The Gig Economy and the Decline of Work in the U.S

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In recent years, you may have heard conversations about America’s shrinking middle class or how the income of the one percent has been increasing while job quality is decreasing. Many factors have contributed to these trends, such as wage stagnation, loss of benefits, and household debt. The nascent term “gig economy” has become increasingly prevalent in discourses surrounding the job market. However, the growing gig economy–a labor force characterized by freelance work and short-term contracts–is symptomatic of worsening working conditions in the United States. 

One of the main ways to quantify job quality is by looking at forms of wage stagnation. Jobs simply do not pay as much as they once did, as wages have not risen alongside worker productivity. Workers have historically produced more goods and services per hour at an increasing rate, and wages followed these gains in productivity until the 1970s. Since then, however, productivity has increased yearly by about 75%, while hourly wages have only risen by about 9%. The profit from the increased productivity has not gone to the workers but has been claimed by capital owners instead. Their wages, conversely, have increased by 138%. To put it more concretely, income inequality has cost middle-class families nearly $18,000 in annual income.

Not only have wages remained stagnant—they’ve effectively decreased for the bottom 50% of income earners. Since 1980, pre-tax and pre-benefit income has decreased by 6.2%. This is before factors like cost of living are even considered. Furthermore, workers are being given more expenses and responsibilities covered initially by their employers. For instance, employers have increasingly cut down on healthcare benefits since the 1980s.

The neoliberal trend of shifting costs, such as healthcare and retirement, over to the individual has resulted in people shouldering more debt just to survive. The average American has about $100,000 in debt, which has steadily increased since 2013. The gutting of social services also adds to this trend: The average retirement age has been raised by three years over the past 30 years. Republicans have discussed plans to delay retirement even further by pushing back the age when people can receive full Social Security benefits. These policies target poor Americans who are already less likely to reach the retirement age than wealthy Americans. 

The gig economy has normalized a decrease in job security, as employers have turned to “quiet hiring.” This new term–analogous to the “quiet quitting” TikTok trend–refers to hiring workers on an irregular and intermittent basis. Such contractual work has been marketed as “flexible” by companies like Uber and its other gig economy equivalents. These companies describe the gig economy as a completely new way to work, giving their independent contractors the “freedom” to be their own boss by choosing their hours and making supposedly generous earnings. 

It is difficult to figure out exactly how much Uber drivers and other gig workers earn, even amongst the workers themselves. Factors including location, hours, demand, tips, surge pricing, and app policies make it difficult to find a general universal estimate. The lack of a concise answer allows Uber and its clones to inflate the numbers and combine. For example, in 2014, Uber stated that the median salary of a driver in New York was $90,000 per year. This is well above the minimum wage and average American salary. The figure was unfortunately inaccurate, as reporters soon estimated the full-time yearly salary to be about $25,000. To be fair, this was in 2014 and anecdotal due to the lack of data at the time. Uber drivers in New York now make about $37,000 to $54,000, but, again, this is a wide range due to countless external factors. 

While these numbers help obtain a general understanding, the earnings estimates are not needed to see the overarching problem with gig economy jobs. Many gig economy workers are considered independent contractors by their companies (though this is shifting in some states). Independent contractors are generally not granted the basic benefits of traditional employment: minimum wage, health insurance, time off, overtime, etc. Due to the nature of gig work, workers who use these apps as a sole means of income are incentivized to spend as much time as possible working to earn the maximum amount. This means that sudden circumstances, such as injuries, put gig workers in a difficult position, whereas a salaried worker would have the benefit of paid time off. While Uber and Lyft have caps in place to limit overworking, drivers can simply switch between the apps to continue earning. This method becomes more attractive when the 40-hour work week is simply insufficient to meet basic living expenses, leading to reports of drivers sleeping in their cars after working for long periods of time. 

The advertised “freedom” of setting your own hours largely allows Uber to avoid these criticisms. Framing gig workers as independent contractors rather than employees is possibly a deliberate distinction. Most of the costs associated with Uber and other apps fall completely on the shoulders of the drivers. These include buying or renting a car, maintaining and cleaning it, insurance, healthcare, and gas. All those expenses and taxes leave gig workers with a net income much closer to the poverty line than the apps claim, especially in the likely scenario that workers also provide for a family. A traditional salaried job would provide for these expenses or at least pay a minimum wage.

To maintain these legal loopholes, Uber and its counterparts have to portray themselves as mere middlemen, not employers. They claim to allow their “non-employees” the flexibility a normal job would not provide. However, Uber exploits the data from its drivers and riders to determine prices and number of rides. Drivers are not able to see this information nor negotiate with Uber. Despite denying its employer status, this data collection ultimately gives Uber a level of control over its drivers that is significantly greater than what is standard for traditional employment.

There is also the fact that, despite what Uber says, it depends on its full-time drivers. Uber claims to be an app for independent contractors and people looking for a secondary source of income. In 2021, Uber put $250 million into a driver stimulus program to transition its part-time drivers to full-time employment. In Seattle, full-time drivers make up one-third of Uber’s workforce but provide about half of all of the rides in the city. Uber would simply not function without its full-time employees. Yet, it risks defying labor laws cutting into its business model by denying them employee status.

There is a reason it is called the gig economy, or “uberization” of the economy: Other sectors have bought into the model. Several companies have attempted to adopt the model in the healthcare industry by giving nurses an independent contractor status. Rather than hospitals saving money through reforms in health insurance and the pharmaceutical industry, they are choosing to save money by slashing the paychecks of healthcare workers. The airlines are in on it, too, with 70% of RyanAir pilots today classified as independent contractors. Such changes in these important industries are alarming and often greater in magnitude than those two examples. 

About 53% of people aged 18 to 34 in the gig economy use it as their primary source of income. Between 2005 and 2015, 94% of net employment growth in the U.S. was in alternative work,” i.e. the gig economy. According to the same study, Uber’s workforce comprised only 0.5% of employment growth, meaning that while Uber and Lyft seem like the main perpetrators of the shift to gig work, many other employers are actively utilizing the same method of quiet hiring. Our economy seems to be not only shifting but also becoming dependent on the loophole of contract work–hence the boom of gig jobs.

Despite Uber circumventing decades of labor struggles and progress, some states have begun to push back against Uber and gig apps’ aversion to classifying their workers as employees. California and New York have implemented policies to ensure minimum pay and limited benefits. The Labor Department, under the Biden Administration, made a ruling that could extend benefits and protections to gig workers. These are all steps in the right direction because if gig workers earn the title of actual employees, the protections they would gain open up a possible path for unionization and collective bargaining between gig workers and employers. Such moves provide hope for a future of fair employment and an end to the exploitative gig economy.

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This article was edited by Delbar Nonahal.