After my experience with a gig economy company yesterday afternoon, I decided that I need to write a common sense blog article debunking the marketing language that gig economy companies use. Let us begin by defining what the gig economy is: It is an economy of individual jobs known as piecemeal work. Somebody working in the gig economy only gets paid for work performed or work produced and this is piecemeal work. When working in the gig economy, you are a contractor which means that you pay for most or all expenses that you incur in the performance of the job to include taxes on your earnings. There is no pay for downtime between jobs, there is no sick time, and there certainly is no vacation time. Furthermore there is no compensation should you become injured in the performance of the job.
Now that we understand what the gig economy is, let’s disassemble some of the marketing language that is used by these companies. The gig economy companies call themselves disruptors but they really aren’t disruptin or innovating anything. In reality, this is a return to 18th, 19th, and early 20th century economics where it was common for people to be only paid for the work that they produced without any guarantees of safety or protection in times of sickness or disability. There is nothing technologically innovative about the gig economy as smartphone apps existed before the existence of the company and humans are still performing the work. If anything, the gig economy companies are simply unimaginatively circumventing labor, employment, and taxation laws.
- Set your own schedule: It is mostly true that you can set your own schedule and choose what days you want to work. However because you are 1099 contractor, you only get paid for the work you produce. No work means no pay, even while waiting in between jobs. The reality is that you will be working even more hours.
- You choose to accept or decline a job: Gig economy companies need a task to be performed in order to make money. Declining to perform a task is expensive to the company because if enough people say no, then the company must offer greater incentives. If the contractor declines too many tasks, they become a liability to the company and the company may elect to terminate the person’s contract.
- Freedom to work as hard as you want: Many of the gig companies have metrics and consistent failure to meet these metrics is grounds for terminating the contract. So if a contractor’s ratio of accepted jobs to declined jobs favors declined ones, your contract is terminated. Companies like DoorDash, UberEats, and GrubHub all have metrics that measure the on-time performance of individual contractors often not taking into account traffic, weather, and other factors outside of a person’s control.
One technique that Uber and the others use to help control costs is to dilute the labor pool so they purposefully recruit more contractors than they need which encourages competition between the contractors. More contractors competing for fewer jobs means that it won’t be as hard to get a task completed for substantially less money. There is also less risk of the task remaining uncompleted which is costly to a gig company’s reputation and bottom line. It’s always advantageous for the gig economy to have say, 50 contractors competing for 25 jobs.
The diluted labor pool is actually balkanizing labor and actively preventing organization efforts because the gig economy laborer has no idea how many other contractors there are in a given market. Indeed the gig economy takes great pains to hide this fact. The companies almost operate similar to franchisees where the contractor is in essence running a franchise of the company, hence the uniforms and logo gear. There is one very important distinction in that a true franchise relationship the prospective franchisee knows how many other locations exist in the area and can readily evaluate the competition. The gig economy worker has no way of knowing what his or her competition looks like so they cannot make an informed decision. The less the gig economy laborer knows of the organizational structure of the parent company, the better it is for the parent company.
As well as diluting the labor pool, a surplus labor pool is created by offering more contractor opportunities than there is available business. The gig economy companies know that a certain number of contractors are going to decide to quit or will not meet metrics. By being able to draw on this pool of surplus labor, the gig economy company is spreading its risk of reputation out. It is always worrisome to the bottom line when a task gets left not performed.
Gig economy companies also want a revolving door of contractors because new contractors are usually a little more starry-eyed about the prospects for income and personal advancement. New contractors are not wise to the ways of operating a micro-business and are more apt to take on tasks without careful analysis of potential profit and loss. They may believe the hype that the harder they work the more money that they earn. For example, take the new Uber driver that decides to accept every job that comes their way. Maybe they see a 600.00 earnings in a week and then the transmission in their car breaks and the repair costs 1000.00. In essence, they just paid Uber for the privilege of transporting Uber’s customer. This contractor is apt to see the insanity of continuing on. One contractor down and then another needs to take their place.
The only way for the gig economy workers to get the upperhand is to know how many other workers are serving the same market and to get them together in a forum and get them to all simultaneously reject the tasks given to them. The danger of this happening to a gig economy company is remote and the company knows this. Nevertheless, it is still a tangible risk so the gig economy company makes contract termination very easy as there is language that makes termination without notice allowed. So if an individual contractor or group of contractors could threaten the business model, the gig company need only disable access to the app.
In short, the only beneficiaries of the gig economy are the gig companies. Do yourself a favor and do not fall for the hype. You are better off working in a semi-protected, semi-regulated job than the wild wild west of employment. But also please do not patronize these companies. By patronizing GrubHub, UberEats, DoorDash, and the others you help perpetuate a very destructive model of employment that has far reaching consequences.