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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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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

How the Bullet Journal method has been hijacked and twisted

(EDITORIAL) I’m a big fan of the Bullet Journal method, but sticker-loving tweens have hijacked the movement. Worry not, I’m still using black and white bullet points with work tasks (not “pet cat,” or “smile more”).

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It’s taken me some time to come around to the Bullet Journal method, because it took me some time to fully understand it (I have a tendency to overthink simplicity). Now that I understand the use, I find it very beneficial for my life and my appreciation for pen-to-paper.

In short, it’s a quick and simple system for organization tasks and staying focused with everything you have going on. All you need to employ this method is a journal with graph or dotted paper, and a pen. Easy.

However, there seems to be this odd truth that: we find ways to simplify complicated things, and we find ways to complicate simple things. The latter is exactly what’s happened with the Bullet Journal method, thanks to creative people who show the rest of us up.

To understand what I’m talking about, open up Instagram (or Pinterest, or even Google) and just search “bullet journal.” You’ll soon find post after post of frilly, sticker-filled, calligraphy-laden journal pages.

The simple method of writing down bullets of tasks has been hijacked to become a competitive art form.

Don’t get me wrong, I like looking at this stuff because I dig the creativity. But, do I have time to do that myself? No! For honesty’s sake, I’ve tried just for fun and it takes too much damn time.

With this is mind, this new-found method of Bullet Journaling as an art is something that: a) defeats the purpose of accomplishing tasks quickly as you’re setting yourself back with the nifty art, and b) entrepreneurs, freelancers, executives, or anyone busy would not have time for.

Most of these people posting artistic Bullet Journal pages on Instagram are younger and have more time on their hands (and if you want to spend your time doing that, do you, man).

But, it goes against the simplistic method of Bullet Journaling. The intent of the method.

And, beneath the washi tape, stickers, and different colored pens, usually lies a list of: put away laundry, feed cat, post on Insta. So, this is being done more for the sake of art than for employing the method.

Again, I’m all for art and for people following their passions and creativities, but it stands to reason that this should be something separate from the concept of Bullet Journaling, as it has become a caricature of the original method.

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Opinion Editorials

The perfect comeback to that earnest MLM guy you meet at every coffee shop

(EDITORIAL) We’ve all been cornered by someone that wants to offer us financial freedom for joining their pyramid scheme, but we typically freeze or just reject them. There’s another way…

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The following editorial was penned by Chris Johnson who offers the perfect comeback to that stranger who approaches you in Starbucks or that person you haven’t talked to since high school that wants to discuss your financial freedom:

Last week, I was at Starbucks, doing some marketing work. This was apparent to all who could view my laptop by the big 72 type “Marketing” headline that I was working on in my browser.

A man sharing a table, with no apparent laptop of his own, was taking interest in what I was doing. He was mid-40s and he was ambiently stalking and sizing everyone around him up. He was swallowing and always “about to talk.”

Finally, after I looked up to collect my thoughts, he broke my reverie.

“Are you in marketing?”

See, our man (Justin was his name) had just stated a business, an e-commerce business. He was vague on his details.

I knew where this was going. We all know.

Anyone that’s ever worked from a Starbucks has met Justin.

Justin mentioned a couple of his relatives, also with businesses. And, without asking what type of clients I serve, told me that they’d be a great fit for me. He’d love to introduce me, if we could just exchange contact info.

I knew exactly what he was doing. As God as my witness, I knew the only place where this interaction would possibly go. I wasn’t, not for a minute, fooled by the promise of referrals that would never happen.

Of course, I give it to him, not because I think there’s any hope that this will work out. But because I want to know. We exchange texts, and I save his contact info.

He excuses himself and gets into his 2002 rusty Kia, and drives off.

The next day, I get a call with the ID: MLM GUY STARBUCKS 2019.

“Chris, we met at Starbucks,” he says, “This is Justin. And I was wondering if you were open to financial opportunities for your family.”

Well, knock me over with a feather. This was such a surprise.

Without a plan in my head, I said “Justin, are you in the Amway organization? Because if so, I have been waiting for your call.”

Justin confirmed that yes, he was in Amway. And he was really glad!

“Justin, I’ve got some great news for YOU, would you like to hear about it?”

“Sure,” he goes.

“OK, well, you have to be open – and committed – to improving your relationship with Amway. Is that something you’re open to right now?”

“Yes,” he said, “Definitely.”

“Great. So let me tell you about what I do with the Amway people I meet. See, I’ve made a really profitable career out of helping them, and it’s turned into the focus of my life.” This is, of course, a lie, but we were even because Justin got my phone number on the pretext of referring me business.

“OK, so the deal is this. One of the problems with Amway is that it turns you into someone that has to monetize all of your family and friends. And when that happens, you become less about the relationship, and more about the money. Has that happened to you?”

“Yes. Yes it has.” Justin admits.

“Yes, great, this is what we’re hearing.”

The words tumbled out of my mouth: “See all over America there are Amway distributors, just like you. They are chained to various Starbuckses. This is the old model, there’s simply no freedom.

They have to fight tooth and nail to get appointments and most of ’em don’t go anywhere. For most of the Amway owners, this isn’t working once they pitch all their friends and all their family.

So I’ve created an organization called Amway Freedom. All you have to do is sign up. By signing up, you agree to automatically pay $5.00 per month to me, to be free of Amway.

But the REALLY good news is that you can sign OTHER people up, and keep half of the money for your family and your freedom. And when they sign up, half goes to support the reps, and the other half goes to support your opportunity!

From what I hear, over 1.5 million Americans signed up for Amway at some point. Tell me, Justin, if you got just 1% of that market – 15,000 people to pay you $5.00 a month without you having to do anything, would that change your life?

Would $75,000 per month change your life?”

Justin said “Um, well, this isn’t really what I was think-”

“Look Justin, this isn’t for everyone. I know that. Most people won’t be able to take advantage of this opportunity. They only think of the problems. They can’t imagine how this could work, a business with no merchandise and freedom.

But, Justin, you’re helping people get free of the endless random meetings… the Starbucks bills… the gas expenses. You’re turning your story of struggle into a story of success. Are you ready, Justin?

This is my business,” I said, “And this is what I want for you, Justin. Are you ready to join your challenge and fight for the freedom of 1.5 million people that have tried Amway?”

“Um…” Justin said. “I just don’t.”

“I see. This might not be working for you, Justin, and that’s 100% OK. Take all the time you need. But, if you sign up today, I’ll offer you the EXCLUSIVE market rights to help free people from Younique, Herbalife, Infinitus and over 30 other household brands. That makes a market – just in America – of 20 million Americans! Doesn’t that sound great, Justin? If you captured just 1% of that, that’s 200,000. And that business would earn 1 million every MONTH.

All without products to store, all while helping people.

Will you be paying with a Visa or Mastercard?”

Justin paused for a moment. “This was a waste of my time,” he finally said.

“You don’t really have a business!” he spat.

Well done, Justin, well done indeed.

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Opinion Editorials

Culture can be defined by what employees don’t say

(OPINION) What your employees say defines your business. What your employees don’t say defines your culture.

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Whether the boss realizes or not, employees – the folks who often manufacture, handle, and sell the products themselves – can see sides of the business that management could easily overlook, including potential risks and improvements. So how do you make sure your employees are speaking up? A new study by Harvard researcher Hemant KakkarSubra Tangirala reveals that when it comes to speaking up, your company culture is probably either encouraging or discouraging it.

Tangirala wanted to compare two theories as to why employees choose to stay quiet when they could share their worries or ideas with company management. The “personality perspective” presumes that shy, reticent employees simply don’t have the gumption to speak up; therefore, the way to get more perspective from your employees is to make a point to hire extroverted people.

Meanwhile, the “situational perspective” posits that the company culture may either be encouraging and even expecting employees to speak up or discouraging it by creating an environment wherein employees “fear suffering significant social costs by challenging their bosses.”

In order to test these two theories against one another, Tangirala surveyed nearly 300 employees and 35 supervisors at a Malaysian manufacturing plant. First, the survey measured each employee’s “approach orientation,” that is whether or not, all things being equal, they had a personality more inclined to speaking up or staying mum. Next, employees were asked whether they thought their input was expected, rewarded, or punished. Lastly, supervisors were asked to rank the employees as to how often they spoke up on the shop floor.

The survey showed that both personality and the work environment significantly influenced whether or not an employee would speak up – however, it also showed that environmental factors could “override” employees’ natural inclinations. In other words, if employees felt that they were expected or would be rewarded for speaking up, they would do so, even if they aren’t naturally garrulous. On the other hand, even the most outspoken employees would bite their tongues if they thought they would be punished for giving their opinion.

The study also identified two major areas wherein employees could be either encouraged or discouraged from sharing their perspective. First, employees can be encouraged to suggest improvements or innovations that will increase workplace safety and efficiency. Secondly, employees should be expected to speak up when they witness dangers or behaviors that could “compromise safety or operations.”

Although the study was limited, it seems to point towards the importance of creating a workplace culture wherein your employees are rewarded for speaking up. Doing so could potentially provide you with invaluable insights into how to improve your business – insights that can only come from the shop floor.

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