Gig Economy - share (the scraps) economy

Bhargav September 3, 2015

With fingers weary and worn, With eyelids heavy and red, A woman sat, in unwomanly rags, Plying her needle and thread-- Stitch! stitch! stitch! In poverty, hunger, and dirt, And still with a voice of dolorous pitch She sang the "Song of the Shirt." "Work--work--work! My labour never flags; And what are its wages? A bed of straw, A crust of bread--and rags. That shatter'd roof--and this naked floor-- A table--a broken chair-- And a wall so blank, my shadow I thank For sometimes falling there!

These are few lines from the long forgotten poem “The Song of the Shirt” of Thomas Wood that resonates forcibly with “Putting-Out” form of labor prevalent in the late 19th century. The song is about a woman working under the wretched conditions of “Putting out system”; a system widely used in English and American textile industry as means of subcontracting the work and completing it in offsites, often at crowded workshops under poor conditions, usually with piece-rate system of payment. You get paid for the number of pieces of garment you produce. “Sweatshops” that's what they were called back then. As they say, the fate of “sweatshop” or even the term “sweatshop”, is history now.

Fast forward and replace the above scene with “gig-economy” - much hyped and fastest growing class of service industry1. There is no factory. There is only a website where the consumers can book any service such as maid service, handyman, cabs and almost everything. There are no machines. We have a massive array of computers that can possibly do all the job except the actual job of cleaning, plumbing and driving. There are no workers. We have only micro- entrepreneurs running mini businesses - cleaning, plumbing and driving. There are no greedy capitalists. It is all owned by geeky whiz kids who want to make the world a better place by cleaning, plumbing and driving; servicing one customer at a time.

Robert B.Reich, of University of California at Berkely, writes:

“How would you like to live in an economy where robots do everything that can be predictably programmed in advance, and almost all profits go to the robots’ owners? Meanwhile, human beings do the work that’s unpredictable – odd jobs, on-call projects, fetching and fixing, driving and delivering, tiny tasks needed at any and all hours – and patch together barely enough to live on. Brace yourself. This is the economy we’re now barreling toward. They’re Uber drivers, Instacart shoppers, and Airbnb hosts. They include Taskrabbit jobbers, Upcounsel’s on-demand attorneys, and Healthtap’s on-line doctors. They’re Mechanical Turks. The euphemism is the “share” economy. A more accurate term would be the “share-the-scraps” economy.“

What is Gig Economy?

The term “gig” is usually associated with entertainment industry where an artist used to perform certain act for a specified time and get just paid for it. With the onset of “mobile revolution” and post recession economic slump, there was a spurt of on-demand startups that created digital marketplaces and platforms to instantly fulfill consumer demands of goods and services. Just by a click of button consumers could book a cab or hire a maid or hire a computer programmer or even rent a grandma2. In theory it resembles a genuine peer-to-peer market economy.Individuals trying to maximize their profits by offering service and in doing so making society a better place - Adam Smith’s “invisible hand” at work 3. So it seems only if the “visible hand” of the platform providers is taken out of the equation. The companies that provide the digital marketplace and platforms who organize these economic activity pretty much control the show. They set the prices, they set the terms of services and in some instances even they set the color of the shirt to wear.


Image Credits: Stop Uber

The proponents of this crowd-working model argues that in this model you are not a mere employee but an entrepreneur or micro-entrepreneur running your own mini business. Some even argue that such a model is most productive, efficient and healthy4. But fact of the matter is that this model exploits the loophole for avoiding labor laws. The companies claim to offer only a marketplace where there is a growing demand for such service and there is a steady supply of workers willing to provide the service. Companies pockets hefty commission for each service availed through the marketplace. The workers hired through the service are not employees of the company and hence they don’t have to offer any security, insurance or other benefits which must be provided otherwise for a legal full-time employee. Often the workers have to pay for the supply and resources needed to provide the service. For instance, there are stories of Uber drivers taking a hefty car loan to purchase high segments cars, and paying the mandatory auto insurance premium from their pockets. Companies don't have to fire them. All they probably need is to downgrade the service provider by mysteriously changing the ratings algorithm. Amazon’s Mechanical Turk workers launched a campaign in late 2014 - “I am a human being and not an algorithm”.

The fate of this model will be determined by the slew of class action lawsuits recently filed against these companies for misrepresenting the workers as “independent contractors”. In a class action lawsuit the plaintiff is “group of people”, in this case the gig-workers, who are affected almost same way by the defendant or group of defendants, in this case the gig-companies. It determines whether companies such as Uber is a tech-enabled service giant valued at billions of dollars or just another huge transportation company. Money street is hoping that a middle ground will be reached with alternatives suggested to move to a co-op model or to even define a third category of employee in the labor law. There is precedence, where in 2012, host of strippers managed to win a similar class action lawsuit against the strip clubs stating that “ if the exotic dancers have no control of the workplace and if the business wouldn’t exist without the exotic dancers then they must be treated as employees and not as independent contractors” 5. In effect it will determine whether the gig economic model will reverse the time and take us back to the 19th century sweatshop work model, when “when workers had no power and no legal rights, took all the risks, and worked all hours for almost nothing.” It will determine if there ever will be a “The Song of the Uber Driver”.

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