It’s a funny new world.
Dara Khosrowshahi, chief executive of Uber, made $12.2 million in compensation this past year. It was a 71% drop from 2019. Khosrowshahi waived his base salary after the company was forced to lay off 25% of its employees, or 6,000 people, amid the pandemic’s toll on demand. Even so, the CEO-to-employee ratio was 123 to 1.
So far, another CEO comp story, whether you’re outraged or fatigued by how much these moguls make.
But Uber also has about 1 million drivers in the United States, 3 to 4 million worldwide. They are the backbone of the company’s revenues. But they are not considered employees. They are so-called gig workers, independent contractors, and make about $9 an hour after expenses. They aren’t counted in that 123-to-1 ratio either.
No wonder in 2020 Seattle passed a $16.39 minimum wage for drivers at ride-hailing services such as Lyft and Uber. New York City has done so, too. (An ordinance passed here in 2015 allowing drivers to unionize faced years of legal challenges, forcing the City Council to water it down).
The gig economy giants came right back, scoring a big win in California with a proposition that repealed a law classifying gig workers as employees. They spent $200 million to persuade voters. Now the companies hope to take that success to other states.
It’s a different story in the United Kingdom, where Uber just agreed to classify its 70,000 drivers as workers who will receive a minimum wage, vacation pay and access to a pension plan. This came after a court ruling that Uber drivers were entitled to more protections. The EU is also looking into similar measures.
The U.K. victory for workers will face a difficult time jumping the pond.
“Uber and Lyft have demonstrated that they will go to the mat and pay millions of dollars to ensure their workers are classified as independent contractors,” Caroline Bruckner, a tax policy professor at American University who has studied the gig economy, told Bloomberg.
It’s estimated that the business costs of gig companies would rise 40% if they were required to treat contractors as employees.
This funny new world is coming to resemble the old world of piecework, where workers had few if any benefits or protections.
While companies such as Uber claim their drivers voluntarily take these gigs for the flexibility and independence, we’re seeing the rise of a significant number of Americans with low wages, no access to company health insurance or 401(k)s, and a dismal future in retirement — if they ever get to retire.
With inequality rising in the Digital Age, one big divide is between those who have real jobs, with all the benefits that come with them, and those who have gigs. While some are highly skilled tech consultants or people who choose to make some money on the side driving for a ride-hailing company, too many would prefer real employment but are stuck in gigs.
A 2020 article in the Milken Institute Review — hardly a bastion of the left — found that the gig economy was exacerbating inequality and falling hardest on racial groups with a history of discrimination.
These highly valuable companies also get to offload normal employment costs onto the taxpayers. For example, tens of thousands of Uber and Lyft drivers received $80 million in federal assistance during the pandemic even as the companies avoided paying unemployment insurance.
Uber’s claim of its drivers as independent entrepreneurs doesn’t pass the smell test, either. A 2019 report from the labor-backed Economic Policy Institute pointed out the many ways the company keeps tight control.
For example, drivers can’t control prices or expand their customer base — they can only drive more hours. Also, the report notes, “Uber drivers are ‘supervised’ by semi-automated and algorithmic systems that track their acceptance rates, time on trips, speed, customer ratings, and other factors, and drivers can be ‘deactivated’ based on these factors.”
The problem goes far beyond ride-hailing companies.
The Federal Reserve’s 2019 Survey of Household Economics and Decisionmaking (SHED) revealed that three in 10 U.S. adults performed some gig work at least once in the month before the survey. This ranged from providing personal services to renting out property and selling goods online.
Nor was it confined to app-based companies. Child and elder care, cleaning, and property maintenance were the most common gigs. A Boston Fed study estimated that only one in 10 gig workers performed what it called “internet platform-based work.”
The gig workforce is growing. Corporations and shareholders are profiting mightily off gig workers, many of whom have no other options. And the companies have shown mighty political power. If gig-based companies can roll back a legislative protection of workers in deep-blue California, where can they be stopped?
With the Gilded Age that peaked in the 1890s, it took decades to see the rise of the Progressive Movement, finally the New Deal and the triumph of unions to ensure a wide middle class and secure jobs.
Then, Progressives were both Republicans (Theodore Roosevelt) and Democrats (Woodrow Wilson, FDR).
Now, in such a closely divided and polarized country, similar progress depends on Democrats alone hanging onto the Congress by their fingernails.
Then, gigs were something musicians played.
Now a gig is a way of life, a song of desperation for too many.