> These companies need non-employees to make it viable I believe.
I'm curious about this. Does this mean that, once gig-economy workers factor in all the costs that are normally born by employers (Insurance premiums? Certain taxes? Mileage costs? What else?), that they are effectively making less than minimum wage? If so, why do they do it? If not, what is the intrinsic reason that this work must be done by contractors rather than employees?
Definitely. A lot of current startup darlings are shifting costs traditionally borne by the business to the workers. Uber is exhibit A here. Taxi companies, for all their flaws, at least paid for, maintained, and took on most of the risk of the cars. With Uber, all of that is on people desperate enough to drive for Uber. This strikes me as woefully inefficient systemically; large organizations are much better placed to manage cost and amortize risk.
For example, maybe I want to make extra money but don't want to be tied to a shift. This type of flexibility is amazing for lots of people. It's very appealing if you need extra money, and have a lot of time. Unfortunately, this aligned in an economic cycle where people needed work, and undervalued their value as workers(and for sometime bonuses, and gamification made this type of work very profitable i.e. 4k a week driving uber in SF).
The gig economy is more about having workers without giving them benefits and with making the workers shoulder the burden of shifting demand throughout the day. With food delivery you have the lunch rush and the dinner rush and outside of those windows your demand is a lot smaller. The gig economy means the company isn't on the hook for predicting or satisfying that demand; if there's too many workers for the demand, it's the workers who take the pay hit rather than the company. And if demand spikes unpredictably the company has an easy lever to push to get more workers out there (just notify workers of the spike, and surge pricing as needed to make the unplanned demand more attractive to the workers).
So the gig economy is really just auto scaling applied to human resources instead of computing resources.
Is that actually true, though? I've seen anecdotal reports from certain Uber drivers or whatnot, but I have not seen data. (It seems counterintuitive that such a huge amount of contractors would continue to choose that work over traditional employment in service jobs if it paid less.)
It could be that they're not factoring in the cost and maintenance of their vehicles because they foresee this as being a temporary period of their life. They're borrowing from the future cost of their cars.
From my experiences with Gig workers, I used to work in the engineering part of an early one, there will be definitely a bi-modal distribution between full time and part time workers. There will be those that will only want to 'pay a bill' with the proceeds. There will also be those that buckle down and organize their lives/finances around it. For the former, it wouldn't surprise me that they're earning less than service jobs, all in. However, the freedom of choosing one's hours really is powerful for those looking for just a few extra hundred dollars, plus the emphermeral cost against one's vehicles is easy to overlook.
This same factor applies to Amazon, McDonalds, Walmart et al: they pay minimum wage (though Amazon steals some back, though not as much as companies like DoorDash) but not really enough to live on; the balance is made up via a subsidy from the government (food stamps et al).
But those government-subsidized jobs count as "jobs" in the unemployment statistics so I suppose it's all good.
Gig-economy workers are working for cash, and most are operating at a net loss. That's one of the reasons why the mythology around "gig economy" is that people are just making extra cash on their downtime. All of these platforms push their contractors to accept more work for longer durations of time.
An Uber driver gets paid something like $0.80/mi for a trip that costs something like $1.05/mi. But the independent contractor doesn't factor in depreciation and maintenance well.
With employees, you generally provide employees with vehicles, reimburse employee expenses, or otherwise ensure that net pay less expenses are more than minimum wage. The average cost of operating a car for normal (not livery) use is about $0.55/mi. The number for an Uber is probably 30-50% more.
All of these bullshit gig economy businesses that require a car would be dead in the water if they had to pay real employees or deal with the compliance issues, worker's comp, etc.
The N.Y. Times published more detailed data last year iirc.
I used the GSA expense schedule for the standard mileage rate and various online sources (rural mail carrier reimbursement ($0.70), livery and van per mile estimates) to estimate the actual cost.
Better data exists on the expense side, but I didn’t go down that path due to time constraints.
You (as the business operator) need the flexibility of being able to pay only for work done, to adjust pay based on performance metrics very easily, and to avoid the otherwise heavy costs of traditional hiring and firing.
You don't want to be on the hook for guessing how many drivers you need on a given day or for a given area. By utilizing them as contractors, they naturally adjust their own numbers as work becomes highly available or scarce, and you're not on the hook to pay them when they're not contributing to your bottom line.
As for why the workers do it: In many cases it's likely not their best financial decision, but there is some value to them in the flexibility of the schedule. And the ones that get particularly good at gaming the system (to the extent that it's possible) might make enough that it beats comparable jobs.
I'm curious about this. Does this mean that, once gig-economy workers factor in all the costs that are normally born by employers (Insurance premiums? Certain taxes? Mileage costs? What else?), that they are effectively making less than minimum wage? If so, why do they do it? If not, what is the intrinsic reason that this work must be done by contractors rather than employees?