
How Estimates of the Gig Economy Went Wrong - Reedx
https://www.wsj.com/articles/how-estimates-of-the-gig-economy-went-wrong-11546857000
======
thatoneuser
Maybe predictions were off for reasons the article says, but the article
woefully misses the biggest factor in why the “gig economy” (cringe) won’t be
as big as we originally thought - you can only pay sub minimum wage for so
long before people say fuck it and walk away flipping you off.

These companies provided very little as far as tech revolution. They mostly
rely on cutting wages and offputting risk/liability/taxes/benefits onto the
workers. That’s a business model that’s doomed to fail. The word we’re looking
for is “greed”.

~~~
alkonaut
You can only win as a "gig economy" as long as you find a weak spot (a.k.a
loophole) in regulations and use it. That loophole will close, and the
business will either need to expand or converge to a traditional business of
the kind it displaced. AirBnB will be like any other apartment rental place.
Uber will be (and is already in many places) like any other Taxi company. It
should be called the "loophole upstart economy". What they do is grow at a
breakneck sped into an area where there is regulation that can be abused. The
trick is to grow so fast that regulation can't keep up (in the US you can even
grow so fast that eventually you'll be big enough to lobby your own
regulation).

As an example: In Stockholm where there are no Taxi mediallions (anyone can be
a taxi or car hire service in any way they want as long as they regiser and
comply with insurance, standardized meters, and other regulations) and the
competition alreay has new cars, app-based booking etc - there is precious
little margin for Uber to cut from, compared to a city with medallions, cab
shortages, ancient taxi companies that don't offer app hauling/prepayment etc.

So how can Uber make a killing in Stockholm? Answer: they find another
regulation to work around. Tax regulation. Taxis are required to enter all
fares into the meter and that's reported to tax authorities. Uber drivers are
supposed to enter the rides themselves into the meter after completing. The
kicker is: there is a huge incentive for the individual driver to under-report
the fares, and that incentive also helps Uber. This being revealed will
obviously now mean that Uber will be forced to pay an estimated and much
higher tax, and the drivers won't be trusted to do this themselves in the
fuuture. And this will only mean one thing: Uber will pack up and leave. There
is no way they can be competitive (to the extent their investors will want)
without breaking either Tax law or Labor laws.

~~~
Erwin
After Uber exited the Danish market, the Danish tax authority received details
(from the Dutch tax authorities) of whom Uber actually paid. It turned out 99%
of the drivers did not put that income on their electronic tax forms.

Uber's statement was that the individual drivers are responsible for that sort
of thing. Wink, wink.

What's worse 75% of them were receiving various types of government money for
unemployed people (which are supposed to be decreased if are able to find a
job).

Uber is planning to return to the Danish market -- the Danish spokesperson
says they will return "with integrity".

AirBnb however has agreed to automated reporting of who receives rental income
in Denmark. If you agree to automatic reporting as a landlord, you get a
certain tax discount.

~~~
ryanwaggoner
Why is it Uber’s responsibility though? Why is this different from how
restaurant servers are required to report their cash tips, but basically none
of them do? Should we blame the servers, the restaurant owner, the government,
all of them, no one?

~~~
thatoneuser
That industry shouldn’t exist the way it does either imho. It’s wrought with
tax evasion itself. And minimum wage needs to be respected.

~~~
ryanwaggoner
I completely agree, but again, are we mad at restaurants for following the law
when the servers are the ones breaking it?

~~~
michaelmrose
The servers in states which allow below minimum wage for tipped employees is
keeping servers near starvation wages if not for state benefits and undeclared
tips.

The "market" rate is partially set based on those assumptions because
employees wouldn't be able to live on what they are paid thus the labor force
and thus the company would collapse without an increase in wages.

In both cases its a transfer of wealth from the middle class to relatively
rich owners.

The extra cash helps for when business is slow and the server has to report
they made the minimum wage to the employer anyway because the employer is
responsible for ensuring that the server makes state minimum if the wage plus
tips doesn't equal such. Basically the employer will just fire people who make
the employer actually do this.

It also helps cover the foregone wages when the employee is working through
breaks and lunches even though the half hour lunch is deducted from the
employees pay.

In short employers sometimes pay as little as $2 an hour x 24 hours per week.

Since nobody on earth can live on $200 a month some combination of tips from
you, government benefits paid for by you, and second or third jobs makes
survival possible.

Most of us are not terribly concerned if the server is paying taxes properly
and are concerned that the business is basically welfare for inefficient
businesses who should probably go under.

------
genidoi
The estimates here were wrong because there was nothing to estimate at all -
gig economy is a marketing buzzword for an unusually isolated yet reasonably
substantial unemployment bracket. The upper bound of the bracket being the
sub-minimum wage compensation that Uber pays their drivers[0] and the lower
bound being the amortized cost of the cheapest vehicle that Uber lets drivers
utilise for their 'gig'.

That's a really small demographic who would fit both criteria. Recently
unemployed people and students come to mind.

Importantly - Uber knows this fact very well and are doing everything they can
to survive until fully autonomous self driving cars reach mass production.

[0] [https://www.chicagotribune.com/business/ct-biz-uber-
driver-w...](https://www.chicagotribune.com/business/ct-biz-uber-driver-
wages-20180518-story.html)

~~~
toufiqbarhamov
Uber betting everything on self driving cars may be their only hope, but it
should be clear by now that their runway is shorter than the time required to
bring lvl5 to market. We’re not even into the real edge cases yet, and
automation is still _really_ hard to get right. Maybe the tools being applied
are simply not up to the task, or if they are, decades away from the maturity
required.

All of which is to say that Uber is in trouble, and having been such a
notoriously bad actor, will be kicked down the hill at every step.

~~~
sschueller
They already killed one person. How many before execs at Uber are held
accountable for all their crimes?

~~~
kakarot
The entire point of a corporation is arbitrating responsibility away from a
company if one employee isn't doing the job they were paid for.

------
mrdoops
The Gig Economy hasn't even started yet. We've yet to solve Identity (Who is
this?) and Merit (Is this person qualified/competent?). Hell, we've only
barely started decentralized finance let alone scalable-decentralized-
organizations. Uber/Lyft/Taskrabbit/Fiverr are low-hanging fruit compared to
the complex workflows most services entail.

I expect we're going to see more niche gig-economy businesses being built
around more complex workflows with higher skilled labor. Lots of B2B and B2C
potential when you break up services into smaller tasks that can be fulfilled.
Success is providing the benefits of scale without the challenge of doing it
yourself.

~~~
humanbeinc
As someone working in this industry on the "employer"-side: Yes, I believe
this is exactly whats going to happen. It's a real business pain that we don't
have these kind of informations about gig workers and would pay top dollars to
have them... it's only a matter of time until this becomes standard practice
in these business modells... just like credit rating agencies we're gonna see
it on a work-level too.

~~~
inertiatic
Here's a novel idea. Instead of paying top dollar for "these kind of
informations about gig workers", pay top dollar for employees.

------
Dowwie
The study used for this article can be found here:
[https://scholar.harvard.edu/lkatz/publications/understanding...](https://scholar.harvard.edu/lkatz/publications/understanding-
trends-alternative-work-arrangements-united-states)

"Gig Economy" is a new label on an old practice. Take, for instance, nurse
staffing in the United States. In unregulated, non-unionized states, nurses
are staffed as-needed. Hospital administrators partner with nursing agencies,
who manage relationships with nurses and contract short-term work. This market
of nurses enables work-life flexibility and pays fairly well. Yet, the costs
and risks continue to rise for nurses. If hospital census (# of patients) is
low, shifts are cancelled up to minutes before work is scheduled to begin.
Further, hospital administrators have dramatically increased the burden on
nurses, increasing nurse-to-patient coverage and demanded more and more of
them without assistance. Staffed nurses play the role of scapegoats, too,
blaming them for mistakes and shifting risk from the hospital. There are more
problems and risks for staffed nurses than ever.

Yet, despite its Gig-like behavior, nurse staffing seems to elude journalists
and academics. This is only one example. There are others.

Again, the gig economy isn't a new phenomenon. It's just spreading to other
sectors now because of technology innovation. We must learn what works well
and what doesn't, for all involved parties. Academics and journalists are thus
far failing to learn what works by ignoring legacy business activities.

------
goelakash
"About a third of what passengers pay goes to Uber for commissions and booking
fees." Holy shit. That's way too much commission for a company that uses
software and not actual labor to connect drivers to riders.

~~~
mschuster91
Hmm. Not an Uber user myself as we have cheap and reliable taxis in Germany,
but how is payment handled? Does Apple take their usual 30/15% cut as with
Netflix, Spotify and friends?

~~~
TulliusCicero
I'm an American in Munich, and while taxis here are indeed reliable, I
wouldn't call them cheap. Ballpark, I'd say they're about twice as expensive
as the Uber/Lyft trips I've taken back in the States.

~~~
mschuster91
> I'm an American in Munich, and while taxis here are indeed reliable, I
> wouldn't call them cheap.

Compared to the stories I have heard about US taxis (underqualified drivers,
bad technical maintenance, general unreliability), I am not surprised. You
can't have reliable _and_ cheap.

In addition to the mentioned factors, of course Uber/Lyft can be less
expensive in the US - they ditch the contributions to social security,
healthcare and pension system that is _required_ for German employees.

btw, I am Munich-based too... yes our taxis are expensive indeed but so are
the living costs. Can't have no taxi drivers when they don't have a place to
live in.

~~~
TulliusCicero
> You can't have reliable and cheap.

Well, the ones I've taken so far in the US have been fine.

> btw, I am Munich-based too... yes our taxis are expensive indeed but so are
> the living costs.

Much of my Uber using has been in the SF bay area, which is substantially more
expensive to live in than Munich. It's still way cheaper.

------
adinobro
Everyone focuses on driving which in the long run is probably going to go away
as self-driving cars come onto the scene.

The best example I've seen of the gig economy is jobs that were already
contract based but where it was hard to find and connect contractors with
customers.

Walking dogs, small home renovation, etc. I've seen these apps make a massive
positive change in the market where people are able to find more work than
they code before (at roughly the same rate) and customers can find contractors
willing to do the work and they are rated by past customers rather than just
word of mouth.

~~~
thatoneuser
Yeah, the problem with the driving apps is the damn greed. They could have
made an improved taxi service where people still payed a fair amount and in
exchange you get a pleasant, on demand taxi (without the credit card machine
being “broken”).

But they didn’t just want to compete with taxi. They wanted more. They wanted
everyone to use their service. How do you do that? Offer it cheaper and pass
the responsibility to the driver. If Uber and Lyft has stayed humble they
could have had profit, happy workers and happy riders. Instead they wanted
billions.

~~~
JumpCrisscross
> _They could have made an improved taxi service where people still payed a
> fair amount and in exchange you get a pleasant, on demand taxi_

This was what Uber was. Then Lyft launched its product and, to Uber’s shock,
didn’t get any regulatory pushback. (Most people in most American cities had
horrible cab experiences. Also, the tech backlash hadn’t yet begun.)

Uber probably improved the pay laws for New York’s taxi drivers by bringing
light to their plight. It also improved quality across the board.

This isn’t a simple “they got greedy” story.

~~~
m-ee
Uber originally was a black car service. Sidecar was the first company I was
aware of to use the model that Lyft and UberX currently follow.

------
tomrod
Are outline urls still welcome?

[https://outline.com/rmXDJa](https://outline.com/rmXDJa)

~~~
gumby
Not in submissions but welcome (and helpful!) in comments, it seems.

I assume this is because otherwise every link would seem to be hosted (in the
parenthetical trailer) by outline.com or other depaywaller instead of wsj.com,
ft.com, et al.

------
abakker
I always loved the corporate euphemism “contingent labor” more than gig
economy. It contains all the cynicism you need, right in the semantics.

~~~
rozenmd
The two terms reflect different segments of the market though. You'd be hard
pressed to find a freelance Management Consultant willing to self-identity as
a gig economy worker.

~~~
abakker
That's true, but if you were at conferences for SuccessFactors or Workday
about 4 years ago, you'd have heard lots of presentations about the rise of
contingent workforce and the gig economy. In fairness to management
consultants, most of them are not "contingent labor". Most of them are
employed by companies. I think the major distinction is that "gig economy"
tends to reflect contracting individuals only, while contingent labor includes
both gig workers and those who are contracting through some kind of corporate
entity like an LLC.

------
austincheney
Fail. A more simple way of looking at this is sustainability of the end
product. Can an Uber driver earn a practical income and benefits equivalent to
the taxi driver they are replacing? Is that Uber driving willing to work in
that field/position as long as the taxi driver they are replacing?

Sometimes you don't need to be a math genius to see that major economic shifts
incur cost restructuring that caps growth/penetration.

~~~
disishhsha
Seems to me Uber has led to a huge increase in the number of hired rides. So
in most cases, the Uber driver isn’t replacing anything, except perhaps the
passenger driving themselves for free.

~~~
gamblor956
Parking and gas. Uber has basically replaced parking and gas costs.

------
momentmaker
[http://facebook.com/l.php?u=https://www.wsj.com/articles/how...](http://facebook.com/l.php?u=https://www.wsj.com/articles/how-
estimates-of-the-gig-economy-went-wrong-11546857000)

~~~
_Microft
Does Facebook as referrer get around other paywalls as well? It would lend
itself as 'quick search' (i.e. by using a keyword from the adress bar) in that
case.

------
RestlessMind
Gig economy can be a victim of its own success if it starts accounting for a
significant portion of the labor force. Because of the inevitable political
backlash about its business model. Once you see too many successful companies
with workers scraping by, you will also see political demands to treat these
as full time workers instead of mere contractors. At that point, gig economy's
business model would stop working and these companies will have to live with
far lower margins of the traditional industries they are disrupting.

~~~
r00fus
Unless the end goal is to become irreplaceable (TBTF) and therefore insulated
from political pressure.

You can see they knew this by the lobbying effort that Uber did to even get
where they did so they could ignore laws without immediate consequence.

~~~
mschuster91
> You can see they knew this by the lobbying effort that Uber did to even get
> where they did so they could ignore laws without immediate consequence.

In the US that worked (simply because US politicians can be bought off via
Super PACs etc, which is absurd in itself), but in other markets (esp. Europe)
they got quite a beating from regulatory agencies.

~~~
gaius
_they got quite a beating from regulatory agencies_

Not really, the British regulators and courts keep finding against them but
there’s zero enforcement, Uber continue operating as normal. The Mayor Of
London is weak.

~~~
mschuster91
Uber Pop (=private drivers) got banned in Germany, France, Italy, Spain and
Belgium [1], Uber Black (=cars for hire, with pro driver) got banned in
Germany [2]. Given that Germany, France, Italy and Spain are the Top 5 EU
economies by BIP (with the half-exception of UK where Uber simply ignores
court rules), I'd say "took a beating" is the most civil way to write what
really happens.

[1] [https://www.handelsblatt.com/unternehmen/handel-
konsumgueter...](https://www.handelsblatt.com/unternehmen/handel-
konsumgueter/eugh-urteil-uber-verliert-prozess-frankreich-darf-
fahrdienstvermittler-
verbieten/21157952.html?ticket=ST-574798-CePbhxFdqIrGwojlzDsh-ap5)

[2]
[https://www.rbb24.de/wirtschaft/beitrag/2018/12/bundesgerich...](https://www.rbb24.de/wirtschaft/beitrag/2018/12/bundesgerichtshof-
berlin-urteil-uber-black-limousinen-service1.html)

------
aitrean
Glad that moronic speculation is over with. On to the next one!

~~~
kopos
WeWork ;)

------
k5hp
[https://outline.com/7RG8ps](https://outline.com/7RG8ps)

------
skynode
It appears the gig economy will be remembered as the last stand of humans
before the machines took over.

~~~
neolefty
[1]
[https://en.wikipedia.org/wiki/Industrial_Revolution](https://en.wikipedia.org/wiki/Industrial_Revolution)

------
tomrod
Related: [https://www.businessinsider.com/jp-morgan-chase-institute-
st...](https://www.businessinsider.com/jp-morgan-chase-institute-study-uber-
gig-economy-poverty-wages-2018-9)

------
brianmcc
Insecurity wrapped and sold as "flexibility".

