Is the Uber economy bad for workers?

Adam Allington Mar 10, 2015

Is the Uber economy bad for workers?

Adam Allington Mar 10, 2015

You don’t have to look very hard these days to find an app billing itself as, “The Uber of … A, B, or C”.  Case in point: Waffle House, the national chain of all-night eateries, has joined forces with Roadie, an app that connects drivers with people who want something shipped.

There are also apps to do your grocery shopping, wash your clothes, even clean out your garage. The thing that all these businesses have in common is they use smartphones to connect people who want a job done with those who need the work.

But, the economy is already awash with temp workers and this “Uberification” of the job force might actually do more harm than good.

Three years ago, AJ Brustein was a brand manager for Coca-Cola. At the time and he noticed one problem that Cokes merchandisers, the companies who keep Coke stocked on store shelves, constantly struggled with.

“They’d get a call from a store manager somewhere saying, ‘Hey, Coke Zero is out of stock you need to come back and restock it, or ‘Hey, you need to build this display today instead of tomorrow or Pepsi is going to build it.”

Brustein says these kinds of unplanned stops meant delays, and diverting staff from other jobs, which all added up lost sales and increased costs.

“Paying overtime, extra transportation costs, consumers are buying Pepsi instead of Coke,” says Brustein. So, he and his co-founder Yong Kim, pitched Coke on an idea for an app they call Wonolo, which stands for “Work. Now. Locally.”

The app allowed companies to post these extra, unexpected jobs on Wonolo, where they could find vetted temps to do the work.  Just like using TaskRabbit to find someone to clean your garage.

Wonolo has since spun off from Coke — but haven’t we always had temp workers in our economy? Has anything really changed? The answer is yes, and the reason is smartphones and GPS.

“The ability to create a marketplace really depends on being able to match buyers and sellers,” says Stewart Thornhill. Thornhill is the Executive Director, Zell-Lurie Institute for Entrepreneurial Studies at the University Of Michigan Ross School Of Business. 

Thanks to the smartphone most of us carry in our pocket, the ease of finding people ready to take on a little extra work has made it frighteningly easy for companies to offload jobs that would otherwise go to full-time staff. 

“This is really digitizing that worker in the Walmart parking lot,” says Thornhill. “If I were a labor organizer or on the workforce side, I’d find that a very concerning trend. If I were on the corporate employment side, I would see that as a cost-cutting measure.”

But part of the appeal of many of these gig-economy jobs is specifically because they are not full time.

Joe Franco works as a personal shopper for Instacart in Washington DC. Instacart allows people to order groceries and have them delivered directly to their house. There’s no fleet of trucks, no inventory, just software.

As a senior at the University of Maryland, Franco says Instacart’s flexibility is key.

“So, I take classes in the morning and I’m done by around noon time. So, on Tuesdays and Thursdays, I’ll typically work from around 2:00 to 9:00pm,” says Franco.

Franco has worked for Instacart for about a year. He’s paid by commission based on the quantity of groceries he picks up and how many deliveries he makes.

“Typically shoppers earn between $12-$20 per hour. I’ve certainly had times when it’s been more lucrative than that,” he says.

Still, at some point many of us hope to have a real job. The kind covered by basic labor laws, like overtime, unemployment insurance, social security, or even the occasional sick day — all benefits companies like Instacart, Uber, or Wonolo, don’t have to offer because workers are technically “independent contractors.”

It’s a loophole of labor regulations that some feel is creating a speedy race to the bottom.

“If people are willing to work two or three hours helping set up a display at a store, or mowing someone’s lawn, they’re not doing that simply because you have this app on the web,” says Dean Baker, an economist at the Center for Economic and Policy Research. “They’re doing it because of a larger set of policies that deprive them of alternatives.”

By acting as middlemen in the market for temp work, Baker says these gig companies are able to skirt labor laws, while putting pressure on other industries to do the same.

“Well, that’s simply bad for the economy, we should have the same set of regulations everywhere, and it really doesn’t matter if they order you over the web, it should be the same.”

Baker says there is a key distinction between creating work and creating jobs. He points to Uber which has 850 permanent employees and over 160,000 drivers.

Jordan Metzner is the CEO of Washio, a mobile app for laundry washing. Maybe laws do need to change, he says, but people are going to use new technology, and he feels most people are savvy enough to seek out work that suits them.

“You know, a lot of our drivers are either music instructors, or Yoga teachers, or students, or professionals getting a new degree and it’s an awesome opportunity to make additional capital,” Metzner says.

At the end of the day, Metzner says the sharing economy is about creating systems that work for the customer first, and the company second.

“If you think of a taxi service, you still have to call a central line and speak to an operator and wait to get a car dispatched, and all of that was convenience for the service provider, for the taxi in this case. And if you look at what Uber does, it cuts out all of these steps that make it convenient for the consumer,” Metzner says.

According to the Department of labor the U.S has around 2.8 million temp workers, which is a record. But those numbers only count people employed by “temp agencies”, and don’t include a single person working in the gig economy.

Correction: A previous version of this story misspelled Washio CEO Jordan Metzner’s name. The text has been corrected.

There’s a lot happening in the world.  Through it all, Marketplace is here for you. 

You rely on Marketplace to break down the world’s events and tell you how it affects you in a fact-based, approachable way. We rely on your financial support to keep making that possible. 

Your donation today powers the independent journalism that you rely on. For just $5/month, you can help sustain Marketplace so we can keep reporting on the things that matter to you.