortable about global tech giants signing up millions of casual workers and creaming off as much as 25% of their pay, while offering none of the benefits of a full-time job: paid holidays, minimum wage, overtime, redundancy pay, not to mention the right to join a union and bargain for pay. This issue is particularly important in Britain, because so many people have gone freelance since the global financial crisis. The number of self-employed workers is more than 700,000 higher than it was in 2008. No other member of the G7 group of the world’s richest nations has so many freelancers as a proportion of the total workforce.
Talk to the bosses of the Big Gig Inc and it’s hard to see what the fuss is all about. “The sharing economy is profound and popular. People as businesses – you can’t kill this idea,” Brian Chesky, one of the founders of Airbnb, tells me, as he relaxes in the living room of the three-bedroom apartment where Airbnb started. Not the real one. He has had a replica built in his firm’s vast office, near San Francisco’s waterfront. You can do that kind of thing when you’re a 34-year-old billionaire. A few blocks down Market Street, Travis Kalanick, Uber’s pugnacious co-founder, claims that the new techno-platforms liberate the little guy from full-time wage slavery. “They can push a button and get to work. They can also push a button and stop working”, is the way he puts it. Kalanick and Chesky have a point. Their new firms “are fundamentally empowering, because they move the role of the individual from ‘provider of labour’, as it has been for centuries, to individual ‘owner’ of the means of production”, explains Arun Sundararajan, a British-born professor at New York University’s Stern School of Business and the author of The Sharing Economy. “People use their own assets, a spare room or car, and their time to become micro-businesses.”
What could possibly be wrong with this freewheeling new take on the American dream? Plenty, critics say. Far from liberating us from “working for the man”, the Big Gig bosses are the robber barons of the modern age, they argue. They use their shiny new techno tools to obscure the fact that they are pulling off the oldest capitalist trick in the book: exploiting workers. They point to Uber’s terms and conditions. Its “partners” must provide their own car, of a high standard, and, usually, their own smartphone. The firm gives its drivers guidelines on how to work, urges them to promote the Uber brand, sets standards, determines fares, and “deactivates” drivers if the rating each passenger gives them after a ride dips below a certain level. Even if they work 24 hours a
“Chesky has had a replica of his old apartment built inside his office. You can do that kind of thing when you’re a 34-year-old billionaire”
day, drivers are not employees and, therefore, not entitled to any employee benefits. Uber takes 20-25% of their takings. What do drivers get in return? Uber stickers for their car, the right to use the Uber app – and contacts to help finance a car purchase. That, says Duncan Mccann, of the London-based think tank New Economics Foundation, is “the opposite of ‘partnership’. The firms share nothing and partner with no one other than their investors. They exploit the labour and assets of often low-income workers to amass great wealth.” The risk is that the gig economy will “spark a race to the bottom that leaves people working more hours for less money and with minimal job security and benefits”.
Macdonald says that is exactly what happened to him. He decided to join Postmates in Boston when he saw advertisements “saying you could be your own boss and make $800 for a 40-hour week”, he recalls. Things went well at first. He pedalled around Boston delivering everything from burritos to Armani suits. But he says he soon began to notice that he could not sit down to rest for more than 15 minutes without the app assuming he had stopped working and logging him off. As the economy worsened, he says the firm changed his terms and conditions, abandoning income guarantees. His take-home pay plummeted from $300-$400 to $170 for 40 hours. Macdonald claims that tips fell, too, because the company removed a tip function from the couriers’ smartphones. “I went from being comfortable to making less than minimum wage,” he says. And then he was knocked off his bike.
Macdonald is one of thousands of workers who are suing the gig firms. There are class-action lawsuits against Postmates, Uber and its rival Lyft. The workers argue that their activities are so tightly controlled, they should be reclassified as employees. If the workers win, it could cost the Big Gig outfits billions. That’s what their nemesis is determined to make happen. To find her, I take Boston Cab No. 11580, driven by an Uber hater called Guy, to the Uno pizzeria in downtown Boston, and walk up the stairwell on the left. In her blue sweater and deconstructed grey jacket, Shannon Liss-riordan looks more Boston Legal than doughty workers’ champion. But a glance at her office walls, decorated with press clippings celebrating her victories for workers at some of America’s corporate titans – Starbucks, Fedex, American Airlines – confirms she is Big Gig’s worst nightmare. “I’ve got more than a dozen cases against these so-called sharing-economy firms, with implications for hundreds of thousands of workers,” she smiles.
She sets out her case against the gig firms simply. “They argue that they are something new, so the laws that have been written over decades to protect workers don’t apply to them. They also say that because workers can set their own schedule, they are independent contractors. Both claims are wrong. The laws do apply to companies, new or old. They can’t opt out because they don’t like them.” It is true, she concedes, that gig workers can choose their schedule, “but many employees of large companies do that, too, without being demoted to contractor status”. She adds: “When they are working, gig workers have to follow strict rules – and if they don’t, they get ‘terminated’, which elevates them to the status of employees. What these firms do is illegal and, I would argue, immoral.”
How does Big Gig respond to its critics? In Airbnb’s new London office, I meet Nathan Blecharczyk, Chesky’s former flatmate and the firm’s co-founder. “In a time of slow wage growth,” he tells me, gig outfits “benefit society by providing fresh options for people to make money. It’s incredibly exciting.” I see just how exciting it can be a few weeks later when I visit Cuba, Airbnb’s fastest-growing market. There, almost everyone is taking advantage of their greatest asset, their house, to become a mini-entrepreneur, creating muchneeded wealth in an economy left bankrupt after 57 years under the dual cosh of communism and the US trade embargo. The average Airbnb host makes £170 per booking. That might not sound like much, but Farah Calatras, who rents out her three-bedroom 1930s home in the fashionable Vedado district of Havana, tells me it is ten times the average wage. “Finally, I can live with money,” she grins.
Yet back in Britain, I find it hard to escape the feeling that gigging is tilted against already hard-pressed workers – that it is the “sharing the scraps” economy, rather than the sharing economy, as Robert Reich, former US labour secretary, puts it. Many of the Uber drivers I met researching this article told me they did not want to drive, but felt they had to because they could not support themselves doing their day job(s). A recent detailed study by Buzzfeed, using Uber data relating to a million rides in the US, found Uber drivers earned around the minimum wage in Detroit, and not much more than it in Houston. It cannot be right that Uber can become the fastest-growing start-up in history and the most valuable private firm ever, making its founders multibillionaires, without creating a single staff job for those who provide its core customer service.
It’s also worrying that the new entrants do not have to follow the strictest health and safety laws. Uber could easily stop its drivers working long hours by logging them off its system after, say, eight hours, but it chooses not to. The firm points out that there is no law that limits the hours that private hire or taxi drivers can work. Public safety is also threatened by the competition between rival start-ups. In London, Deliveroo’s riders have been caught jumping red lights and crashing into pedestrians. Richard Vaux, a video editor from Wembley, told The Sunday Times recently that he was hospitalised with two broken wrists after a Deliveroo cyclist smashed into him. Vaux said the company refused to accept liability because its riders are self-employed, and would not pass on the rider’s details so he could make an insurance claim.
Could things improve? There are signs they might be beginning to. Some gig firms, notably Instacart, Juno and Shyp, now offer their workers the chance to become employees. US politicians and some gig firms are toying with creating a new legal category of worker, somewhere between a traditional employee and a freelance contractor. And here, Labour’s Tom Watson is calling for the establishment of a new union for digital-economy workers.
It’s a good start, but it’s not enough for Macdonald. Now that he has recovered from his concussion, he has moved on from cycling for his supper to making it. “I work as a shift supervisor in a small café in Cambridge, near MIT, called Café Luna,” he tells me. Before heading back out into the sunshine, he shows me the café’s website. The steak and lobster Benedict looks good. If you’re in Boston this summer, I’d book a table and tip him handsomely. He’s earned his new gig.
“Uber has become the most valuable private firm ever, without creating a single staff job for those who provide its core service”