Given the tendency of historians to give generally glowing (if somewhat carefully edited) appraisals of liberal presidencies, there’s little doubt that years from now, the next Ken Burns or Douglas Brinkley might well refer to the Obama years as “The Age of Startups.” Although the current administration has mostly fallen flat in its forays into innovation (remember Solyndra?), those of us living through this current era cannot deny the proliferation of the innumerable innovative, tech-based companies that have sprung up from the Bay Area to Brooklyn in the past five or six years.
With these startups and their corresponding apps has come the emergence of the collaborative consumption we now refer to as “the sharing economy.” While websites such as eBay predated smartphones, much less the apps you can use on them, the modern sharing economy is probably best symbolized by companies like Airbnb, Lyft, and perhaps most of all, Uber.
Uber might well be the poster child of the sharing economy. If it isn’t, it certainly rates as the most talked about member of the bunch. It is Criticized and praised (even by 2016 presidential hopefuls) on a daily basis. As polarizing as it is convenient, the ride-hailing service from San Francisco is, in many ways, a product indicative of its time.
What does that mean exactly? Well, if you ask any conservative, honest Democrat, or Bernie Sanders about the falling unemployment rate, you’re likely to get a very defiant answer: the count is a faulty product of part-time work combined with the cratering number of labor force participation. The Bureau of Labor Statistics bears them out. The total number of people who are actively employed or seeking to become employees has been an ongoing net loss, quarter after quarter, for years now. Another thing the sharing economy has given us, though, is a fundamental debate about just what constitutes “employment.”
According to the Internal Revenue Service, there are three criteria for determining whether or not the relationship between a business and its workers is one of conventional employment or that of a hired, independent contractor: behavioral control, financial control, and type of relationship.
In terms of behavioral and financial control, companies like Uber definitely fall more on the “employer” side of the divide than they’d like to. There’s simply no getting around the vehicle requirements for one to become a driver, and the company’s ability to dictate not only what you get compensated but also how much of it you’re entitled to keep (before you pay your taxes). It resembles something a lot closer to what traditional employees agree to, more so than any arrangement one might have with a contractor.
What most businesses try to hang their hat on in defense of this setup is the third clause, specifically how it and its workers perceive the relationship. Uber and companies similar to it, in spite of very calculatedly referring to the many “jobs” that have been created through their model, rely heavily on a mutual understanding with its drivers that they are not considered employees.
While there’s a point to be made about the flexibility of work hours and all of the freedoms that come with that (such as being able to look for full-time work while supplementing your income), the sharing economy is fast approaching a point of diminishing returns.
The Toll of Regulation and Obamacare
One of the major complaints conservatives have long had about Obamacare, even during its original debates, was the way in which it would and has discouraged full-time employment – and the provision of things like healthcare benefits by companies – due to the dramatic increase in what hiring someone full-time would cost.
Uber’s CEO, Travis Kalanick, has a neat way of spinning this phenomenon, which he shared with BuzzFeed:
The democratization of those types of benefits allow people to have more flexible ways to make a living. They don’t have to be working for ‘The Man.’ His quixotic usage of an old counterculture idiom aside, Kalanick is actually making that ‘indicative of its time’ point rather simply: the American economy has now become so allergic to the creation of actual jobs that its taken the worst elements regular employment (company control of your earnings and what you have to do to acquire them) and independent contracting (a lack of continuity in income, no paid sick or vacation time, having to purchase your own health benefits) – and people are accepting it. Gleefully.
Even the way Uber markets itself and the way its drivers discuss their work gives away that it’s more a means to an end than something to make a long-term career out of; a recent report released by the company and co-authored by former Obama Administration Cabinet member and economic advisor Alan Krueger revealed that one-third of drivers say they partnered with Uber ‘to earn money while looking for a steady, full-time job.’
Driving Into an Uncertain Future
With all of that being said, it would be tragic if rulings (like the recent one by the California Labor Commission) and the regulations Hillary Clinton would undoubtedly draft (should she be elected) failed to navigate a way between a classic employer-employee and business-independent contractor relationship, thus effectively bringing Uber and its sharing economy colleagues to their knees.
The sharing economy isn’t some scam dreamt up by Stanford grads in Silicon Valley; it’s just the inevitable result of a long over-regulated economy. Having taxed the cost of skilled and unskilled industry right off of our shores and arbitrarily hiked minimum wages to the point that high school and college students are now left with fewer options for earning spending money, participation in the sharing economy is our attempt to fill the vacuum left by the jobs we’ve chased away.
There’s nothing inherently terrible or exploitative about Uber or companies like it. Hillary Clinton isn’t wrong to point out that we don’t want to become a nation of freelancers and contractors and Jeb Bush isn’t wrong to push back against her for failing to recognize the sharing economy’s stimulative benefits. It wouldn’t be wise, however, if she monkeyed with it in the name of “economic equality,” just as he’d do well to not oversell it as a perfect example of free-market capitalism.
The mistake we’re probably all guilty of making, though, is any sort of delusion that things have gotten significantly better. As a country, we’ve spent the past few years partnering with sharing economy companies like Uber on the way to full employment. Unfortunately, too many of us are still no closer to where we need to go.