The “Gig Economy” Debate Goes Mainstream

I have been waiting for the “independent contractor vs full employee” debate to go mainstream. It’s the 1099ers vs the W-2’s. It’s happening, right now. This past week, I was invited to be on NPR for a great discussion hosted by KCRW for “To The Point,” which included Noam Scheiber from The New York Times, Ben White from Politico, David Rolf from SEIU, and yours truly. You can listen to our conversation here, it’s 32 minutes and though I’m biased, it’s a great survey of where we are today, how politics are going to get involved (a la Hillary), and how powerful Uber’s moves are vis a vis the rest of the small but growing on-demand sector:

Back in September 2012, before I started investing, , I wrote a post for my TechCrunch column titled, “Recruiting The New Labor Force.” In that post, which is worth re-reading carefully, I mentioned there is an underbelly to any new trend, such as the on-demand sector:

As with any new wave, there is an underbelly. These new companies are more efficient at routing a freelancer’s time, assuming there’s enough demand. Being an actual freelancer may suit some just fine, for a while, but eventually, I’d imagine many of them may want more predictable, more reliable forms of employment — a sentiment many Lyft and Sidecar drivers expressed to me during my many rides with them. These folks often were in between jobs, or in some kind of transitional phase of their lives. The way forward could be that companies like Postmates or Instacart provide that softer landing for those moving in and out of the formal labor market, or perhaps they themselves turn into real companies that fully employ freelancers, more along the model that Exec seems to be carving out, as a staffing solutions company.

Eventually, I started investing and made a considerable number of investments which somehow touched on The On-Demand Stack. As the I gained more experienced, I wrote another post for my TechCrunch column titled “Tap Your Phone, Get Stuff (Including Funding).” In that post, I argued the following:

Speaking of fulfilling requests, those are usually completed by humans enabled by software. Right now, with the bottom-third (or so) of the labor force in a mix of freelance, hourly, or contract employment (if employed at all), startups are competing for labor at a fierce rate. In the Bay Area, where many of these services start, it’s not unusual for companies in this category to have more consumer demand than they can handle, all constrained by the fact that they can’t hire enough drivers, enough skilled workers, and so forth. With mobile, thankfully, workers can work when they choose, and startups can access labor at the edge of the network, often at will.

At some point, this was going to turn into a bigger issue. It started with some lawsuits here and there. FedEx and Amazon also have some similar legal things going on. Then the California Commission made a ruling against Uber, in favor of drivers being deemed employees. During this time, I began to invest in some companies, like Managed By Q, which proactively addressed the issue by creating on-ramps for 1099ers to move up in the company and gain W-2 status, as well as new tools for companies and contractors like Payable, which help simplify tax and reporting for both companies and workers. Recently, we put together The On-Demand Conference in SF in May 2015 (videos here) and are planning for v2 of this event to be in NYC on September 15: www.ondemandconference.co

Today, in an online thread between myself, Greylock’s John Lilly, and Spark’s Nabeel Hyatt, we had an interesting discussion around the pros and cons of being a 1099 vs W-2 — click here to open the thread. Other ideas have been offered. Albert Wenger of Union Square Ventures in NYC has been a long-time supporter of Universal Basic Income, where he imagines a world of autonomous drones and cars further taking away jobs. I didn’t realize until Lilly pointed this out that being W-2 helps with immigration and naturalization, as it’s often tied to income. I am not sure how Uber can help solve that, but he had a great idea — create ways inside the Uber driver app for drivers to easily ask for INS coverage and advocacy.

Finally, I will briefly lay out how each side of the debate has merit:

For workers – Clearly, we can agree that everyone wants to make sure that contractors have the ability to feel secure in terms of health, safety, and not being fired without cause. In a world where contracting may be the norm, how will people enjoy the safety and security provided by insurance traditionally? On the flip side, just tying this all to being a W-2 does have some costs — as in my response to Nabeel, the flexibility in schedules for a contractor could be undervalued and hard to quantify in such analyses. I myself have had a flexible schedule for the past 10+ years and I oftentimes value that above most other things. I imagine many others do, too. Some jobs allow for it, but being a contractor participating in a few labor markets can offer real time flexibility as well as the option of moving from one geography to another. As you listen to the NPR discussion, you’ll note my comments at the end — the genie is out of the bottle, Uber isn’t going away, and governments will have less power, relatively speaking, on how to shape this moving forward. The cost of more formal ties between employer and employee or contractor may end up being flexibility, which is why I’m writing all of this and hoping companies will follow Managed By Q’s lead and offer a range of choices for the best and most loyal employees to pursue.

Haystack is written by Semil Shah, and is published under a Creative Commons BY-NC-SA license. Copyright © 2018 Semil Shah.

“I write this not for the many, but for you; each of us is enough of an audience for the other.”— Epicurus