The rise of Uber has convinced many pundits, economists, and policymakers that freelancing via digital platforms is becoming increasingly important to Americans’ livelihood. It has also promoted the idea that new technology—particularly the explosion of platforms enabling the gig economy—will fundamentally alter the future of work.
While Uber and other new companies in the gig economy receive a lot of attention, a look at Uber’s own data about its drivers’ schedules and pay reveals them to be much less consequential than most people assume. In fact, dwelling on these companies too much distracts from the central features of work in America that should be prominent in the public discussion: a disappointingly low minimum wage, lax overtime rules, weak collective-bargaining rights, and excessive unemployment, to name a few. When it comes to the future of work, these are the aspects of the labor market that deserve the most attention.
Curiously, the best evidence of Uber’s relatively small impact on the American labor market comes from data released and publicized by the company itself. David Plouffe, an Uber strategist, began a recent speech by saying, “I want to talk today about the future of work—specifically, the fact that a growing number of people are engaging in flexible and freelance work because of the sharing economy or through on-demand platforms.” He highlighted the large number of people driving for Uber, saying, “Uber currently has 1.1 million active drivers on the platform globally. Here in the U.S., there are more than 400,000 active drivers taking at least four trips a month.” As he went on to list the number of drivers in the biggest American cities, he said, “The numbers show just how attractive this type of work is to people around the country.”
In other words, Plouffe is sending the message that Uber is very big and growing, and he portrays his company and other companies in the gig economy as increasingly important to the United States’ economic future. But these claims are undermined by the relatively minor contribution Uber makes to its drivers’ incomes. Indeed, in the same speech, Plouffe emphasized that Uber primarily provides supplemental income for a widening number of part-time workers who need flexibility or extra cash, often as they’re in between jobs. Most tellingly, Plouffe said that “for most people, driving on Uber is not even a part-time job …it’s just driving an hour or two a day, here or there, to help pay the bills.” He noted that half the drivers work less than 10 hours per week, and, even then, significantly adjust their schedules week to week as needed. Plouffe noted that “the average number of hours driven continues to fall; in fact, it’s down more than 10 percent since the beginning of the year.” The work is frequently transitory: As Plouffe observes, “a third of drivers said they used Uber to earn money while looking for a job.”
Other data Uber has collected bears out a similar finding. A report written for the company by Uber’s own Jonathan Hall and Princeton’s Alan Krueger found that 85 percent of uberX drivers are part time (meaning they work fewer than 35 hours per week). The report also found that only 24 percent of Uber drivers rely on Uber as their sole source of income, and that Uber income is the largest but not the sole source of income for another 16 percent of drivers. Thus, Uber clearly was not the main gig for 60 percent of its drivers, and its drivers do not necessarily view driving for Uber as a long-term proposition.
All this pretty clearly goes against Uber’s public image of embodying the gig economy’s dominant future: Driving mostly for supplementary income on a transitory basis conflicts with the notion, promoted by the company, that Uber, and gig work more generally, are a major feature of how people will earn a living in the future.
It turns out that Uber’s actual contribution to American employment is relatively trivial. Hall and Krueger’s findings suggest that the average Uber driver is working for the company between 15 and 20 hours a week, which means that each driver can be thought of, for the purposes of tallying employment, as half of a full-time, 40-hour-per-week worker. With that in mind, the 160,000 drivers reported by Hall and Krueger at the end of 2014 are the equivalent of just 80,000 full-time workers. Meanwhile, the United States had 130 million full-time-equivalent employees in 2014. This means Uber drivers represent significantly less than 0.1 percent of all full-time-equivalent employment. Even using Plouffe’s current count of 400,000 Uber drivers, all working 10 percent fewer hours than in 2014, then Uber could account for between 0.1 to 0.14 percent of total full-time-equivalent employment at the end of 2015.
More confirmation of Uber’s small economic footprint comes from Plouffe’s brag, in a recent article, that Uber drivers earned $3.5 billion in the first 10 months of 2015. That is a lot of earnings, yet it represents about 0.06 percent of all private-sector compensation.
Given that Uber is the juggernaut of the gig economy, it should not be surprising that the entire gig economy is not all that large. Nor has it grown much in recent decades. According to the Census Bureau, the revenues brought in by all self-employed businesses accounted for, on average, a bit more than 3 percent of all American revenues from 1997 to 2013. In fact, employee-less businesses’ lowest share was in 2012 and 2013, even though there were 23 million such establishments in 2013. It is telling that the Census says that “due to their small economic impact, these firms are excluded from most other Census Bureau business statistics.”
Employment data also contradicts the notion that the U.S. is becoming a nation of freelancers. A recent analysis I did for the Economic Policy Institute shows that the self-employed (those with no paid employees working for them) comprised only 7 to 8 percent of total employment in 2014. What’s more, self-employment was stable in the 20 years before then. Uber is frequently in the news, and digital-freelancing platforms garner a lot of attention, but evidence of an exploding gig economy is, as they say, showing up everywhere but the data.
However, all this should not be taken to mean that Uber’s rise doesn’t raise important policy questions. The company may be small relative to the economy, but it is still a sizable company. Moreover, the controversies surrounding Uber’s practices may lead to legal changes that would affect workers in a number of other sectors.
The most prominent legal and legislative question—one that has major implications for workers in industries as varied as construction and trucking—is whether Uber drivers are being misclassified when Uber considers them independent contractors instead of actual employees. Independent contractors lack important protections, such as unemployment insurance and compensation for on-the-job injuries, that are granted to workers classified as employees. They also must pay both the employer’s and the employee’s portions of the Social-Security payroll tax. This classification also has implications for collective bargaining (as independent contractors are not covered by the legal framework enabling it) and for the overall collection of tax revenues (as the failure to report income is very common among independent contractors).
Some argue that work through digital platforms is so qualitatively different that new legal categories are required to govern employment relations. This is reminiscent of Amazon’s argument in the 1990s that online orders shouldn’t be subject to sales tax because they are qualitatively different from brick-and-mortar purchases—an argument that rings even more hollow now than then. The Harvard law professor Ben Sachs has persuasively argued that Uber should be considered an employer and that “workers can choose when and how much to work, and can even work without immediate supervision, and still be employees.” The challenge, then, is to preserve the plainly evident value of Uber’s services while having the company comply with rules that provide adequate consumer, tax, and worker protections.
With all this in mind, it is strange that so much attention is paid to the speculative future of gig work and possible widespread automation—developments attributed to technological change—when there are so many problems that already exist in the labor market today. The most prominent example is the overwhelming stagnation of white-collar and blue-collar wages: The Bureau of Labor Statistics reports that from 2007 to 2014 the bottom 87 percent of workers faced falling or stagnant wages, and the bottom 80 percent endured falling or stagnant compensation (which includes wages and benefits). There is also the erosion of the retirement system, the fissuring of the workplace as temporary staffing and subcontracting have become more common, widespread misclassification of employees as independent contractors, a minimum wage whose buying power has been dramatically lowered by inflation, and the erosion of collective bargaining. Other challenges include the ongoing evolution of globalization and immigration, and the shifting demographics of our workforce (becoming majority minority, for instance).
None of these forces are being driven by technology: Rather, most embody a shift in the rules of the labor market dictated by policies adopted under pressure from the wealthy and powerful. When thinking through the future of work, the focus should mostly be on fixing those policies—not on a high-profile company and a gig workforce that represent a much smaller sliver of the economy than people believe.
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