Independent contractors are a staple of the “gig economy”
Hiring workers as independent contractors (ICs), rather than employees, is a staple of many “gig economy” company business models. Uber and Lyft are two notable leaders in the new gig economy; nearly all of their drivers are ICs. These drivers work when they want – jumping in and out of service as their schedules allow, or when the feeling strikes that making a few dollars is more desirable than sitting down and marathoning their favorite TV show or writing the next great novel. The use of ICs isn’t contained to ride services, however. Maids on demand, grocery delivery, and online courier services are all types of companies that utilize armies of ICs.
ICs enjoy scheduling flexibility, greater control over tax planning, and a degree of independence and freedom not generally shared by the average employee. In return, they give up security, health benefits, and other things that are the hallmark of most full-time employment positions. There are pros and cons even for companies. ICs can be less devoted to the company than employees and, by law, companies can’t exert much control over ICs. This is why many companies do not like managing ICs.
Do a little online reading, and you are bound to come across articles vilifying the gig economy companies who use ICs. Read too many of these articles, and you may buy the myth that no IC wants to be an IC—that they are all pushed into this precarious status because companies won’t make them employees. Many online commentators are calling for the government to step up and curb the abuses of these companies.
The feds are asking questions, but ignoring the obvious
The Department of Labor (DOL) has prioritized the enforcement of misclassification of workers as ICs for several years. The DOL recently stated that whether a worker is classified as an independent contractor under the Fair Labor Standards Act is based on the “economic realities” test. The DOL listed the following questions to assist in making a determination:
- Is the work an integral part of the company’s business?
- Does the worker’s managerial skill affect the worker’s opportunity for profit or loss?
- How does the worker’s relative investment (this does not necessarily include tools or equipment) compare to the company’s investment?
- Does the work performed require special skill and initiative?
- Is the relationship between the worker and the company permanent or indefinite?
- What is the nature and degree of the company’s control?
Notably absent from the list of questions is the desire of the workers and companies themselves. The DOL isn’t concerned with how companies and workers would like to define their relationship. Shouldn’t that consideration enter into the determination?
The media’s skewed view of the gig economy
As discussed earlier, from the standpoint of each group, there are pros and cons to employee status versus IC status. Does each get exactly what they want, in every context? No, of course not. Let’s consider hypothetical worker, Pat, who values security and would love a full-time job. Not finding that full-time position, Pat starts driving for Uber as an IC. After a couple of months, Uber lets Pat go due to too many customer complaints. Now, Pat is back out of work and can’t claim unemployment.
It is possible that, if Uber had employed her as an employee, they would have hesitated to let her go so quickly? Pat did not get what she wanted – safe, full-time employment. If the media picks up on her story and spins it into a cautionary tale of the gig economy, we all forget about the many ICs who willingly embrace the arrangement. We also forget that Pat might be out of a job even if she had been hired by Uber as an employee.
We may overlook the fact that Pat received an opportunity in the first place.
If you think there will be the same amount of employment “gigs” to go around if all workers are required to be employees, you are incorrect. In most European countries, employers are required to give at least 90 days notice in order to terminate and employee. You may laud that regulation, which is fine, although it’s not debatable that employers who are required to make greater commitments to their hires are less inclined to hire until they know, with absolute certainty, that they need a new employee long-term.
The same thinking is at play with employees (even “at will” employees who can be let go at any time for almost any reason) versus ICs. Companies are quicker to hire the latter, slower to hire the former. Quick hiring is action that is pro-efficiency, pro-progress, pro-company, and pro-worker. Quick firing is the first three, obviously not the latter. On balance, there’s a strong argument that maximizing company flexibility is of the greatest benefit to our overall economic system. Hence why there isn’t ta ton of chatter in the U.S. for modifying the default “employment at will” standard.
Could a self-employed world would be a more productive economy?
So, why do so many people seem to believe that IC status is only good for the companies that engage the ICs and not the ICs themselves? Using IC labor may allow companies to be more nimble, reduce (if not eliminate) pay for periods of non-performance, incentivize workers to continually develop their skills, and demand that workers consistently perform at their peak in order to compete in a more fluid market for talent. All four of these outcomes are clearly pro-company.
However, the last two outcomes are also solidly pro-worker, at least if we gaze beyond the short-term. We all benefit from performance incentives and expectations from others to deliver our best. Admittedly, the process of shifting workers from employment status to IC status may be, for many, painful. Full-time employment is easier, it’s safer. That is exactly what makes it less efficient. It’s human nature to work harder when you need to, when it really matters. Does anyone doubt that, pound for pound, self-employed people work harder, are more dedicated, than regular employees? A world in which everyone was self-employed, no one collecting a steady paycheck, would translate into a more productive economy.
Is government intervention the answer?
But let’s say you completely disagree with me and feel that we’re not talking simply about a fundamental right of companies and workers to freely label their contractual working relationship. Let’s say you believe this is very clearly about companies using their leverage to push their agendas on reluctant workers. And, you also don’t buy my argument that the company flexibility of being able to hire and fire translates, quickly and directly, into pro-worker benefits. In that case, is government regulation the best way to address the problems at hand, to contain these Dickensian companies?
Government intervention has its limits, the primary one being that companies, just like the human beings that comprise them, don’t generally embrace things they are forced to do. They reluctantly comply. They do just enough.
Empowerment is shifting from companies to workers
Guess what’s more effective than using legislation to force companies to change? The free market when it works well. The relationship between companies and workers is changing rapidly and radically. Because we are living through it, it is sometimes difficult to step back and soak in just how much change has already occurred. Empowerment is shifting from companies to workers.
Today, the playing field is considerably leveled, if not slightly tilted in favor of the worker. Among the reasons for this tectonic shift are:
- Mobility: 100, even 50 years ago, workers were much less mobile. Our modes of transportation and attitudes about relocation have changed remarkably. Meanwhile, the rise of the telecommuter and virtual worker have made physical proximity to the workplace much less critical.
- Information: Glassdoor, Vault, and similar sites give workers information about which companies treat their workers well and which do not. Company reputations matter today in a big way.
- The Internet: In the Industrial Age, the means of production was the factory. Factories are expensive and, consequently, the few who could afford to build them, the “industrialists,” became fabulously wealthy while the rest of the population made ends meet. Today, the Internet is the most important means of production and it is just about free to everyone.
- The Freelance Movement: Freelancing is no longer viewed as something you pretend to do while you’re really scouring for full-time employment. The freelance movement is bestowing a level of independence on workers that was previously unheard-of. Over one-third of the American work force is now made up of freelance workers. According to a new report by the Roosevelt Institute and the Kauffman Foundation, our economy will be “scarcely recognizable” in 25 years, as this number is expected to balloon.
Though full time employment is safer, it is much less empowering. Daniel Priestley, author of Key Person of Influence, speaks about the transition that we are living through from an industrial economy to an entrepreneurial one. He points out that the owners of capital in an industrial economy, the factory-owning industrials we spoke of earlier, are motivated to keep workers just content enough – content enough to keep doing their jobs and to not challenge the system. Employers don’t want to make their employees wealthy and financially independent, because that isn’t ideal for controlling employees. As a society, we can legislate these employers to do a little more – provide more time off, better health care benefits, etc., but they will always do just enough when forced to act. And, “just enough” will never be all that fulfilling for the employees.
Workers have been handed a golden opportunity to wrestle power from companies
Companies can’t control ICs like they do employees. ICs that work for multiple companies have the leverage in the relationship. It’s game-on and it’s not from unionizing and government intervention. Workers are gaining power due to a shifting work landscape. They are gaining power by disuniting.
Admittedly, some workers are not embracing this opportunity with open arms. For them, it may take a while to see the seeds of opportunity planted in this “problem.” As a society, if we adopt the paternalistic viewpoint that companies must give workers employment (as opposed to IC) status, we are disrupting a natural, positive, and powerful rebalancing that is at work in the market. In doing so, we would unwittingly be undermining the power and long-term well being of the very constituency we seek to protect.
We should all be freelancers, self-employed, entirely responsible for ourselves
Those anachronisms of the bygone era of lifetime employment – frothy pensions, gold watch retirement ceremonies, etc. – are not coming back. We can beg the government to step in and try to hold on to the last vestiges of that era, but we will at best be hanging on by a thin thread. And, the security employees seek? It’s been gone for a long time. My parents and their peers expected lifetime employment. No one my age and below expects that.
We all recognize our companies are unlikely to out survive us. In today’s increasingly quick, hyper-competitive, global economy, friction in the employment market is the default standard. There is simply no longer any real security in being a private-sector employee. However, empowered ICs aren’t at the mercy of individual employers. Their security is self-determined.
This is one fight we don’t want the government to win
Many workers are embracing the new gig economy and its flexibility. The option to work as an IC shouldn’t be ripped away due to a misguided sense of paternalism. The process of shifting from employee to IC is challenging for many, and often full of risks, but the ultimate reward of a successful shift is freedom and empowerment. Let’s not force workers to trade the pursuit of those treasures for vision, dental and ten days off per year.
Can we combat grind culture and injustice with a nap?
(OPINION EDITORIALS) A global pandemic and a climate of racial injustice may require fresh thinking and a new approach from what grind culture has taught us.
Information is delivered to us at warp speed with access to television, radio, and the internet (and more specifically, social media). We are inundated with messages. Oftentimes they’re personalized by something that a friend or family shared. Other times we manage them for work, school, or just keeping up with news. Many entrepreneurs already wear many hats and burn the midnight oil.
During this global pandemic, COVID-19, we have also seen a rise in awareness and attention to social injustice and systemic racism. This is not a new concept, as we all know. But it did feel like the attention was advanced exponentially by the murder of George Floyd on Memorial Day 2020. Many people and entrepreneurs felt called to action (or at least experienced self-reflection). And yet they were working at all hours to evolve their businesses to survive. All of this happening simultaneously may have felt like a struggle while they tried to figure out exactly they can do.
There are some incredible thought leaders – and with limited time, it can be as simple as checking them out on Instagram. These public figures give ideas around what to be aware of and how to make sure you are leveling up your awareness.
Dr. Ibram X. Kendi, Director of the Center for Antiracist Research – he has been studying anti-racism and has several books and interviews that help give language to what has been happening in our country for centuries. His content also delves into why and how white people have believed they are more than people of color. Here is a great interview he did with Brené Brown on her Unlocking Us podcast.
Tamika Mallory – American activist and one of the leading organizers of the 2017 Women’s March. She has been fighting for justice to be brought upon the officers that killed Breonna Taylor on March 13. These are among other efforts around the country to push back on gun control, feminist issues, and the Black Lives Matter movement.
Brené Brown – research professor at the University of Houston and has spent the last two decades studying courage, vulnerability, shame, and empathy. She has been listening and engaging on how racism and our shame intersect. She also speaks about how people can reflect on themselves and where they can take action to better our society. She has some antiracism resources on her website.
With all of this information and the change in our daily routines and work habits (or business adjustments), what is a fresh approach or possibly a new angle that you haven’t been able to consider?
There is one social channel against grind culture that may not be as well-known. At an initial glance, you may even perceive this place as a spoof Twitter and Instagram that is just telling you to take a nap. But hold on, it’s actually much smarter than that. The description says “We examine the liberating power of naps. We believe rest is a form of resistance and reparations. We install Nap Experiences. Founding in 2016.”
It might be a great time for you to check out The Nap Ministry, inspired by Tricia Hersey. White people are called to action, and people of color are expressly told to give time to taking care of themselves. Ultimately, it goes both ways – everyone needs the time to recharge and recuperate. But people of color especially are being told to value their rest more than the grind culture. Yes, you’re being told you need to manage your mental health and include self-care in your schedule.
Through The Nap Ministry, Tricia “examines rest as a form of resistance by curating safe spaces for the community to rest via Collective Napping Experiences, immersive workshops, and performance art installations.”
“In this incredibly rich offering, we speak with Tricia on the myths of grind culture, rest as resistance, and reclaiming our imaginative power through sleep. Capitalism and white supremacy have tricked us into believing that our self-worth is tied to our productivity. Tricia shares with us the revolutionary power of rest.” They have even explored embracing sleep as a political act.
Let this allow you to take a deep breath and sigh – it is a must that you take care of yourself to take care of your business as well as your customers and your community. And yes, keep your drive and desire to “get to work”. But not at your expense for the old grind culture narrative.
The actual reasons people choose to work at startups
(EDITORIAL) Startups have a lot going for them, environment, communication, visible growth. But why else would you work for one?
Startups are perpetually viewed as the quintessential millennial paradise with all of the accompanying perks: Flexible hours, in-house table tennis, and long holidays. With this reputation so massively ingrained in the popular perception of startups, is it foolish to think that their employees actually care about the work that startup companies accomplish?
Well, yes and no.
The average startup has a few benefits that traditional business models can’t touch. These benefits often include things like open communication, a relaxed social hierarchy, and proximity to the startup’s mission. That last one is especially important: While larger businesses keep several degrees of separation between their employees and their end goals, startups put the stakes out in the open, allowing employees to find personal motivation to succeed.
When employees find themselves personally fulfilled by their work, that work reaps many of the benefits in the employee’s dedication, which in turn helps the startup propagate. Many aspiring startup employees know this and are eager to “find themselves” through their work.
Nevertheless, the allure of your average startup doesn’t always come from the opportunity to work on “something that matters.”
Tiffany Philippou touches on this concept by pointing out that “People come to work for you because they need money to live… [s]tartups actually offer pretty decent salaries these days.”
It’s true that many employees in their early to late twenties will likely take any available job, so assuming that your startup’s 25-and-under employee base is as committed to finding new uses for plastic as you are may be a bit naïve—indeed, this is a notion that holds true for any business, regardless of size or persuasion.
However, startup experience can color a young employee’s perception of their own self-worth. This allows them to pursue more personally tailored employment opportunities down the road—and that’s not a bad legacy to have.
Additionally, startups often offer—and even encourage—a level of personal connection and interactivity that employees simply won’t find in larger, more established workplaces. That isn’t symptomatic of startups being too laid-back or operating under loosely defined parameters. Instead, it’s a clue that work environments that facilitate personalities rather than rote productivity may stand to get more out of their employees.
Finally, your average startup has a limited number of spots, each of which has a clearly defined role and a possibility for massive growth. An employee of a startup doesn’t typically have to question their purpose in the company—it’s laid out for them; who are we to question their dedication to fulfilling it?
How Peloton has developed a cult-following
(OPINION EDITORIALS) How has Peloton gotten so popular? Turns out there are some clear takeaways from the bike company’s wildly successful model.
Peloton is certainly not the first company to gain a cult-like following–in the past we’ve talked about other brands with similar levels of devotion, like Crossfit and Yeti. Now, full disclosure: I’m not an exercise buff, so while I’d vaguely heard of Peloton–a company that sells stationary bikes–I had no idea it was such a big deal.
I mean, it’s not really surprising that an at-home bike that offers the option for cycling classes has grown so much during the pandemic era (a sales growth of 172% to be exact). But Peloton has been highly popular within its fanbase for years now. So, what gives? A few factors, actually.
If your company really wants to guarantee the vision and quality you’re aiming for, one of the best ways to enact it is through vertical integration, where a company owns or controls more than one part of its supply chain. Take Netflix, for example, which not only distributes media, but creates original media. Vertical integration lets companies bypass areas that are otherwise left to chance with third-party suppliers.
Peloton uses vertical integration–everything from the bike to its Wi-Fi connected tablet to the classes taught are created by Peloton. Although this may have made the bike more expensive than other at-home exercise bikes, it has also allowed Peloton to create higher quality products. And it’s worked. Many people who start on a Peloton bike comment on how the machine itself is well-built.
Takeaway: Are there any parts of your business process that you can improve in-house, rather than outsourcing?
But with people also shelling out $40 a month for access to the training regimen Peloton provides, there’s more going on than simply high-quality craftsmanship.
Hey, plenty of cults have charismatic leaders, and Peloton is no exception. Okay, joking about the cult leader part, but really, people love their trainers. Just listen to this blogger chat about some of her favorites; people are connecting with this very human element of training. So much so that many people face blowback when suggesting they might like training without the trainers!
The trainers are only part of this puzzle though–attending live classes is a large draw. Well, as live as something can be when streamed into your house. Still, with classmate usernames and stats available while you ride, and teachers able to respond in real time to your “class,” this can simulate an in-person class without the struggle of a commute.
Takeaway: People want to see the human side of a business! Are there any ways your company could go live and provide that connection?
Pandemic aside, you can get a decent bike and workout class at an actual gym. But the folks at Peloton have one other major trick up their sleeve: Competition. Whether you’re attending a live session or catching up on a pre-recorded ride, you’re constantly competing against each other and your own records.
These leaderboards provide a constant stream of goals while you’re working out. Small accomplishments like these can help boost your dopamine, which can be the burst of good feeling you need while your legs are burning mid-workout. With this in mind, it’s no wonder why Peloton fans might be into it.
Takeaway: Is there a way to cater to your audience’s competitive side?
At the end of the day, of course, Peloton also has the advantage of taking a unique idea (live-streamed cycle classes built into your at-home bike) and doing it first. Plus, they just happened to be poised to succeed during a quarantine. But that doesn’t mean you can’t learn from what Peloton is doing right to build your own community of fanatics. There are plenty of people out there just waiting to get excited about a brand like yours!
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