By: Katy Steinmetz
January 6, 2016
After 28 years as a matchmaker, Sherry Singer, a 51-year-old resident of Long Beach, Calif., had grown tired of making matches. She had also grown accustomed to the independence of being her own boss as she helped customers find love. But she fretted about where or how to find a new line of work. Then Singer met a woman who said she was making $200 a day working as a freelance courier for Postmates, a San Francisco–based startup specializing in on-demand deliveries from restaurants and stores in major cities, the types of places that wouldn’t normally bring their gourmet burgers or cough syrup to someone’s doorstep. “I said, ‘Sign me up!’” Singer recalls. Within about a week she was patching together a living one order at a time as requests came through on her smartphone, and working whenever she felt like it. No experience or formal interview was required.
Companies like Postmates connect people who want goods and services—whether it’s a meal from a restaurant that doesn’t deliver, a bedroom to stay in for the night or someone to help move a piano—with people who will provide them for a price. These peer-to-peer transactions, numbering in the hundreds of thousands each day, bypass the traditional employer-employee relationship in ways that are befuddling regulators in cities and states across the country. The new companies—they often call themselves “platforms”—don’t seem to fit the old models. Ride-app company Uber, for instance, has become the fastest-growing startup in history, now valued at more than $60 billion at just five years old. Yet to hear the company tell it, Uber has done this without hiring a single driver; its role is simply providing software that allows willing parties to connect.
This raises many questions, among them: Can algorithms replace human managers? Do these business models demand a rethinking of labor laws? Or are companies just using new tools to get up to old tricks that give them an edge?
There is no one name—whether sharing economy, gig economy or on-demand economy—that captures the diversity of this disruption. But it’s clear that the demand for this way of working and consuming is profound. According to a first-of-its-kind poll from TIME, strategic communications and global public relations firm Burson-Marsteller and the Aspen Institute Future of Work Initiative, 44% of U.S. adults have participated in such transactions, playing the roles of lenders and borrowers, drivers and riders, hosts and guests. The number this represents, more than 90 million people, is greater than the number of Americans who identify, respectively, as Republicans or Democrats. (Poll figures exclude adults who are not Internet users.) “This is a disruptive explosion that we’re seeing,” says Michael Solomon, a professor of marketing at Saint Joseph’s University. “Is it good or bad for workers? The real question is, What kind of worker are we talking about?”
That question is at the center of several lawsuits about how many of these companies have classified their workers. TIME’s poll of 3,000 people, conducted by Penn Schoen Berland in late November, found that 22% of American adults, or 45 million people, have already offered some kind of good or service in this economy. And in doing so, they’ve likely made a trade-off: the typical drivers and handymen using these platforms have operated as independent contractors, which means they enjoy the freedom of working without set hours but are not afforded the safety nets that traditional 9-to-5 employees have. In return, companies like Uber and Postmates save fortunes on employee-related expenses such as payroll taxes but must give up control over exactly how and when workers do their jobs. Questions about liability and responsibility—and whether these companies are exercising more control than they’re acknowledging—have led to protests, bans and referendums from San Francisco to New York.
The vast majority of these 45 million people who have so far offered goods or services have other sources of income and describe their experiences in this new economy as positive, according to the poll. About one-third, whom we might call motivated offerers rather than casual ones, aren’t just earning extra bucks; they either make more than 40% of their income in this economy, describe it as their primary source of income or say they can’t get work in a more traditional job. These workers, per the poll, are the ones who most treasure the liberty this type of work provides yet say they miss the security and benefits they’ve traded for it. Take Singer: she started out optimistic, then grew disillusioned as parking fees, smartphone costs and her frustrations with company protocol piled up. Eventually, she signed up to be a lead plaintiff in a suit against Postmates, alleging that she was controlled like an employee and therefore should have been treated like one, getting reimbursements for things like gas, for instance. (The case is pending.) And yet after all that, Singer then started working as a contractor for a ride-app startup in the same economy. “I need to,” she says. “I’m only as good as my last ride.”
New economy poll
The growing momentum of peer-to-peer economics is undeniable. When the poll asked how many Americans had used goods-exchange platforms like eBay and Etsy, as well as other new-economy services, the participation rate jumped to 70%. For most people, as they rent out their pool house or get paid to run someone’s errands, worker status is likely far from their minds. Meanwhile, highly skilled jobs, like consulting and teaching, are shifting to more gig-like models too. “There’s something nice about getting a regular paycheck,” says Arun Sundararajan, a business professor at New York University, “but we’ve got to get away from thinking that that is the only model.”
So while a change in the social contract is already under way, politicians and regulators are still scrambling to catch up. In the U.S. today, workers fall into one of two buckets: employee or independent contractor. These two categories have roots in 18th century England, when legal minds decided that servants, at the mercy of their masters for a living wage and bound to obey their orders, deserved some protections in return. The U.S. built on those in the 20th century, developing and expanding basic rules about employee wages and hours. But many of those don’t apply to contractors, who are viewed as more autonomous in the eyes of the law.
Though assigning either category to any worker is notoriously complicated, a crucial element is control. Take an electrician who could be engaged to do several jobs by several different clients, quoting his own rate, organizing his own schedule and leveraging a skill set that allows him to function as his own business. That, says University of Connecticut law professor Sachin Pandya, looks more like a contractor. Now imagine the fast-food cashier who must adhere to set shifts and wear a certain uniform and has a single boss who tells him what to do and how to do it. That looks like an employee. The idea is that “people who are classified as employees are in a more vulnerable position in the economy,” Pandya says.
Yet it’s often not clear-cut, and many companies in the new economy blur the distinction by exercising varying amounts of control over workers who use their apps to valet-park your car or deliver your groceries. If Uber sets the rate that drivers can earn per mile and reserves the ability to kick drivers off the platform if they get low customer ratings, that suggests an element of control. But when those drivers can turn their app on or off at any time, working as much or as little as they like, that looks pretty freewheeling.
Complicating the issue for policymakers is the fact that these platforms are luring all kinds of workers. TIME’s poll found that offerers are most often young, male, urban-dwelling and members of a racial or ethnic minority. (Nearly 40% are female.) While they’re more concentrated in metro-heavy states such as New York and California, they live all over the country. Perhaps most important, while a small percentage depend on home-sharing or ride apps for 100% of their income, about half say these gigs account for less than 20% of it and may only offer services a couple times per month or year. So it is far from clear that more government oversight makes sense. “From an efficiency perspective,” says St. Louis University law professor Miriam Cherry, “you don’t want somebody who gives someone a ride once a week in their car to be regulated.”
Workers within platforms aren’t cookie-cutter either. Some Lyft drivers may be empty nesters looking for something to fill their days, while others use the platform 50 hours a week to feed themselves. Some Airbnb hosts are struggling middle-class workers who need the rental money to pay their mortgage, while others are landlords who are taking units off the market because they can make more renting them out a few nights at a time. In August, Uber’s lawyers made diversity a key argument before a judge in California’s Northern District Court who was deciding whether to certify an estimated 150,000 drivers as a single class in a lawsuit against the company. There is no such thing as a “typical” Uber driver, the firm argued, and if the company were forced to reclassify all drivers as employees, Uber’s entire business model would have to change; drivers would have to work in shifts. “These are real live human beings who vary widely,” the company’s lawyer said in court. “It’s a hornet’s nest.” After a judge issued an order in December that could certify a class of that size, Uber vowed to appeal. “Drivers control their use of the Uber app,” the company tells TIME in a statement. “Their flexibility is key.”
The poll reveals that many workers say they’re happy as things are. Some 71% described their experience offering services as positive, while 22% said their experience had been mixed, and a mere 2% described their experience as flat-out negative. About two-thirds agreed that these companies are trustworthy and care about their workers, and that’s a point the new firms often make in court. Uber filed 400 testimonies from “driver-partners” in an attempt to prove how satisfied its contractors are with the status quo.
The new economy can make self-employment more attractive, at least at the start. The ease of getting onto these new platforms can be thrilling, with a low barrier to entry and promise of making as much money as you’re willing to work for. Ads often tout promises of making $25 an hour. According to the poll, new-economy workers tend to be more optimistic about their financial future than workers as a whole. “There’s something a little bit more adventurous,” a Lyft driver from Chicago says, “knowing that I kind of determine how much money I will be getting at the end of the week.” Yet a number of lawsuit plaintiffs allege that after all their expenses were considered, they weren’t even making minimum wage.
Increasingly policymakers from both sides of the aisle fear that the erosion of the old social contract between employers and workers could place a large burden on state and local welfare budgets if those new-economy jobs don’t last. “Without a social contract,” notes Senator Mark Warner of Virginia, who co-chairs the Future of Work project at the Aspen Institute, “the social safety net will be stressed much more later on. For some of these workers, the gig economy is all good until it’s not.”
Which is why some politicians are pursuing new compromises within existing frameworks. In December, the Seattle city council voted unanimously to become the first city to allow Lyft and Uber drivers to unionize. States like Utah have passed laws that let certain new-economy companies operate only after they register with the state and meet insurance standards. “The intent of this legislation is to create an environment where innovation can continue to happen but not at the expense of the workers,” said Mike O’Brien, the council member who spearheaded the Seattle proposal. Uber and Lyft testified in opposition.
Some companies have decided to change back to the old models, transitioning workers from contractor to employee status. Instacart, a grocery-delivery-app company, announced in 2015 that in-store shoppers would have the opportunity to switch, after a pilot showed that treating them as employees improved retention of better-trained workers. Still, some politicians and labor experts believe that this doesn’t need to be such an either-or situation, nor one that regulators solve by themselves. “Just as these enterprises have been able to disrupt [various industries],” says Warner, “maybe we ought to unleash that innovation in what the social contract should look like.”