Setting your hours
Gig economy offers opportunities, but critics say pay and benefits lag
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.
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.
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.”
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.”
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.