The true debate around worker classification in the Sharing Economy
The numerous law suits against companies like Uber and HomeJoy (which actually forced it to liquidate as a result last week) has spurred huge political debate around the sharing / on-demand economy, Employee classification and protection.
The arguments against companies operating in this space are mainly that they disguise employees as independent contractors therefore resulting in loss of protection for the workers and – more to the point – less tax income for the IRS.
I think this argument is very skewed and in fact hypocritical. Firstly, Tax income IS the real concern for the government NOT worker protection, yet subtly forgotten in the debate. Secondly, in an nation that’s thrived due to peoples appetite for risk with the inevitable loss of protection for the pursuit of upside it’s far too populist and goes against the grain of what made America great. Why do we celebrate and praise Entrepreneurs yet we pity the ‘Solopreneur’ and want to protect them. Both choose to forego the perks of a secure job for the freedom to work for themselves, determining their own times and patterns of work and in many cases earning more.
On our site PeoplePerHour.com for example consistently over 80% of our 1m+ freelancers polled tell us that they would never go back to secure employment. Our top earners make north of $10k per month in net earnings which in most cases exceeds what they made or still make in their 9-5 job. Numerous conversations I’ve had with Uber drivers testify to the same, and I’ve recently met one person (of many others I’m sure) who made more money renting out his place on Airbnb that he quit his job and turned that into a business!
The real question that’s missed therefore is that of real ‘choice’. One in three people are now members of this freelance economy, a number backed by Mary Meeker’s latest report. Of those the vast majority choose to do so for some of the reasons mentioned above.
Yet, unquestionably, there are some edge-cases where companies force this ‘contractor’ engagement on Workers, whilst stripping them of the freedom to dictate their own work conditions. In these cases the argument that they are in essence employees in disguise stands correct. FedEx was one such example, losing a long standing suit instigated by its drivers which was settled in 2014 forcing it to reclassify their workers as employees.
The distinction needs to be understood though. There is a big difference between an Employer dictating when you turn up at work, what you wear (in this case a uniform), the hours you work and whom for, or how you perform your duties. These are the elements that define the level of control an organisation exerts on the worker. The litmus test is to ask ‘how different would it be had that person been an employee’. If the answer is ‘not materially different’ then its Employment in disguise.
The answer is different for most participants of the tech-powered on-demand economy today because of exactly that: technology empowers workers to make that choice theirs, and be truly independent. In the digital economy, in which we are participants, this holds absolutely true. Freelancers on PeoplePerHour or SuperTasker CAN AND DO choose when to work, for whom, the location from where to work, and they can choose to work as much or as little as they want and for what rate. In fact 95%+ of the work gets done remotely and the lack of physical dependency means that they can also be performing multiple jobs simultaneously (whilst a cleaner for HomeJoy or a FedEx driver cannot be at two places at the same time)
Uber arguably does dictate the ‘where’ by routing drivers to a specific location but we forget that the drivers choose when to toggle in and out of the network. They have that self-chosen freedom. De Blagio’s decision to drop the claim this week was therefore – in my opinion – correct.
So in short, I believe that some regulation is indeed needed to monitor and prevent these edge-cases from going mainstream and protecting workers’ rights (and Uncle Sam’s coffers), but they should not be misunderstood as being the norm, else we run the risk of over-regulating a growing and very promising market, destroying healthy businesses and limiting choice for the consumer.
The sharing economy is not a fad. It’s a truly revolutionary movement that unlocks waste in an economy, or ‘spare capacity’, be it people’s skills or time, their spare bedroom, their car sitting in the garage or their closet. Its putting idle resourced back to good use for the benefit of society. I often think of the sharing economy as ‘Recycling 2.0’. What recycling did for physical consumables is now – unbeknown to most – generating half a trillon dollars and touching everyone’s lives, plus making the world a better place. Out of what would have been just trash!
The sharing economy has the potential to do exactly the same for intangibles and physical assets. What machines did for trash, the internet and software is doing for almost everything that surrounds us. And that will certainly make the world a better place.