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Workers of the world, disunite! The gig economy is transforming the future

Independent contractor statuses are being reviewed by the government, but they’re asking the wrong questions and missing this historic moment as we shift toward an entrepreneurial society.

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the gig economy

the gig economy

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.

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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.

#GigEconomy

Brett is The Startup Shepherd – part startup consultant, part angel investor/financier, and part business lawyer. A six-time entrepreneur and recovering “left brainer,” Brett particularly enjoys helping startups and rapidly growing socially-conscious companies.

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7 Comments

7 Comments

  1. Gabe Sanders

    September 26, 2015 at 1:32 pm

    Yes, I can understand why many workers embrace this concept. Though the ability of the employers (and they are employers) to take advantage of the contractors will grow and potentially do more harm than the potential good.

  2. Robin Bull

    October 7, 2015 at 1:20 pm

    Hi Brett – If you think about it (or, rather, if others think about it), we are all self-employed. For some of us, like me, it’s just more obvious because we work from our homes and with multiple companies. However, even those who work in a more traditional environment (I used to be a paralegal) are still self-employed. It is up to us regardless of the location or type of work that we do to ensure that our clients / employers are happy and that we are able to continue to working. One of the main differences is that what I do as a freelancer is actually more secure. Think about it: what am I going to do – fire myself? Clients may come and go, but at the end of the cycle there are always companies that need good workers. I’m grateful to be able to work on a long term basis with many of my clients (such as http://www.mikogo.com). It definitely helps to have clients that come back on a weekly basis for my services.

  3. Brett

    October 11, 2015 at 8:58 am

    Gabe, I disagree. As (if) IC status grows, I believe it will be more well understood and there will be more opportunities for IC “gigs” (jobs), both outcomes resulting in less power for employers.

    Robin, I agree entirely that everyone should think of themselves as self-employed in that sense. Unfortunately, many don’t, however

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  5. Skip Mendler

    June 8, 2016 at 1:06 pm

    So eventually, would all workers need to become conversant in the potentially tricky language of contracts, and the intricacies of arbitration? Gee, they’re going to need lawyers, aren’t they?

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Opinion Editorials

AT&T hit with age discrimination lawsuit over using the word “tenured”

(EDITORIAL) 78% of workers are victims of age discrimination. As awareness arises, lawsuits show what may constitute discrimination, including verbiage.

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Older man at cafe representing age discrimination

According to the AARP, 78% of older workers have seen or experienced age discrimination in the workplace. As awareness of ageism increases, lawsuits that allege age bias can help employers understand what constitutes discrimination. A recent case from the U.S. Court of Appeals for the Fifth Circuit, Smith v. AT&T Mobility Services, L.L.C., No. 21-20366 (5th Cir. May 17, 2022), should give employers pause about using other words that could potentially be a euphemism for “older worker.”

What the lawsuit was about

Smith, a customer service representative at AT&T, alleged that he was denied a promotion because of his age. His manager told him that she was not going to hire any tenured employees. The manager wanted innovative employees in the management positions. Smith took this to mean that he was being denied the promotion because of his age. He sued under the Age Discrimination in Employment Act and Texas law.

The district court found that Smith failed to exhaust his administrative remedies as to one claim and failed to establish a prima facie case of discrimination as to the other two claims. Smith appealed. The Appellate court affirmed the district court’s decision, but they did say it was “close.” AT&T did not discriminate against Smith by using the word tenured, because there were other employees of the same age as Smith who were promoted to customer service management positions.

Be aware of the verbiage used to speak to employees

This case is another example of how careful employers need to be about age discrimination, not only in job postings. It’s imperative to train managers about the vagaries of ageism in the workplace to avoid a costly lawsuit. Even though AT&T prevailed, the company still had a pretty hefty legal tab. Don’t try to get around the ADEA by using terminology that could screen out older workers, such as “digital native,” or “recent college grad.” Remind employees and managers about ageism. Document everything. Pay attention to other cases about age discrimination, such as the iTutor case or this case about retirement-driven talk. You may not be able to prevent an employee from feeling discriminated against, but you can certainly protect your business by doing what you can to avoid ageism.

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Opinion Editorials

Writing with pen and paper may mean your smarter than your digital peers

(EDITORIAL) Can writing old fashioned make you smarter? Once considered and art form, handwriting is becoming a thing of the past, but should it be?

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Writing on paper job titles.

When I was in college, in 2002, laptops weren’t really commonplace yet. Most students took notes by writing with pen and paper. Today, most students take notes with laptops, tablets, cell phones, or other electronic devices. The days of pen and paper seem to be fading. Some students even wait until the end of class and use their cell phones to take a picture of the whiteboard, so in effect, they are not absorbing any of the information because they “can just take a picture of it and look at it later.”

Is it easier to take notes on an electronic device? I think that largely depends on preference. I type faster than I write, but I still prefer to take notes on paper.

According to researchers at Princeton University and the University of California, Los Angeles, students who take handwritten notes generally outperform students who typed them.

Writing notes help students learn better, retain information longer, and more readily grasp new ideas, according to experiments by other researchers who also compared note-taking techniques.

While most students can type faster than they write, this advantage is short-term. As the WSJ points out, “after just 24 hours, the computer note takers typically forgot material they’ve transcribed, several studies said. Nor were their copious notes much help in refreshing their memory because they were so superficial.” So while it may take a bit longer to capture the notes by hand, more likely than not, you will retain the information longer if you put pen to paper.

As I teach English Composition at the University of Oklahoma, I would also like to say that while I find this to be true for myself, every student has a different learning style. Typed notes are much better than no notes at all. Some students detest writing by hand and I understand that. Everything in our world has gone digital from phones to cable television so it makes sense, even if I don’t like it, that students gravitate more towards electronic note taking than pen and paper.

While I would like to see more students take notes by hand, I certainly won’t require it. Some students are navigating learning disabilities, anxieties, and other impediments that make taking notes digitally more advantageous.

I imagine the same is true for other areas as well: instead of typing meeting notes, what would happen if you wrote them by hand? Would you retain the information longer? Perhaps, and perhaps not; again, I think this depends on your individual learning style.

I would like to suggest that if you are one of the more “electronically-minded” writers, use a flashcard app, or other studying tool to help you review your classroom notes or meeting notes to make them “stick” a bit better. While I find this type of research intriguing, if you enjoy taking your notes electronically, I wouldn’t change my method based on this.

If it’s working for you, keep doing it. Don’t mind me, I’ll be over here, writing everything down with pen and paper.

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Opinion Editorials

5 reasons using a VPN is more important now than ever

(EDITORIAL) Virtual private networks (VPN), have always been valuable, but now, more than ever, entrepreneurs and businesses really should have them.

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VPN

Virtual private networks (VPN), have always been valuable, but some recent developments in technology, laws, and politics are making them even more important for entrepreneurs and businesses.

A VPN serves as an intermediary layer of anonymity and security between your computer and your internet connection. Your Wi-Fi signal is a radio wave that can ordinarily be intercepted, so any data you transmit back and forth could be taken and abused by interested parties. VPNs act as a kind of middleman, encrypting the data you transmit and protecting you from those prying eyes.

Top10BestVPN.com offers a selection of some of the best-reviewed VPN services on the market; there you can see the different approaches to security and anonymity that different brands take, and get a feel for the price points that are available. But why is it that VPNs are becoming even more important for business owners and entrepreneurs?

These are just five of the emerging influencers in the increasing importance of VPNs:

1. The rise of IoT. The Internet of Things (IoT) is already taking off, with a predicted 8.4 billion devices will be connected to the internet by the end of the year. All those extra connections mean extra points of vulnerability; hackers are skilled at finding tiny entry points, so every new channel you open up on your Wi-Fi connection is another opportunity they could potentially exploit. Using a VPN won’t make your network completely hack-proof—user errors, like giving your password away in a phishing scam, are still a potential threat—but VPNs will make your network more secure than it was before.

2. The popularity of ransomware. Ransomware is growing in popularity, seizing control of devices, sometimes for weeks or months before activating, then holding the device “hostage,” and demanding payment in exchange for releasing the files that are stored on it. These attacks are fast and efficient, making them ideal for hackers to use against small businesses. Again, using a VPN won’t make you immune from these types of attacks, but they will make you harder to target—and hackers tend to opt for the path of least resistance.

3. The escalation of attacks on small businesses. Speaking of small businesses, they happen to be some of the most frequent targets of cybercriminals. About 43 percent of all cyberattacks target small businesses, in part because they have fewer technological defenses but still have valuable assets. Protecting yourself from cyberattacks is a must if you want your business to survive.

4. Political attacks on net neutrality. Politicians have recently attempted to attack and eliminate net neutrality, which is the long-standing guarantee that internet providers can’t violate user privacy by collecting and/or reporting on certain types of data, and can’t create “slow lanes” that throttle certain types of traffic. If net neutrality is abolished, you could face slower internet traffic and decreased privacy on the web. A VPN could, in theory, protect you from these effects. First, your web traffic would be anonymized, so internet providers couldn’t gather as much data on you as other customers. Second, you’ll be routed through a private VPN server, which could help you get around some of the speed throttling you might otherwise see. It’s uncertain whether net neutrality will ultimately fall, but if it does, you’ll want a VPN in place to protect you.

5. The affordability and diversity of VPNs available. Finally, it’s worth considering that VPNs are more affordable and more available than ever before. There are specific VPNs for all manner of businesses and individuals, and they’re all reasonably affordable. Inexpensive options can be yours for as little as a few dollars per month, and more robust, secure options are still affordable, even for frugal businesses. If you try a VPN provider you don’t like, you can always cancel and switch to another provider. This availability makes it easier to find exactly what you need.

If you’ve never used a VPN before and you’re confused, try not to be intimidated. VPNs sound complex, but connecting to one is a simple login process you can use on practically any device. The hardest part is choosing a reliable provider that suits your business’s need. With the influx of coming changes, it’s a good idea to get your VPN in place sooner rather than later.

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