As the valuations and profits of on-demand tech companies soar, few benefits are trickling down to their contract workers, creating a workforce that lacks the security of employee benefits and struggles with financial uncertainty.
SAN JOSE, Calif. — Companies such as Uber and TaskRabbit have promised a new on-demand labor economy where workers are free from the restrictions of a 9-to-5 schedule and will still earn enough money to pay rent.
A report released Wednesday, however, tells a more discouraging story about this growing class of contract workers — the thousands of people who work for on-demand tech companies as freelance labor and not regular employees.
As the valuations and profits of these companies soar, few benefits are trickling down to the laborers, creating a workforce that lacks the security of employee benefits and struggles with financial uncertainty.
“These companies talk a kind of political correctness about the new economy and about making things fairer and offering people new opportunities, but they aren’t living up to it,” said Andrew Keen, a commentator on the tech industry and author of “The Internet Is Not the Answer.”
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The report, called the “The 2015 1099 Economy Workforce Report,” referring to the name of the tax form for independent contractors, offers one of the first sweeping views of the conditions of contract labor across a broad variety of on-demand companies. Among the findings in an extensive worker survey:
• The average pay is a relatively low $18 per hour.
• More than one-fifth of on-demand workers work more than 40 hours a week.
• About a quarter of workers age 25 and older don’t have health insurance.
• More than a quarter say their income from these jobs represents nearly all or the entirety of their household income.
Perhaps one of the most surprising findings of the survey is that 8 percent of respondents who work for a ride-hailing company and 16 percent of respondents who work for a delivery company do not have car insurance.
Both Lyft, a ride-services company, and Postmates, a delivery startup, said drivers were required to show proof of insurance and would be kicked off the platform if their insurance expires. When asked whether any drivers had been discovered driving uninsured, Lyft declined to comment.
The report is authored by a group, made up of Stanford University graduate and undergraduate students and an alumnus of seed fund Y Combinator, called Requests for Startups, which sends out weekly newsletters to help entrepreneurs create companies that venture capitalists are eager to fund.
The report is based on responses from 1,330 survey respondents from 78 companies, including Airbnb, DoorDash, Postmates, Homejoy, Thumbtack, Uber, Lyft, TaskRabbit and Instacart.
While on-demand companies offer large-scale employment opportunities that defy the traditional 40-hour workweek, bringing more flexibility and autonomy to the job market, they often put otherwise educated professionals in jobs that require few skills and offer little upward mobility.
“There is income instability and it’s a very real issue,” said Fiona Ramsey, director of communications for Peers, which supports on-demand workers. “When they are economically dependent on one of these jobs, that creates a vulnerability that you don’t have when you are a legal employee.”
The on-demand economy — born in the Bay Area — is the fastest-growing sector of this freelance labor force, due partly to the venture-capital money that has flooded Silicon Valley startups. The prosperity of these contract workers will at least partly determine whether the middle class will flourish or continue to erode.
“The problem is more and more people are deriving their living through this,” Keen, the report’s author, said. “You have this underclass of 1099 laborers who are doing all these different jobs who are potentially unskilled. They have no security and no safety net.”