Set­ting your hours

Gig econ­omy of­fers op­por­tu­ni­ties, but crit­ics say pay and ben­e­fits lag

The Denver Post - - BUSINESS - By Ethan Mill­man

Most morn­ings, Jonathon Row wakes up at 4 a.m., gets in his car, opens the Uber app on his phone and pre­pares to pick up early-morn­ing fares at Den­ver In­ter­na­tional Air­port. He works long hours on some days and puts in 40-plus hours a week.

Row has been a full-time Uber driver for nearly a year. He es­ti­mates that he can make at least $36,000 an­nu­ally driv­ing for the ride-hail­ing ser­vice — likely on the high side for ride-hail­ing driv­ers and enough to pay his rent and bills.

Uber al­lows Row, who is 49 and mar­ried, to have steady work that’s flex­i­ble enough that he can fo­cus on his startup selling Ital­ian truf­fles to lo­cal restau­rants. That doesn’t mean be­ing an Uber driver is easy.

“It does take a bit to get used to the hours,” Row said. “And some days you just don’t come away mak­ing that much. But you have to re­lax and be pa­tient. It’s like hunt­ing or fish­ing. It’s a bit of luck to get a catch, but you start to know where to go as you do it more.”

Row is part of the “gig-econ­omy” of in­de­pen­dent work­ers in Colorado — a grow­ing num­ber of whom use phone apps such as Uber, Lyft and Airbnb to con­nect di­rectly with cus­tomers and al­low more flex­i­bil­ity than tra­di­tional work.

The gig econ­omy has cre­ated new op­por­tu­ni­ties for work just as it has opened new op­tions for con­sumers for ev­ery­thing from ride-hail­ing

and travel ac­com­mo­da­tions to gro­cery shop­ping and meal de­liv­ery. But its ef­fect on the over­all econ­omy re­mains a mat­ter of de­bate due to in­con­clu­sive or con­tra­dic­tory data. For ex­am­ple, does gig-econ­omy work re­duce em­ploy­ment in tra­di­tional jobs such as taxi driv­ers? And is it tak­ing peo­ple out of the full-time work­force?

And a cho­rus of ques­tions is aris­ing as to whether gig econ­omy com­pa­nies are tak­ing ad­van­tage of work­ers with low pay and few ben­e­fits — and whether their busi­ness model is sus­tain­able. With unem­ploy­ment at record lev­els, Uber and oth­ers are hav­ing dif­fi­culty hold­ing onto work­ers and are start­ing to of­fer richer perks, ben­e­fits and sign­ing bonuses, The Wall Street Jour­nal re­ported last week. In July, Uber up­dated its app to en­able tip­ping by cus­tomers, among other changes.

Es­ti­mates of the size of the gig work­force who work through these on­line plat­forms vary, but a Mck­in­sey Global In­sti­tute study from last year put it as high as 10 mil­lion in the United States or roughly 4 per­cent of the work­ing-age pop­u­la­tion. That in­cludes full-timers and those sup­ple­ment­ing their in­come or par­tic­i­pat­ing oc­ca­sion­ally, as well as those who choose such work — the ma­jor­ity — and those who do it out of ne­ces­sity.

A Jp­mor­gan Chase & Co. In­sti­tute study of Chase cus­tomers es­ti­mated 1 per­cent of adults earned in­come from the “on­line plat­form econ­omy” in a given month, with more than 4 per­cent hav­ing par­tic­i­pated over a three-year pe­riod.

New op­por­tu­ni­ties

While Row’s story isn’t the typ­i­cal nar­ra­tive of an Uber driver us­ing the ser­vice as a part-time gig to make some ex­tra cash, he’s not alone in us­ing the gig econ­omy for con­sid­er­able in­come.

There are 13,000 Uber driv­ers in Colorado, com­pany spokes­woman Stephanie Sed­lak said. And ac­cord­ing to data from Airdna, a Den­ver-based Airbnb data anal­y­sis, there are over 2,600 renters in Den­ver and an­other 1,000 in Boul­der.

Com­pa­nies such as these — along with food-de­liv­ery ser­vices such as Post­mates or pet-sit­ting apps such as Rover — have brought many ways to make money into the state. And it’s still grow­ing.

Ian Hath­away, a non­res­i­dent se­nior fel­low at the Brook­ings In­sti­tute who is based in Boul­der, has co-au- thored mul­ti­ple re­ports on the gig econ­omy. One of Hath­away’s most re­cent re­search briefs sug­gest that not only have ride-hail­ing ser­vices such as Uber and Lyft grown in re­cent years, they haven’t even reached a plateau yet.

Nonem­ploy­ment firm rides in­creased by 84 per­cent in 2015, ac­cord­ing to the Brook­ings re­port. And in the com­ing years, Hath­away and co-au­thor Mark Muro said ride-hail­ing ser­vices can con­tinue to grow.

The re­searchers ad­mit­ted it’s dif­fi­cult to es­tab­lish whether the gig econ­omy is can­ni­bal­iz­ing or cre­at­ing jobs, although they sus­pect it leans slightly to­ward the for­mer. In most of the 50 largest U.S. cities they stud­ied, pay­roll em­ploy­ment in­creased some­what among taxi operators and re­lated com­pa­nies from 2010 to 2014, de­spite the in­flux of nonem­ployer con­trac­tors work­ing for Uber and Airbnb. In Den­ver, con­tract driv­ers in­creased 87 per­cent, but pay­roll em­ploy­ment in the ground trans­porta­tion sec­tor rose 21 per­cent.

De­spite the long hours and com­par­a­tively low pay, Row said he has en­joyed be­ing an Uber driver. He earns more per hour than the av­er­age Den­ver Uber driver, which is $13.17, ac­cord­ing to a 2016 re­port from Buz­zfeed News.

Since start­ing, Row said he has a bet­ter han­dle on when and where to go for higher and more fre­quent fares, a cru­cial skill to earn­ing more money.

“You have to have a plan ev­ery sin­gle day to to wake up and work all hours of the day,” Row said. “But if you’re will­ing to get up ev­ery day and do it, you’ll make it work.”

The south­east Den­ver res­i­dent works up to 40 hours a week, and like most self-em­ployed work­ers, he doesn’t re­ceive ben­e­fits from his work.

While Row has made the gig econ­omy work to make ends meet, he said un­ex­pected fi­nan­cial ex­penses can greatly af­fect in­come. And when driv­ing tens of thou­sands of miles, Row is start­ing to ex­pect costly fixes to main­tain his car.

Busi­ness model

While the gig econ­omy has un­doubt­edly brought new mon­ey­mak­ing op­tions into Colorado and across the U.S., some econ­o­mists and an­a­lysts say the model is un­fair to work­ers and un­sus­tain­able.

Although busi­ness looks good now, Hath­away said he doesn’t think Uber can main­tain its model.

“Right now, they’re pric­ing ar­ti­fi­cially low,” he said. “They do that to cap­ture a mar­ket. Uber’s los­ing a fair amount of money per ride. They’re go­ing to raise prices sig­nif­i­cantly at some point. The party will be over. Some think Uber will never be prof­itable. We don’t know.”

An­ders Frem­stad, an eco­nom­ics pro­fes­sor at Colorado State Uni­ver­sity, said apps such as Uber and Lyft need to in­crease pay.

“I like the idea of a shar­ing econ­omy,” Frem­stad said. “The idea to con­nect work­ers to get jobs done, but I’m more skep­ti­cal of a gig econ­omy.”

With most of the money from fares go­ing to ex­ec­u­tives rather than driv­ers, Frem­stad said changes need to be made to al­low driv­ers a more liv­able wage.

“The fact that they’re will­ing to sell their la­bor at that price and keep do­ing it shows it could be bet­ter than other op­tions,” he said. “But Uber is al­most a mo­nop­oly. These plat­forms can take a chunk out of what we pay. We need to think strongly about this model. Not a lot of this money is go­ing to the driv­ers. Just be­cause a driver chooses this work doesn’t mean it’s fair. The flex­i­bil­ity of the hours is ap­peal­ing, but I think a lot of peo­ple just don’t have bet­ter op­tions.”

Like Hath­away, Frem­stad said he doesn’t think Uber’s cur­rent busi­ness model is pos­si­ble long-term.

“It’s hard to imag­ine go­ing back to a world where we can’t con­nect to tasks with our phones. But for this to be sus­tain­able, we need wages to go up. If we do noth­ing, even­tu­ally they’ll run out of peo­ple to hire.”

Po­ten­tial over­state­ment

Alexan­dra Hall, chief econ­o­mist for the Colorado De­part­ment of La­bor and Em­ploy­ment, said the gig econ­omy has af­fected the econ­omy, just not in the way that most peo­ple might think.

“I don’t think it’s very new,” she said. “We’ve got a new name for it and it’s much more ac­ces­si­ble now. Apps like Uber, Lyft and Airbnb are re­mov­ing the bar­ri­ers to en­try. It wasn’t this ac­ces­si­ble be­fore.”

While ac­cess has made the gig econ­omy a more com­mon means of work, Hall said on an em­pir­i­cal level, the apps don’t seem to be chang­ing em­ploy­ment.

With 93 per­cent of jobs still pay­roll em­ploy­ment — a num­ber Hall said hasn’t changed much since 1976 — new gig-econ­omy jobs don’t seem to be draw­ing work­ers from tra­di­tional jobs.

And the amount of mul­ti­ple job­hold­ers hasn’t spiked ei­ther. It’s this met­ric, Hal said, that she would ex­pec the gig econ­omy to mos greatly im­pact. But the num­ber of mul­ti­ple job hold­ers didn’t change much over the past 15 years. In 2015, about 6 per­cent of em ployed work­ers had multi ple jobs, sim­i­lar to num­ber from the early 2000s.

Hall did say, how­ever that it’s pos­si­ble that these new job op­tions could be re­plac­ing the way peo­ple ap­proach an ex­tra job. Be cause re­plac­ing jobs isn’ nec­es­sar­ily adding new ones, a change such as thi may not be re­flected in the data.

Gig econ­omy apps may not be al­ter­ing em­ploy­men num­bers, but Hall said it’ still cru­cial to rec­og­nize how these ser­vices have made get­ting in­come easie and much more read­ily avail­able.

“Ten years ago, if some one needed ex­tra work their op­tion was to go to re tail stores or util­ity ser­vic es,” she said. “But to­day there are ways you can ge work laid out around you needs. You can just down load an app on your phone and drive peo­ple or rent ou an empty space in you home. This lower bar­rier to en­ter makes it eas­ier to find in­come.”

Pho­tos by John Leyba, The Den­ver Post

Uber driver Jonathon Row picks up a fare, Kayla San­ders, Thurs­day at Den­ver’s Union Sta­tion.

Ride-hail­ing apps con­nect driv­ers who want more flex­i­bil­ity and in­come with pas­sen­gers who want a con­ve­nient lift.

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