A while back, a friend of mine posted this graphic on Facebook. It’s a well-presented picture of the changing landscape for 21st Century participants in the economy.
The next to bottom rung of this ladder resonated most with me. For much of the last 15 years, I have earned compensation by virtue of results I have achieved. No salary – just commissions or splits of revenue or profit. So, rather than being paid for my time, I was subjected to the forces of the market without an employer as an intermediary.
Sometimes it’s more than a little nerve wracking. I spent five years as an intermediary representing private businesses for sale. In a good year, I would get five or six paychecks. In a not-so-good year, three. It’s hard to plan your future when you’re not sure what you’ll be making this year or next.
On balance I like the flexibility of being an independent contractor. But, I am a professional earning a good living. At the other end of the pay scale, there are legitimate concerns. Our social insurance system has been built around traditional employment. In the sharing economy, workers are typically independent contractors. For some, that’s not an appealing arrangement.
The online forum for Uber drivers (UberPeople.net) captured this sentiment from a driver using the pseudonym Honkadonk, "Uber's whole game … is to make everything some weird frayed-line, grey area where nothing is their responsibility. It's ride share but Uber is "everyone's private driver". We're IC but we have rules, answer to bosses, and can be fired. We're illegal cabs but it's okay because we're not cabs. We earn $35/hr except we f---ing don’t.”
Well, he’s right of course and Uber isn’t the only example. It is the basic nature of corporations to shift liability to third parties. That’s why we need regulation.
But, how much regulation? Smartphone apps and the Internet reduce the ‘friction cost’ of doing business. It’s to everyone’s advantage to benefit from the efficiency that’s created. The challenge is finding the right regulatory balance so as not to stifle innovation and the disruption that is native to the free enterprise system.
Plaintiffs’ lawyers and politicians continue to try to reinforce the fraying social contracts of the last century. An article written for the website Hill.com predicts that the National Labor Relations Board will soon tighten rules for independent contractors so that even franchise owners – the millionaires who own McDonalds franchises, for example – would be considered employees.
We would be better served if we endeavored to place this new reality at the center of our values. After all, market forces are unstoppable. It’s not the consumers or the Uber drivers really being hurt by this new paradigm, it’s the entrenched interests of taxi companies, unions and regulators who have the most to fear.
We should be asking this question: how can we decouple the employee safety net of unemployment insurance, workers’ compensation and social security from the framework of full-time employment? Like it or not, Obamacare has already done so for health insurance coverage.
The Wall Street Journal’s Lauren Weber has suggested a new status – the‘dependent contractor’ to which we might extend some of the same benefits.
For their part, Uber contracted with a Princeton economist to analyze the relative pay of Uber and taxi drivers in key markets. The results show an Uber driver makes an average of $6 per hour more than the average taxi/chauffeur/limo driver. Here is the chart they have published:
The Huffington Post followed up with an analysis of their own suggesting that the fallacy of Uber’s study is that it doesn’t consider that Uber drivers bear the cost of operating their own vehicles.
Fair enough. However, the line of thought that suggests that the sharing economy is sucking jobs from traditional 9-to-5 employment is off-base.
In a survey of its drivers, 78% reported being satisfied working for the company. The survey also revealed that many drivers (32%) consider their Uber gig as a fall back while they are looking for a better job.
Would we rather have them depending upon unemployment compensation?
Whatever it is that draws workers to this kind of work and consumers to this kind of service should be embraced not resisted. The only question…
WHO WILL LEAD?