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How the gig economy finally went into retreat

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A loophole that many self-employed people have used to avoid paying income tax and national insurance in the UK has closed. After a yearlong delay, the IR35 regulation came into force on April 6. It gives larger companies the responsibility for deciding contractors’ employment status, with a view to ensuring they pay the taxes that they are supposed to.

This will reduce the leeway thousands of voluntarily self-employed workers have to avoid tax payments and social contributions. It also makes it harder for companies to avoid taking proper responsibility for these people by denying them employment rights and benefits such as pensions or holiday entitlements, while avoiding the considerable expense of paying employers’ national insurance for them.

The change in the rules for the voluntarily self-employed is mirrored by exactly the same trend regarding the involuntarily self-employed that saw investors criticising Deliveroo’s employment model ahead of its disappointing IPO, and the UK’s supreme court ruling against Uber. The dominant liberal interpretation of the relationship between employers and their workers is becoming less and less acceptable within society. And it raises profound questions about the future of liberal capitalism.

The loophole closes

The new IR35 regulation changes the rules around what is known as off-payroll working for private companies. It puts an end to workers who are really employees voluntarily working as self-employed by establishing their own intermediary company.

Many workers take advantage of the rules to pay themselves very low salaries through these companies and pay most of their income as dividends, meaning they paid far less tax on their take-home pay.

Many engineers are being affected by IR35 changes.
ThisIsEngineering RA Eng, CC BY-SA

In 2015, the government said that 100,000 workers fell into this category, and only 10,000 were paying the income taxes and national insurance that they should have been. Since then, the number of self-employed people is estimated to have risen considerably.

The IR35 loophole was closed for the public sector in 2017, notably forcing the BBC to convert many celebrity presenters into employees. The same change was supposed to have been introduced for private companies in 2020 but was delayed by a year.

In making these changes, the UK government has shown little sympathy with arguments by some contractors and employers that the benefits of contractual freedoms outweigh the costs. This is comparable to the recent Deliveroo and Uber cases, where investors and the supreme court respectively dismissed suggestions that denying workers their rights in the name of freedom was acceptable.

‘This is what we believe’

The question of contractual freedom and the extent to which an employment contract reflects a power relationship between the employer and the employee is central to liberalism. From a liberal perspective, contracts entered into under coercion are not compatible with the principles of individual freedom. The question is, when can we say that someone has been coerced into an employment contract?

The Austrian thinker Friedrich A Hayek, whose teachings have inspired conservative governments since Margaret Thatcher, adopted a very narrow definition of coercion. In The Constitution of Liberty (1960), he argued that “so long as the employer can remove only one opportunity among many to earn a living, he cannot coerce, though he may cause pain”.

The argument is that to coerce someone into an employment contract, you have to be a monopolist withholding an essential good – the owner of an oasis in the desert, say. All other contracts must be considered to have been entered into by free agents. This means that there is no need for the state to intervene to make them fairer.

Margaret Thatcher with Royal Bermuda regiment in 1990
Thatcher hugely admired Hayek.
Wikimedia

Thatcher reportedly enthusiastically endorsed Hayekian views, by pulling a copy of The Constitution of Liberty out of her handbag during a Conservative party meeting and declaring, “this is what we believe”.

Similarly, the arguments in favour of very liberal contracts by Uber, Deliveroo and those opposed to IR35 all have a distinctly Hayekian ring to them. Deliveroo, for instance, has been making the case that its riders value the flexibility that self-employed status gives them.

Clearly, however, such arguments have been losing their clout. Most explicitly, in the Uber case, the supreme court said that, rather than the content of a written contract, what matters in determining the employment relationship is the reality of the power differential between employer and employee.

The court decided that employers can often dictate contractual terms, and workers usually have little scope to negotiate them. Therefore, what Uber presented as its drivers’ choice were not actually choices of self-employed workers, so in realty they were employees.

What next?

It was not long ago that chief executives and academics alike were hopeful that the sharing economy, of which companies like Uber and Deliveroo were often seen as heralds, could be both fair and sustainable. Yet collective discomfort with growing inequality, partly driven by the rise in “gig work” and contractors’ high pay, has changed the dynamic.

It could be argued that we are seeing an epochal shift away from the type of liberalism that has been dominant since the 1980s. Since the global financial crisis of 2007-09, academics have reminded us that any social order – including liberal capitalism – is fundamentally a historical phenomenon and as such will eventually come to an end.

These challenges to the employment contract – a key pillar of liberal capitalism – may be signalling that we are moving a step closer to the end of this particular phenomenon. The big question, of course, is what will it be replaced with?

Humans are notoriously bad at reading the signs of their times until they draw to a close – “the owl of Minerva spreads its wings only at dusk” as the German philosopher GFW Hegel famously put it.

What we can say with certainty, though, is that failing to address growing discontent with capitalism will jeopardise both liberal economic ideas like free trade and light-touch regulation, and also democracy itself – by fanning the flames of populism. The new version of capitalism will clearly have to devise a new social contract between workers, businesses and the state. Changing our interpretation of the liberal employment contract is a good place to start.

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Gig companies want workers back and are paying bonuses in Colorado

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To rev up its workforce, Uber pledged this week to spend $250 million to boost incomes of drivers nationwide. While details on how this would roll out were slim, an Uber spokeswoman shared what it means for Denver drivers: $30.56 an hour.

That’s the median hourly rate — not including tips! — for drivers who spend 20 hours a week on the app and not just engaged with a customer, according to Uber, which saw its ride-sharing business plummet 80% during the early months of the pandemic. 

Right now, there are more riders than drivers, so Uber is trying to get its gig workforce to return. The more local demand, the higher the rate. And Denver, apparently, has high demand. Its hourly rate is above Chicago’s $28.73, Austin’s $26.66 and Miami’s $26.05. 

Don’t miss the free weekly newsletter on Colorado jobs and unemployment. Sign up: ColoradoSun.com/getww

“Denver is the only figure I have for Colorado, but wanted it to be clear that we are seeing demand across the state so drivers may see a boost even on the outskirts of town,” said Kayla Whaling, an Uber spokeswoman. 

That includes bonuses for completed trips on top of the hourly rates. The temporary boost is for new and existing drivers who return to their gigs and will “be in place for the next several months,” Whaling added.

Over at Lyft, an increase in demand for rides also has the company providing incentives to drivers “who are busier and earning more than they were even before the pandemic,” a spokesperson said. The average wage right now, including tips, in Denver is $45 per hour.

Lyft didn’t share specifics on incentives, but according to TheRideShareGuy.com, Lyft has been messaging drivers that it’ll pay a $250 bonus for drivers in Minneapolis who complete 20 rides a week.

Bonuses and pay are still a touchy topic for gig-economy critics, who feel the base pay needs to be raised. Some reminded us that Uber, Lyft and DoorDash spent $200 million last year fighting California’s Proposition 22. The failed initiative would have reclassified gig workers as employees and improved pay and benefits for many.

As we now know, roughly 260,000 self-employed or gig-working Coloradans have filed for the special Pandemic Unemployment Assistance, or PUA, since mid-March 2020. Normally, gig workers don’t qualify for unemployment pay, but federal lawmakers included the group in the coronavirus stimulus plans. Currently, most are eligible for a minimum of $223 in PUA unemployment plus an extra $300 weekly bonus. 

To date, Colorado has distributed $1.29 billion in PUA payments since the pandemic began. As of March 27, about 87,880 PUA users were still unemployed in Colorado. 

→ No dull moments for Dashers: DoorDash’s April rewards program pays out an extra $300 for those who complete 600 deliveries during the month. That’s 20 deliveries per day for 30 days straight!

→ Better paying gigs? An effort to get DoorDash Dashers to reject lower-paying deliveries in order to get the app’s algorithm to offer a higher base payment has gained traction. But for #DeclineNow to work, more Dashers must play along. There’s been mixed results, reports Bloomberg. >> STORY

How 71,750 jobs ended up on the state’s official job board

Anyone receiving benefits through Colorado’s unemployment system knows about ConnectingColorado.com. And if you don’t, that may be what’s holding up your benefits. You’re required to register with the state’s official job board.

But do you know how those 71,750 jobs, as of Friday, ended up on the site? I explored the job board in a story this week that anyone looking for a job or looking to fill a job needs to pay attention to. 

The jobs come from two main sources: DirectEmployers Association and the state’s local workforce centers. DirectEmployers works with 900 employers nationwide and scrapes their websites directly for jobs. Workforce centers get them from local employers. 

But don’t let that job board be your only option. Some jobs were duplicated, like the one I mentioned a few weeks ago that was posted 116 times. And many more jobs aren’t even listed. 

Read the story to find out more: Thousands of new openings post to Colorado’s official job board each week. Here’s where they come from.

→ Now Hiring: Fidelity Investments has 375 positions to fill in Colorado. That’s on top of adding 500 in the state last year. The greatest need? Financial consultants and customer service representatives. >> APPLY

→ Got a $5 million idea? The Colorado Governor’s Office has partnered with ZOMALAB and other education-minded organizations to challenge thinkers to come up with a better something to help our state’s 12 to 24 year olds get the job skills needed for quality careers. If you know what that something could be, turn it into a pitch and present it to SyncUp Colorado by June 1. >> DETAILS 

Paycheck loans running out?

Reports of the federal Paycheck Protection Program running out of money began showing up this week as approved loans reached $223.5 billion as of April 4 (out of roughly $290 billion available). About $4.2 billion has so far been approved for 64,285 small businesses in Colorado. 

But is the federal program for forgivable small business loans really running out? There’s still roughly $60 billion available. Last year, when Paycheck loans debuted, small (and some pretty large) businesses, including The Colorado Sun, snapped up the $349 billion in a few weeks. The rules changed to target smaller businesses, but when the program ended in August, $100 billion still was unclaimed.

This year’s round of $284 billion had a similarly slow rollout. The American Rescue Plan, passed in March, added another $7 billion and extended the deadline to May 31. 

But now, it could run out, said Nim Patel, chief strategy officer with the Colorado Enterprise Fund, which works with local businesses that aren’t able to get a traditional business loan.  

“The weekly disbursements have been between $10 billion and $15 million the last four weeks. That says the money might last another four to six weeks max,” Patel said in an email. “Seems like the money will run out before May 31 but it’s anyone’s guess as to exactly when.”

CEF will continue accepting applications until the money runs out, he added. 

“We know there are many Colorado small businesses who have been unsuccessful accessing PPP through traditional channels and we are ready to help them out however we can,” he said.

→ Still time for a second PPP: Business owners who haven’t applied for a second loan can still do so through May 31, if money is still available. But better get on it soon. Samantha Wranosky, a Fort Collins sole proprietor who got her first one in February, checked with her bank and learned it’s not taking new applications for several weeks. She ended up applying for a second loan at another bank. “I’m glad I went ahead and went to a different bank,” she said.

→ A pause on entertainment venue loans? A day after its launch, the portal for venues hoping for a piece of the $16.2 billion federal relief remained closed Friday “due to technical difficulties.” The Shuttered Venue Operators Grant offers aid to operators of theaters, museums and other live venues forced to close last year because of COVID-19. Check back, though, because the SBA is working with the vendor in order to reopen it as soon as possible. >> Apply

IDme delays continue

IDme, the tool used by the Colorado Department of Labor and Employment to verify identities of unemployed applicants, had a “More than 5 hours” wait for users on March 31, 2021. CDLE is requiring everyone on unemployment to go through the IDme verification process. (Screenshot provided by Dahlia Weinstein)

While I’m receiving fewer emails this week from unemployed Coloradans complaining of long waits to get their identities verified, the wait is still long for some. This is a new requirement for those on unemployment, part of the state’s fight against fraudsters. If you don’t pass, you don’t get paid.

Mo from Highlands Ranch shared his experience with the state’s ID verifier, IDme, sent at 11:30 a.m. on Thursday:

April 5: Waited more than eight (8) hours….No trusted referee.

April 6: Waited more than 7 hours and 45 minutes…No trusted referee

April 7: Waited more than eight (8)…No trusted referee.

Today (April 8th) as I’m dictating this email note, I’ve been waiting since 5:30 a.m. with no trusted referee in sight.

As of Friday afternoon, an IDme spokesman told me that the wait is now 4 hours for a trusted referee, which is the additional step IDme takes when a user’s data — including a selfie — isn’t enough. This usually involves a video call to prove you are who you say you are. (But when everything goes smoothly, the automated process takes about 15 minutes.)

The delays started as more states joined IDme as customers and then dumped hundreds of thousands of unemployed folks onto the system. Waits of 30 minutes dragged on to 5 hours or more. IDme’s CEO Blake Hall even shared a chart last week showing us the backlog. 

And news stories nationwide have reported on the delays hitting North Carolina, Nevada and Arizona

One thing I have heard are tips from readers, CDLE staff and IDme:

  • Check your credit report and fix out-of-date or incorrect information
  • Make sure documents uploaded are clear
  • Increase the brightness on your phone’s camera when taking a selfie
  • Don’t stop after uploading your ID. There are at least nine steps
  • Start with a computer, then switch to a mobile device for the photo
  • More tips are on the private Facebook group page where 8,200 Coloradans are helping each other figure out unemployment benefits. 

And this tip coming in from Twitter: Complain to IDme’s official Twitter account. A Twitter user told me she did just that after seeing the 5-hour wait. IDme’s social staff got her through the system on April 1, she certified for her benefits on Sunday and was paid on Thursday.

IDme appears to be paying attention. In my own effort to help folks asking about IDme on Twitter, the company replied publicly: “We can look into this for you! Please DM us the email address associated to your IDme account for further assistance.”


Thanks for reading through another column. I keep it going as long as readers are interested so if you like What’s Working, share it with someone you know. Keep me posted on your job or hiring situation, tag me on Twitter and don’t forget to follow up when your issue has been resolved. Stay cool! ~tamara



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How Proposition 22 Blocks Cities and Counties From Giving Hazard Pay to Gig Workers

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Haney added that Proposition 22 has given gig companies legal grounds to sue and block an ordinance like this if they decide they don’t want to comply with it.

“Sometimes, as a local government, we are preempted by the states or feds, but usually when that’s the case, another regulatory body or the state Legislature is taking up the responsibility,” Haney said. “What’s the case here is that some regulations that were written into law by the companies and passed by the voters have made it impossible for anyone to provide more extensive and stronger regulations.”

Rey Fuentes, a legal fellow at the Partnership for Working Families, said California cities and counties have a history of pioneering progressive pro-worker legislation, like San Francisco’s paid sick leave program, which he said was the first of its kind in the nation.

Fuentes said it’s important for municipalities to test new policies out so that there are models for state and federal laws. “This allows for the experimentation that I think is so vital to our democracy and to developing good policy,” he said.

While grocery stores are pushing back on the hazard pay by temporarily closing locations and threatening legal action, gig companies don’t have to. Proposition 22 stops local governments from even trying to get higher wages or better benefits for gig workers, halting local experimentation with policy that could help the state’s growing number of app-based gig workers who are denied employee benefits and protections.

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