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In A Bold Move That Could Shake Up The Gig Economy, President Biden’s Labor Secretary Said App-Based Tech Companies Should Convert Contract Workers To Employees

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President Joe Biden positioned himself as the champion of the American worker during his campaign, as well as an ardent proponent of unions. On Thursday, Biden’s Labor Secretary, Marty Walsh, told Reuters that gig workers should be treated as employees.

This simple statement could become an existential threat to app-based technology companies, such as Uber, Lyft, Instacart, DoorDash and dozens of others that heavily rely upon gig-economy workers.

The tech companies are basically built on the backs of contract workers. However, these gig workers are not classified as employees. Without the designation, contractors don’t qualify for traditional benefits, rights and privileges that are afforded to full-time permanent employees.

This sector represents a significant part of the economy. About 55 million Americans work in the gig economy, comprising around 36% of the workforce. If the Biden administration decides to take action based upon Walsh’s plan, it could have devastating consequences. 

Walsh seeks to rectify the situation by reclassifying contract workers as “employees.” The labor secretary said, “We are looking at it, but in a lot of cases, gig workers should be classified as employees…in some cases they are treated respectfully and in some cases they are not and I think it has to be consistent across the board.” Based upon this news, shares of Uber fell as much as 8%, while Lyft took a dive by 12%. Doordash fell nearly 9% and Grubhub was down 3.3%.

There are concerns raised by opponents of the gig-economy structure who say, similar to Walsh, it doesn’t seem fair to workers. Venture capitalists, institutions and wealthy individuals have flooded capital into this sector. When the tech companies went public, the investors, CEOs and top executives reaped vast fortunes. Contractors serve as cheap labor. If they acquiesce to critics like Walsh, they risk losing multimillions or billions of dollars. 

While many people earn a livelihood driving cars, delivering food and offering creative services through on-demand companies, there is a dark side. The contractors work long, hard hours for little pay and no real benefits. Near-monopolies have been created that crush or drive out the competition. Look at what happened to the once-ubiquitous yellow taxi cabs when Uber came to New York City. 

Uber, Lyft, DoorDash, Grubhub and other similar gig-based companies are highly dependent upon independent contractors. They have a financial self-interest in classifying drivers or workers as contractors. This model enables corporations to avoid paying payroll taxes, FICA (Social Security and Medicare), disability, federal and state-level unemployment and health insurance benefits. They are not required to comply with minimum-wage laws nor offer vacation days. 

Although billions were funneled into the companies, most of them are not profitable—some even hemorrhaging money. In its most recent quarter, Uber lost $968 million, Lyft lost $458 million for its last quarter, DoorDash reported a net GAAP loss of $312 million for its fourth quarter of 2020. 

The real issue that no one wants to address is that if contractors are reclassified to employees, the financial situations at these app-based companies would quickly deteriorate. It’s probable that many won’t survive. Hedge funds and the average investor in these companies would likely see large losses on their stock holdings or get wiped out. 

The gig-economy companies are stuck between a rock and a hard place. The investors put in too much money to walk away from. The workers and now the Biden administration want to effect change. There has to be some sort of compromise. In a New York Times op-ed, Uber CEO Dara Khosrowshahi, in an effort to find an acceptable middle-ground solution, called for gig-economy workers to receive benefits, but was also adamant that the rideshare company’s drivers “want to work independently.” 

Walsh said, “These companies are making profits and revenue and I’m not (going to) begrudge anyone for that because that’s what we are about in America, but we also want to make sure that success trickles down to the worker.”

There are many positive aspects of the gig economy. Some drivers may prefer to operate autonomously without strict enforceable schedules. They appreciate the freedom and entrepreneurship to work whenever and wherever they’d like. Other people might have fallen into a gig role due to the brutal effects of the economy and conditions of the job market—as they were unable to procure another job and in dire need of some money. 

The U.S. gig-based corporations may see their future from a recent hard-fought legal battle in the United Kingdom. The U.K. Supreme Court ruled that Uber’s drivers are workers and not independent, self-employed contractors. The high court’s ruling could call for Uber to pay its drivers at least minimum wage, holiday pay and, perhaps, other benefits traditionally afforded to workers. The ruling may have severe consequences for other similar app-based tech companies that depend upon gig workers.  

The decision was viewed as a big victory for labor organizations. They claim that Uber, and other app-based companies, take advantage of its gig workers by not treating them as employees. The recent ruling may affect Uber’s competitor, Lyft, as well as other companies that have a similar business model.

Under a more worker-friendly administration in the U.S., it looks like the gig-economy app companies need to figure out a way to appease the government, regulators and its workers. If they can’t arrive at a fair compromise for all involved, Walsh and the Biden administration could take appropriate actions that may not bode well for them.

According to Reuters, “An Uber spokesman said the United States should be advancing policies to improve independent work and not eliminating it. The company said an overwhelming majority of app-based workers want to stay independent, because it allows them to work when, where and how they want with flexibility no traditional job can match.” Additionally, “a Doordash spokeswoman said ‘dashers have overwhelmingly told us that they value the flexibility to earn when and how they choose. We’re committed to protecting their independence while providing greater security and benefits.’”

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Bye 9-to-5, hi mental health struggles: the effect of the gig economy

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The gig economy offers both freedom and uncertainty (Getty)

The way we work is changing and it’s not only because of the pandemic. There are a lot of options available to us these days. Too many, in fact. One such alternative is the gig economy

 Essentially, the gig economy means that workers are paid for ‘gigs’ which are short-term, temporary jobs, often referred to as freelance work, as opposed to permanent employment.

Gig economy workers could already be in full-time or part-time employment though, taking on gig work to top up their income and make ends meet. Or, they could be self-employed, filling their day-to-day lives with enough freelance hours to make a living. 

Long gone are the days of simply working nine-to-five.

For some, this fundamental shift in the way we work offers flexibility and freedom to carry out work job-to-job. For others, it brings insecurity, no promise of contractual work and lack of holiday and sick pay.

According to research by the University of Hertfordshire, between 2016 and 2019, the UK gig economy workforce doubled with one in 10 working adults using gig economy platforms in 2019.

But whether it’s moonlighting as a YouTuber or Amazon seller as a side hustle or working full-time juggling a variety of jobs like delivering food for Uber Eats or Deliveroo, how do we know the right time to turn off our ‘work mode’ and boot up our ‘life mode’?

And what is this precarious and ever-changing way of working doing to our mental health?

Research findings from a 2016 study commissioned by the charity, Help Musicians UK, looked into the potential links between the gig economy and mental health.

Looking at over 2,200 musicians working in the gig economy in the UK, 68.5% self-reported depression and 71% anxiety.

Some of the key issues which arose in the study pointed at worries about financial stability, job insecurity, and the requirement to have an online presence and network which exposed individuals to relentless opinion and criticism.

Whilst the phrase gig economy originated from the music industry, the rise of the internet and technological innovations has created a whole new world of opportunity for the way we work and seemingly endless opportunities to fill our home life with more and more work.

But is this tech-enabled gig economy causing burnout because we just don’t know when to stop? Or does it allow us to embrace freedom from traditional corporate roles?

Another study, conducted by researchers at the University of Oxford, has been taking a look at the social, organizational, and policy implications of the shift towards the online gig economy.

Dr Alex Wood, who has been working on the study, says the gig economy can have both positive and negative consequences on our mental health.

‘We find that one of the things workers like most about this work is the sense of being their own boss as they don’t have to deal with a manager on a day-to-day basis.’ Alex tells Metro.co.uk.

Dr. Alex Wood has been studying the effects of the gig economy (Alex Wood)

‘This autonomy from traditional management is a real positive for many workers but that comes with the stress caused by the algorithmic control of their work by platforms; knowing that if they don’t work hard they’ll get a bad rating and lose your ability to make a living.’

‘This algorithmic control comes with its own risks for mental health as workers work hard for long hours without taking many breaks which can cause burnout.’

Michael Daly, associate professor in Psychology/Behavioural Science at Maynooth University, says the research he and his team have carried out on underemployment and psychological distress has shown a notable increase ‘when a discrepancy emerges between the amount of hours they would like to work and the hours offered by their employer.’

‘Workers also want job and income security, benefits such as health insurance, and opportunities for promotion and career development that tend to be underrepresented in gig economy jobs.’

But what do the people who actually exist in this new way of working think about it?

Phillip Smith, a freelance editor, is fully immersed in the gig economy and says finding the right work-life balance is tough. 

‘There was a period at the start where I was building contacts where you would be repeatedly hitting refresh on your emails begging for replies, that was tough.’

As a freelance editor, Phill Smith is immersed in the gig economy (Phill Smith)

Phill says carving out time for exercise has massively counterbalanced the negativity overworking has caused his mental health.

‘I’ve had a few crazy weeks where I’ve landed too much work and realised I had to pull back. I found that I have to rota in downtime during the week. I have a home studio so I can and have worked every hour of the day so forcing myself to go for a run or do yoga is essential.’

Working full time in the gig economy is one thing, buy what about having a ‘side hustle’ alongside a full-time job?

Amy Harris works as a full-time retail manager but launched her own craft store on Etsy during the Covid pandemic.

‘Having been on furlough for so long it was something that definitely worried me if I would be able to keep it up once back,’ she tells Metro.co.uk.

Amy says the opportunity to work on something she’s passionate about brought positivity to her life.

‘It really helped me with my mental health when I wasn’t working and gave me a sense of purpose everyday. I’ve always regretted not pursuing what I studied at university and creating this little business has almost lifted a bit of that guilt and given me a creative outlet.’

Amy Harris said the gig economy allowed her to pursue something she’s passionate about (Amy Harris)

So, what is the future like for the gig economy?

Dr Wood says this way of working has seen and will continue to see growth through the pandemic and beyond.

‘I think the gig economy will emerge from the pandemic even bigger than before with local gig work boosted by the growth of food and retail delivery and remote gig economy boosted by companies looking for more remote workers who can be engaged and controlled without needing to bring them on to the companies’ premises.’

‘Companies are also going to be hesitant to invest in permanent employees in these uncertain times.’

What’s clear is that as the gig economy asserts itself in a post-Covid world, the mental health of workers involved shouldn’t fall by the kerbside as a result.



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MLB mental health crisis: Inside relief pitching gig economy

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Ryan Buchter, 34, has spent almost half his life pitching in professional baseball. In those 15 years, Buchter has been traded four times, released three times, changed organizations 10 times, pitched for teams in 22 cities and only once spent a full season in the majors without being demoted or released. What his itinerant playing record does not show is its cost: a drinking problem, depression and mental health issues that left him so wounded he is speaking out because he knows his story is too prevalent among ballplayers.



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New Labor Secretary Says Gig Economy Workers Should Be Classified As Employees | Fisher Phillips

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Secretary of Labor Marty Walsh didn’t beat around the bush when he provided his first public thoughts about the gig economy workforce since assuming office. In an interview with Reuters released on Thursday, Walsh said “in a lot of cases, gig workers should be classified as employees.” His comments should come as little surprise to those in the industry who have tracked his career and followed President Biden’s campaign promises to crack down on purported misclassification.

While he tried to strike a balanced tone – noting that in “some cases” gig workers are treated respectfully, and indicating that he didn’t “begrudge” any companies for raising revenue and making profits – his pointed comments send a direct signal to gig economy businesses that the Biden Department of Labor will soon ramp up efforts to force gig workers to be considered employees.

What Can We Expect?

Walsh said that he wants his agency to have conversations with gig economy companies in the coming months in an effort to ensure workers have access to the types of benefits that a typical employee might have: consistent wages, sick time, health care insurance, and similar benefits. While some business leaders have expressed hope that Walsh’s pragmatic streak demonstrated throughout his career as a union leader and mayor would carry over to the worker classification debate, it appears that he will push through an aggressive agenda on behalf of unions and workers.

First up? We can expect to soon see the DOL to formally rescind the Trump-era “gig economy rule” that was set to make it far easier to classify workers as independent contractors. In its place, the agency will no doubt release a new rule that will more closely align with the Biden administration’s aim to target misclassification and ensure as many workers as possible are considered employees. While litigation filed by business groups is ongoing in an attempt to revive the business-friendly version of the rule, gig economy companies cannot rely on this federal lawsuit to be a magic bullet to erase all concerns in this area.

Walsh also noted the success of the pandemic-related unemployment insurance program that ensured gig economy workers who were left without work could regain some of their lost income. “If the federal government didn’t cover the gig economy workers, those workers would not only have lost their job, but they wouldn’t have had any unemployment benefits to keep their family moving forward. We’d have a lot more difficult situation all across the country,” he said. But in expressing admiration for that legislation – which was paid for by massive stimulus spending bills approved by Congress – he didn’t expressly state how he would expect any future extension of UI benefits for gig workers to be funded or managed.

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