How the Sharing Economy Screws American Workers

By Steven Hill, Huffington Post/WorldPress, January 20, 2016

A new and alarming mash-up of Silicon Valley technology and Wall Street greed is thrusting upon us the latest economic fad: the so-called “sharing economy.” In reality, workers at companies like Uber and Airbnb have little choice but to hire themselves out for ever-smaller jobs and wages, with no safety net, while the companies profit.

Fifty-one years ago, Bob Dylan’s song “Maggie’s Farm,” a brilliant satire that compared the job prospects of that generation’s youth to that of working on a dystopian plantation, was released on Dylan’s album “Bringing It All Back Home.” The owners, Maggie, her ma, pa and brother — a real close-knit unit, like a small “sharing economy” startup — were quite eager to put you to work, but they were a bit stingy on the compensation side for your menial, TaskRabbit-type work. Well, I wake in the morningFold my hands and pray for rainI got a head full of ideasThat are drivin’ me insaneIt’s a shame the way she makes me scrub the floorI ain’t gonna work on Maggie’s farm no more

Dylan wrote that song in the 1960s, at a time when the plight of U.S. workers was actually on an upswing. Wages were rising, living standards were increasing, racial minorities and women were finally starting to find their seat at the table. For the next couple of decades, the U.S. workforce remained one of the most productive and wealthiest in the world. But flash forward to today, and the workforce has been enduring a long strange trip downward for nearly three decades. That’s how long it’s been since, in aggregate, American workers have had a pay increase. Even as corporate profits are at an all-time high, with significant chunks parked overseas to avoid being taxed, not much of the benefits of that labor productivity are being returned to domestic shores. U.S. workers are in the process of being rolled. Let’s call it “Shaggy’s Farm,” led by Maggie’s brother, Shaggy. I ain’t gonna work for Maggie’s brother no moreNo, I ain’t gonna work for Maggie’s brother no moreWell, he hands you a nickelHe hands you a dimeHe asks you with a grinIf you’re havin’ a good timeThen he fines you every time you slam the doorI ain’t gonna work for Maggie’s brother no more

A significant factor in the decline of the quality of jobs today has been many employers’ increasing reliance on “non-regular” employees — a growing army of contractors, freelancers, temps and part-timers. Meet Chris Young, an assembly line worker at Nissan’s manufacturing plant in Smyrna, Tenn. Young works alongside other Nissan employees, but he doesn’t work for Nissan. Rather, he works for a private contractor that provides a majority of Nissan’s workers. Young receives half the salary, less job security and fewer safety-net benefits than the regular Nissan employees. Nationwide, temps like Chris Young, who was profiled by the Washington Post, have provided nearly one-fifth of the job growth since the recession ended. And increasingly, the temps aren’t very temporary. Some have been employed at the same company for as long as 11 years, resulting in the doublespeak term “permatemps.” Microsoft paid $97 million to settle a lawsuit for denying benefits to over 8,000 permatemps.

The advantage for a business of using such non-regular workers is obvious: It can lower labor costs dramatically, often by 30 percent, since it is not responsible for health benefits, social security, unemployment or injured workers’ compensation, paid sick or vacation leave and more. Contract workers, who are barred from forming unions and have no grievance procedure, can be dismissed without notice. A small percentage of contract workers earn high enough wages to make it all work. But most contractors are just grunts down on “Shaggy’s Farm.”

Besides the explosion in the number of temporary jobs, nearly half of the new jobs created in the so-called “recovery” pay only a bit more than minimum wage. Three-fourths of Americans are living paycheck to paycheck, with little to no emergency savings to rely on if they lose their job. Income inequality is now as bad as it was in 1928, just before the Great Depression. Incredibly, the share of wealth held by the bottom 90 percent is no higher today than during our grandparents’ time. It’s as if the New Deal had never existed.

The Latest Twist in the Race to the Bottom

Where are the minstrels and poets to hold up society’s mirror? Why are no major or even emerging recording artists today writing such sharp, penetrating songs as “Maggie’s Farm”? If the corrosive reality of the traditional economy doesn’t inspire a Dylan-esque satire, maybe the latest “Twilight Zone” funhouse on “Shaggy’s Farm” will.

A new and alarming mash-up of Silicon Valley technology and Wall Street greed is thrusting upon us the latest economic fad: the so-called “sharing economy.” Companies like Uber, Airbnb, Instacart, Upwork and TaskRabbit allegedly are “liberating workers” to become “independent” and the “CEOs of their own businesses.” In reality, these workers also are contractors, with little choice but to hire themselves out for ever-smaller jobs (“gigs” and “micro-gigs”) and wages, with no safety net while the companies profit. Uber at first seemed like a great idea to many. Taxi service was crummy nearly everywhere, so the industry was ripe for being disrupted. And with so many people struggling to find any kind of work, a lot of underemployed men jumped behind the wheels of their own vehicles to make a few extra bucks. Not only that, but with the new ride-sharing service, suddenly an American fantasy seemed to be coming true: everyone could have their own private chauffeur at the tap of an app.

But increasingly it’s clear that this huge increase in convenience comes with a price, both environmentally and labor-wise. The reason Uber and Lyft drivers arrive so rapidly is because these companies have flooded the streets with cars. In city after city, from New York to San Francisco to Seattle, already-thick traffic has gotten even more congested.

In New York, transportation analyst Charles Komanoff looked at Uber’s own numbers and concluded that Uber-caused congestion has reduced traffic speeds in downtown Manhattan by around 8 percent. Incredibly, there are now far more ride-sharing cars operating in New York City than there are yellow taxis. Uber cars and those of its ride-sharing competitor Lyft also now vastly outnumber taxis in several American cities. Uber and Lyft have put an estimated 15,000 autos on the streets in San Francisco; Ed Reiskin, director of transportation for the Municipal Transportation Agency in San Francisco, says: “They’re all contributing to the increased traffic.”

Ride-sharing defenders respond that increased congestion is being caused by an improving economy; undoubtedly there’s some truth to that. But I’ve lived in San Francisco for 20 years, and I’ve seen the city streets in both good times and bad. The number of cars — and increasingly desperate drivers — choking in traffic has never been so in your face. Urban cores cannot simply add thousands of additional cars to already crowded streets and not expect rather dramatic knock-on effects.

Urban cores cannot simply add thousands of additional cars to already crowded streets and not expect rather dramatic knock-on effects.

This is not only true today, it was also true in yesteryear: during the Great Depression, so many jobless men jumped into whatever vehicle they could find to provide rides-for-hire that soon local officials and media like the New York Times suggested regulation. Thus was born the much-reviled medallion system, which limited the number of taxis on the streets. It seems we have entered a back-to-the-future scenario.

On the labor side, Uber drivers are not treated as employees but as freelance contractors. Most drivers, after they subtract their considerable driving expenses, don’t earn any more than taxi drivers. Many Uber drivers complain they don’t even earn minimum wage. They receive no benefits and can be cut off the app-based platform at any time. Recently Uber cut off hundreds of drivers (and possibly over a thousand) in Los Angeles and San Francisco because those drivers’ “acceptance rate” was too low. Many veteran drivers have figured out that, given the dramatic increase in congestion, drivers don’t make any money on short rides because they are stuck in traffic. They have begun refusing short rides, so Uber fired many of these drivers without warning. The message was clear: a low acceptance rate can get you fired.

Think about it: if these drivers really are the CEOs of their own driving business, as Uber likes to claim, shouldn’t they be able to refuse a ride they know will cause them to lose money? This incident and others show that Uber exerts control over its drivers, which seems to support the legal claim by thousands of drivers who are suing Uber, insisting they are indeed employees, not contractors. As an employer, Uber would be responsible for paying Social Security and Medicare contributions for these workers, as well as unemployment and injured worker compensation. The drivers are also suing for reimbursement of expenses and for tips.

Welcome to “Shaggy’s Farm.” That’s why, according to Uber’s own numbers , most drivers work only part-time and about half leave within a year. New drivers like the flexibility, but after a while they burn out, with frequent wage cuts and unfair treatment (in early January, Uber slashed wages once again, this time by 30 percent to about 50 cents per mile, less than the $0.54 reimbursement rate set by the government for wear and tear on a vehicle — many drivers aren’t even earning enough to reimburse their vehicle’s depreciation). If driving for Uber was such a great job and paid halfway decently, wouldn’t more drivers last longer and drive more hours? Not surprisingly, many Uber drivers have called for forming a union, and recently pioneering legislation was passed in Seattle to allow NGOs to organize these drivers.

Come Stay on Shaggy’s Farm’ — Courtesy of Airbnb

Airbnb also started out as a good idea: helping “regular people” rent out a spare room in their home to make some extra money. But over the last two years Airbnb has morphed into something quite different: it has been invaded by professional real estate operatives who rent out multiple units, not just a spare bedroom. In many cities, Airbnb “hosts” control dozens of properties; in New York City some hosts have controlled over 200 properties. In San Francisco, Seattle, New York and elsewhere, 40 percent or more of hosts have multiple listings, according to data expert Tom Slee, author of “What’s Yours Is Mine: Against the Sharing Economy.” According to Slee’s analysis, almost half of Airbnb’s revenue in these cities comes from hosts with multiple listings.

A leaked memo from Coldwell Banker Commercial shows the perverse profit incentives on “Shaggy’s Farm.” The memo broadcast to the real estate community that if their rental units are let out via Airbnb instead of to local residents, the projected rate of return is well over twice the profit they can take in from renting to tenants. Often the professionals evict longtime residents and convert entire buildings into Airbnb hotels, eating up the local housing stock. In cities with an already low housing vacancy rate, Airbnb’s thousands of listings in each city are devouring the few vacancies available. It is eating away the thin margin and making an existing housing crisis even more urgent.

“Shaggy’s Farm” is increasingly relying on these types of business operations as a core part of its model to maximize profits. It’s a big contributor to the ongoing race to the bottom. But fortunately there are solutions. One idea that I and others have proposed is creating a “portable safety net.” Each worker should be assigned an “individual security account” into which every business that hires that worker would pay a small “safety net fee,” prorated to the number of hours a worker is employed by that business. Those funds would be used to pay for each worker’s safety net.

We don’t have to wait for a dysfunctional U.S. Congress to pass this “new new deal.” State governments and even city councils in the worst-hit cities could pass this, requiring its businesses to pay into individual security accounts for each worker. This would be a major step (out of the many needed) towards forging a new kind of deal, one in which most workers would be enriched by technology and innovation, instead of being disrupted and impoverished by this “share-the-crumbs” economy down on “Shaggy’s Farm.”

Parts of this piece, which was adapted for The WorldPost, appear in the author’s recent book Raw Deal: How the “Uber Economy” and Runaway Capitalism Are Screwing American Workers.

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