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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

Study says women need to be seen as “warm” to be considered confident

(EDITORIAL) A new study reveals that despite progress, women are still successful when they fall into a stereotype. Let’s discuss.

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About 15 years ago, I took a part-time job in a mental health clinic handling bookkeeping and billing. I had absolutely no idea what I was doing, but I attacked the job with what I felt was confidence. For the first few days, I simply felt as if I was an imposter. I kept asking questions and pushing forward, even though I didn’t make much progress. Within just a few days, I felt the hostility of the office manager.

It got progressively worse, and I couldn’t figure out what the heck I’d done to make her so confrontational with me. I thought I was pleasant and respectful of her position, and I was getting along with the other employees. When I talked to our boss, I was told that I intimidated the office manager. HUH? Me? Intimidating? I was a complete mess at the time. I could barely put together a business casual wardrobe. My emotional health was so fragile that I rarely went anywhere new. And she found me intimidating?

Researchers have been studying how people judge others. Susan Fiske, researcher out of Princeton, found that competence and warmth are two of the dimensions used to judge others. Based on that research, Laura Guillén, Margarita Mayo, and Natalia Karelaia studied the competence and warmth at a software company with 236 engineers.  Guillén and her team collected data at two separate times about these engineers and their confidence and influence within the organization.

They found that “men are seen as confident if they are seen as competent, but women are seen as confident only if they come across as both competent and warm.

Women must be seen as warm in order to capitalize on their competence and be seen as confident and influential at work; competent men are seen as confident and influential whether they are warm or not.”

We encourage women to be confident, but based on current research, it may not be enough to close the gender gap in the workplace. A woman must be seen as helpful and dedicated to others to have the same influence as a man. As a woman, it’s easy to be seen as the #bossbitch when you have to make tough decisions. Those same decisions, when made by a man might be considered just “business as normal.”

I guess the lesson is that women still have to work twice as hard as men just to be seen as equals. I know that I have to work on empathy when I’m in an office environment. That office manager isn’t the only person who has thought I’m intimidating. I’ve heard it from it others, but you know what?  As a self-employed writer, I’d rather be seen as undeterred and daunting than submissive and meek.

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Opinion Editorials

“Starting a business is easy,” said only one guy ever

(OPNION EDITORIAL) Between following rules, finding funding, and gathering research, no business succeeds without lifting a finger.

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While browsing business articles this week, I came across this one, “Top 10 Business Ideas You Can Start for Free With Barely Lifting a Finger.” These types of articles make me mad. I can’t think of many successful freelancers or entrepreneurs who don’t put in hours of blood, sweat and tears to get a business going.

The author of the article is Murray Newlands, a “VIP Contributor.” Essentially, he’s a freelancer because he also contributes to Forbes, HuffPro and others. He’s the founder of ChattyPeople.com, which is important, because it’s the first business idea he promotes in the article.

But when I pull up his other articles on Entrepreneur.com, I see others like “How to Get Famous and Make Money on YouTube,” “Win Like A Targaryen: 10 Businesses You Can Start for Free,” and “10 Ventures Young Entrepreneurs Can Start for Cheap or Free.”

I seriously cannot believe that Entrepreneur.com keeps paying for the same ideas over and over.

The business ideas that are suggested are pretty varied. One suggestion is to offer online classes. I wonder if Newlands considered how long it takes to put together a worthy curriculum and how much effort goes into marketing said course.

Then, you have to work out the bugs, because users will have problems. How do you keep someone from stealing your work? What happens when you have a dispute?

Newlands suggests that you could start a blog. It’s pretty competitive these days. The most successful bloggers are ones that really work on their blog, every day. The bloggers have a brand, offer relevant content and are ethical in how they get traffic.

Think it’s easy? Better try again.

I could go on. Every idea he puts up there is a decent idea, but if he thinks it will increase your bottom line without a lot of hard work and effort, he’s delusional.

Today’s entrepreneurs need a plan. They need to work that plan, rethink it and keep working. They have to worry about liability, marketing and keeping up with technologies.

Being an entrepreneur is rewarding, but it’s hard work. It is incredibly inappropriate and grossly negligent to encourage someone to risk everything they have and are on the premise of not lifting a finger.

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Opinion Editorials

New age stranger danger: teaching kids about AI

(OPINION EDITORIAL) The world is changing and so is technology. As tech changes so must we, in teaching kids about the dangers about AI.

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When I was younger, when my siblings and I would come home from school, we were required to nourish our minds for an hour (study, homework, read, do math practice, whatever we were feeling that day) and then we were banished from the house until dinner.

We had to go outside and create our own fun. We rode bikes to friends houses, we went “fishing” in the creek, sometimes before we left the house we’d search the couch for loose change and go to our favorite corner store and share a bag of skittles.

Our neighborhood was a safe one — it was one of those ideal 90s neighborhoods where our house was seated on the end of a cul-de-sac so there was little traffic and there were enough kids on the street to field two kickball teams.

Each parent on the street was allowed to reprimand us and there were rarely any locked doors. As a 10 year old it felt like ultimate freedom. But, with that freedom came a very important lesson in strangers and what to do if we were ever approached by one.

I’m sure stranger danger is still a thing taught by parents and schools alike but we went from don’t talk to strangers online or get in strangers’ cars to getting online to request a stranger to drive us somewhere.

With the advancement of technology has come a readiness to bring strangers in (/near / to) our homes. The most invitations coming from those personal assistants many homes can’t seem to function without.

Alexa, Google Home, Bixby or whatever assistant you may use are all essentially strangers that you are willingly bringing into your home.

Just yesterday I had a conversation with a college kid that didn’t know that the microphone on those things are always on — as such is true with the Facebook, Instagram and Facebook Messenger apps.

In a recent article from Rachel Botsman (BOTSman, hmmmm), she describes the experience her three year old had with an Alexa.

Over the course of the interactions, her daughter asks the bot a few silly questions, requests a few items to be bought, asks Alexa a few opinions, she ultimately sums up her daughter’s experience as saying, “Today, we are no longer trusting machines just to do something, but to decide what to do and when to do it. The next generation will grow up in an age where it is normal to be surrounded by autonomous agents, with or without cute names.”

I’m not a mother and I’m definitely old enough to be extremely skeptical of machines (iRobot anyone?) but the effects smart bots will undoubtedly have on future generations have me genuinely concerned. Right now it seems as harmless as asking those assistants to order more toilet paper, or to check the weather or to see which movies are screening but what will it become in the future?

A MIT experiment cited in the Botsman article 27 children, aged between three and 10, interacted with Alexa, Google Home, Julie (a chatbot) and, finally, Cozmo (a robot in the form of a toy bulldozer), which are all AI devices/ toys.

The study concluded that almost 80 per cent of the children thought that Alexa would always tell the truth.

Let me repeat that — 80 PERCENT OF THE KIDS BELIEVE THAT THE AIS, CREATED BY COMPANIES WHO WANT TO SELL PRODUCTS, WILL ALWAYS TELL THE TRUTH.

The study went on to conclude that some of the children believed they could teach the devices something useful, like how to make a paper plane, suggesting they felt a genuine, give-and-take relationship with the machines.

All of these conclusions beg the question, how can we teach kids (and some adults if we’re being honest) about security and privacy in regards to new technology? How do we teach kids about commercialism and that as innocent as they may seem, not every device was designed altruistically?

We are quickly approaching an age where the strangers we introduce our kids to aren’t the lurkers in the park with the missing dog or the candy in the van, but rather, a robot voice that can tell a joke and give you the weather and order +$70M worth of miscellaneous stuff.

So now, it’s on us. Children of our own or not, we have to start thinking about best practices when it comes to teaching children about the appropriate time to trust in a computer. If the 5 year olds with smart devices are any indicator, teaching kids to be stingy with their trust in AIs will be an uphill battle.

This story was first published here in October of 2017.

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