Who’s Really Sharing in the “Sharing” Economy?

In the past five years, much of America’s workforce has shifted, and shifted dramatically. Absent any hard data, it is estimated that between 30 and 50 million Americans are now working independently in what has been called the gig, sharing or temporary economy. These numbers grow as technology successfully connects those who need work and can perform a service, with those who have demand for that service. Simple, right?

How the Sharing Economy Flourished

While the system has its benefits – allowing a workforce that was reeling from the aftereffects of the Great Recession to find temporary work to make ends meet – there are questions arising about its model. With the advent of technology’s ability to act as intermediary, it was suddenly easy to share our homes, our vehicles, our tools and our skills with a wider audience. Several factors colliding at once created a perfect storm of opportunity for Silicon Valley’s elite. They paired an overwhelming need for work with consumers seeking a less expensive product. They developed “disruptive” technology platforms that arose to connect the two.

Before this disruption of the traditional workforce by technology that made a direct connection between laborers and consumers possible, job quality had been declining in the United States. Employers were already turning in large numbers to a reliance on “non-regular” or temporary employees. Misclassifying workers as “independent contractors” avoided significant employee costs. If a company could cut out breaks, overtime, medical benefits, retirement, unemployment, workers compensation, disability, paid sick time and vacation leave, the bottom line was improved. The gig model also allowed companies to push off costs of doing business onto their workers. This allowed for more profit at the end of the quarter, and a higher bottom line on their shareholders’ reports.

“Several factors colliding at once created a perfect storm of opportunity for Silicon Valley’s elite: an overwhelming need for work, consumers seeking a less expensive product, and the technology platforms that arose to connect the two.”

This increasing dependence by business on its growing army of temporary workers, freelancers and independent contractors, has begun to have an effect on American jobs. The result may not be the rosy outcome its supporters would like us to believe in. Even the term “independent contractor” is a misnomer. The practice has historically glossed over that workers do not always earn enough money to absorb the costs of entrepreneurship. Those many employee costs that businesses are often shifting to American workers. These facts are the reality of the “1099 economy.”

At Uber, for example, drivers have to pay for their own vehicles, maintenance and fuel. Uber sets the rates and terms of this labor, then takes a large cut for  itself. Uber drivers can receive as little as $1.21 per mile. The cost of operating a vehicle, according to IRS regulations, is $0.56 per mile, and Uber collects 20% of the fare. Once these expenses are deducted, the net result is that Uber drivers can make far below minimum wage.

To make matters worse, the fact that Uber drivers are classified as independent contractors precludes them joining a union. They have no method for banding together to equalize their bargaining power with the company. Without the ability to engage in collective action, the drivers have very little power to compel Uber to treat them fairly.  Proponents of the advantages of the “1099 economy” would argue that it is creative, and it allows for an independent workforce. They point out that consumers are flocking to the model in droves. You will often hear them repeat the mantra of “flexibility.” The list of startups offering such services is endless — Handy, Instacart, TaskRabbit, Homejoy —  a new one pops up almost every day. Each offers to provide services at the tap of a smartphone, at greatly reduced prices. Your entire house cleaned for $20? A plumber for under $60? Who wouldn’t want that? But what’s that old adage? If it seems too good to be true….

The History of “On Demand” Labor

A more accurate way to view the “on demand” worker would be to take a hard look at a little history. A similar business model brought us serfs, sharecroppers and tenant farmers. In the Middle Ages serfs were poor farmers, bonded to a nobleman to work for a period of time. Often that meant service for a lifetime. They earned only the right live on and work a small, arid patch of the nobleman’s land. These people were kept in such poverty that they comprised the lowest social class in feudal society. The noblemen, enriched by their labor, were the real beneficiaries of this system.

Here in the U.S., freed slaves were likewise given a small piece of land in exchange for a “share” of the crops it might produce. When crops failed due to a bad year, these farmers bore the losses alone. If they fell short, they were forced to borrow against the following year’s crops, further extending their indebtedness. In the 1930’s and 40’s, we had day laborers – men who lined up on the docks or at factories. Getting in line at the break of dawn each day for a chance to get whatever work might be available. Most were sent home, after the available slots had been filled. They had all the “flexibility” they could possibly want, but no food for their children. All the while, the rich got richer.

“A structure where the employer can decide that it is not the employer, merely to cut costs, and can rely on this lack of relationship to further his own business interests, is simply not one in which labor can flourish or thrive.”

Any system whose profit depends on paying negligible benefits to the workforce – flexible schedule or no – seems a pretty raw deal. Cheap labor is good business for the business owners, and it is not a new idea.

Most of us understand the American Dream in a post-war context. The concept of wealthy, paternalistic employers who understand and accept their responsibility for the welfare of their workforce. It is uniquely American.  Benefactors in business once believed that robust efforts by a workforce should be recognized by management. Real effort was met with reward.

With the New Deal came the safety nets we have come to rely on. FDR put these programs in place to combat the overwhelming poverty seen immediately after WWII. Today, the George Baileys of the world are fewer and farther between, if they exist at all. This means we must look to the law to protect the American worker’s right to prosper from hard work. The goal should still be that average Americans can reap a reward from a worthy effort. People should still be able to purchase a home, live comfortably in old age, and expect a better life for their children.

Furthering the Divide Between the “Middle Class” and the “One Percent.”

We must ask ourselves: is a little flexibility in employment worth trading away a secure future? Do we really want to assign the bulk of America’s workforce to a lifetime spent working hard so the 1% reaps the reward?  Shouldn’t everyone expect enough take-home pay to make rent? Is the middle class supposed to just accept that they can’t afford to to send their kids to college?

Children are usually taught what it means to share. While we played in the sandbox, our mothers made us display kindness to our siblings. If another little kid in the sandbox wanted to share our pail and shovel, Mom made us hand it over.

The problem with the “sharing economy,” is that there is no real sharing. It allows someone with a great deal more power and influence to use our pail and shovel. They will rent it out to that other kid for a hefty price tag, and maybe give us a shiny penny or a pocket candy for our trouble. But if the other kid smashes the pail, or breaks the other kid’s nose swinging that shovel around, we’re on our own.

The Takeaway

If you’re driving for a ride-sharing company and believe you’re getting the short end of the gear stick, here in California you can contact the Teamsters, as it appears the California App-Based Drivers Association has been folded into the Teamsters umbrella. There is also the National Freelancers Union, an organization dedicated to providing temporary and part time workers a collective voice when negotiating with the employer.

If you are laboring in any arrangement where you believe you have been mis-classified as an independent worker, when you are actually an employee, contact an experienced employment attorney whose practice involves employee-side rights. Lazear Mack can be reached at 510-735-6316 or complete our web intake form.

Lazear Mack, LLP
Employment Law Attorneys
436 14th Street, Suite 1117
Oakland, CA


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