The Gig Economy - New Contracting Companies Cheat Workers

The Gig Economy is just a modern term for farming out work to independent contractors. The Internet has made hiring and coordination of contractors easier, but many new companies do not pay the contractors the extra 30% to 200% that is due to independent contractors (the 30% barely covers costs ordinarily paid by employers, and the 200% is because the work is not full time). They often place illegal restrictions on their contractors (for example, US tax law prohibits exclusive contracts for independent contractors). Also, these companies usually ignore local taxation and regulations.

AirBnB is an excellent idea, it allows micro-hotels with wonderful sites, decor, or services, but they should be paying Hotel taxes and they do not. Since the company does not pay the taxes, the independent contractors who lease their property are responsible. They are also responsible for cleaning, repairs, breakage, and liability insurance (if they can get it). Since those leasing their property do not know about the legal requirements, they are not paying fees and taxes and rarely carry required insurance. Some cities are trying to legislate away AirBnB.

Lyft and Uber are usually much cheaper than Taxi Cabs. Not because these companies have found some more efficient way to operate, but because they don’t pay their drivers enough as independent contractors and they don’t pay taxes and fees.

Almost every Lyft or Uber driver working in an urban area is violating state and local Livery laws (Livery a generic term for Taxis or Limousines). Most cities require Livery drivers to pay special fees, and many require a “Shield” for taxis to restrict the number of taxis on the road at any one time. For example, in Manhattan, the city does not sell many new shields, but (for a fee) allows transferring shields to other vehicles or owners) – obtaining a shield can cost over $20,000.

Livery drivers are often required to have a Livery (or Limousine) driver’s license (or license endorsement). This license requires extra tests and an annual renewal fee. It usually calls for an annual health exam. These requirements are similar to those for interstate truckers.

Lyft and Uber drivers also drive their own cars and pay for their fuel, repairs, and signage. Many do not make a living wage, even if they work over 40 hours per week. Except for the reduced prices, the advantages of Lyft and Uber are being phased into legitimate Livery services.

Many firms offering services that do not require on-site employee presence outsource work to the lowest bidder (internationally) and so profit on lower wages and taxes in developing nations. For example, it is one thing for a US company to subcontract with a Canadian firm, Canadian workers are treated at least as well as US workers. It is true that subcontracting with a Canadian company takes advantage of the weakness of the Canadian dollar (years ago, retailers in Toronto called it a discount for using US dollars), but it also helps bolster the Canadian dollar and the Canadian economy.

Mexican firms usually treat employees badly. Subcontractors should pay much higher than customary local wages. Mexico has almost no environmental regulation, no universal health care, low wages, and high unemployment. Subcontracting to Mexican companies helps to boost the Mexican economy and reduce unemployment, but it is unethical to take advantage of the situation.

Contracting corporations are not new, especially for specialty services. They are a way for people with unique skills to find employment as independent contractors. The contracting firms take a percentage (25-50%) of the amount charged to the client and pay the rest to the contractor. The contractor is paid approximately twice the wage of a full-time job. Real specialists with advanced degrees can demand over $2000 per day for occasional work. The contracting firms usually offer services like health insurance and liability insurance (for additional fees).

Nurse registries and cleaning companies operate on a similar basis. An RN working for a registry can control days and hours worked, and registry nurses are paid considerably more than an RN employed by a hospital.

Some references:
Alternet: 10 Takeaways About the Gig Economy That Has Pushed Europe to Say No to These Predatory Capitalists (very liberal)

Fox Business News: The Gig Economy: Boon for Companies, Bust for workers (very conservative)

The Nation: Elizabeth Warren takes on the ‘Gig Economy’ (liberal)
Fortune: Working in the Gig Economy Is Both Desirable and Detestable (Investor-oriented, conservative)

CNET Uber vs Lyft: 9 things to consider before your first ride Including the “What are the safety concerns?” section and below in the article. (Tech-enthusiasts, mildly conservative, supporters of big business)

San Francisco Times: SF (San Francisco, California) to require Lyft, Uber drivers to obtain business licenses (moderate)

Boston Globe: The gig economy is coming. You probably won’t like it. (slightly liberal)

Boston Globe: The Work Issue