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Chick-News.com Poultry Industry News, Comments and more by Simon M. Shane

Demise of the Gig Economy

09/17/2019

The employment of thousands of non-employee “independent contractors” has changed the relationship between workers and those that pay them. Rise of the “Gig Economy” over the past ten years since the onset of the Great Recession has facilitated the emergence and growth of new enterprises. Uber and Lyft among similar companies rely on the labor of part-time workers devoid of benefits and regular income. The food and retail industries have benefited through enterprises such as DoorDash, Instacart and Shipt offering home and workplace delivery of groceries and prepared foods.

The realization that the relationship between contractor and service provider may be less than benevolent and in some cases downright abusive has led to scrutiny and opposition to the system. Legislation to restrict abuse and potential exploitation is now a reality on both coasts, bellwethers of social change. California has enacted AB5 that will designate contractors as employees eligible for health and other benefits including sick-leave and insurance. New York City has imposed a $17 per hour minimum wage over and above expenses for drivers of ride-hailing services. These action is mirrored in similar laws and regulations introduced in the EU reclassifying gig workers as employees.

Obviously the need to pay competitive wages and to provide benefits will impose additional costs on consumers who have benefitted from lower cost compared to comparable conventional services. The viability of enterprises that developed by combining digital technology, web-based communication and the availability of workers willing to provide services is now in jeopardy.  Even with the current unregulated structure, Uber and Lyft are non-profitable and have no definitive business plan to generate a return for shareholders.

It is axiomatic that social and business trends that emerge on the coasts eventually become accepted in the fabric of our Nation. There are strong forces promoting fair and equitable treatment and remuneration for contract workers. Unions such as the Teamsters and the Service Employees International have exerted political pressure at the city and state levels and have used web-based media to amplify their cause. The three most vocal and socialistically inclined frontrunners for the Democratic nomination have endorsed California AB5 and Governor Cuomo of New York state is considering similar legislation.

 

Companies employing contract workers are activating low-key opposition pointing out the financial benefits to consumers of their services. There is the distinct possibility of a ballot initiative to overturn AB5 in California with over $60 million committed by Lyft and Uber. That public-traded companies are being considered as exploiters of vulnerable workers has questionable optics especially when investors are disillusioned with returns.

 

 A demise of the gig economy will lead to services becoming more expensive and constrained. The upswing in home delivery of food and groceries will be reversed with implications for supermarkets and restaurants and ultimately Amazon the 800 lb. gorilla in the corner. The reality of restrictive legislation compelling reclassification of contractors as employees, which in fact they are, will send investors to other sectors and further diminish market capitalization and funding for expansion. We may be observing the twilight of large-cap service providers depending on the gig-economy.   


 
Copyright 2019 Simon M. Shane