Seattle Times: The ‘shared economy’ is further hurting workers’ rights

By Steven Hill, Seattle Times, December 5, 2015

The U.S. workforce, which has been one of the most productive and wealthiest in the world, is undergoing an alarming transformation. A significant factor in the decline of the quality of jobs has been 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, profiled by The Washington Post, have provided nearly a 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 “perma-temps.” Microsoft paid $97 million to settle a lawsuit for denying benefits to over 8,000 perma-temps.

The advantage for a business of using such non-regular workers is obvious: It can lower labor costs dramatically, often by 30 percent or more, since it is not responsible for health benefits, Social Security, unemployment or injured workers’ compensation, paid sick or vacation leave, and more. Contract workers have no union or grievance procedure, and can be dismissed without notice.

Now a new and alarming mash-up of Silicon Valley technology and Wall Street greed is thrusting upon us the latest economic fraud: the so-called “sharing economy.” Companies like Uber, Airbnb, Instacart, Upwork and TaskRabbit allegedly are “liberating workers” to become “the CEOs of their own businesses.” In reality, these workers also are contractors, hiring themselves out for ever-smaller jobs and wages, with no safety net while the companies profit.

Uber seemed like a great idea, an American fantasy come true: Everyone can have their own private chauffeur. But it comes with a price. The reason its drivers arrive so rapidly is because Uber has flooded the streets with cars. Have you noticed how Seattle’s traffic has gotten so congested?

In New York, transportation analyst Charles Komanoff crunched Uber’s own numbers and estimated that Uber-caused congestion has reduced traffic speeds in downtown Manhattan by about 8 percent. Ed Reiskin, director of transportation for the Municipal Transportation Agency in San Francisco, says Uber and Lyft have put an estimated 15,000 autos on the streets: “They’re all contributing to the increased traffic.”

On the labor side, Uber drivers are contractors. Most drivers, after they subtract their considerable driving expenses, don’t earn any more than taxis 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. That’s why, according to Uber’s own numbers, most drivers leave after a year. New drivers like the flexibility, but after a while they burn out, with frequent wage cuts and unfair treatment.

Not surprisingly, many Uber drivers have called for forming a union. Unfortunately, federal law doesn’t allow workers who are classified as contractors to do that. So legislation has been introduced by Seattle City Councilmember Mike O’Brien to try and rectify this situation. Uber responded last week by dispatching its heaviest hitter to Seattle — David Plouffe, the 2008 campaign manager for President Obama, who now heads Uber’s public relations. In what is becoming a battle for the soul of the Democratic Party in the middle of a presidential campaign, we now have a top Democrat taking an anti-labor stance by opposing the right of these workers to collectively organize and bargain.

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 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 Seattle, 40 percent of hosts have multiple listings — one host has 58 listings, according to data analyst 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 Seattle comes from hosts with multiple listings, who can double their revenue by renting to tourists instead of local residents.

A leaked memo from Coldwell Banker Commercial put the net annual income for renting units of an apartment building to local residents at 5.6 percent. But if those units were rented via Airbnb, the projected rate of return was 13 percent — well over twice the profit.

Often the professionals evict longtime tenants and convert entire buildings into Airbnb hotels, eating up housing stock. In a city like Seattle with such a low housing vacancy rate, Airbnb’s 3,500 listings are devouring the few vacancies available. It is eating away the thin margin and putting the housing and affordability crisis into a much higher state of urgency. Capitol Hill has been particularly hard hit.

Corporate America is increasingly relying on these types of operations as a core part of its business model to maximize profits. One solution that I, along with Seattle’s Nick Hanauer and David Rolf, have proposed is creating a system of “portable benefits.” 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.

The Seattle City Council could pass this idea, forging a “new kind of deal” in which most workers would be enriched by technology and innovation, instead of being disrupted and impoverished by this “share-the-crumbs” economy.


Steven Hill is a senior fellow at the New America Foundation and author of “Raw Deal: How the ‘Uber Economy’ and Runaway Capitalism Are Screwing American Workers.”

Previous Article
Next Article