Open Economy Watch: Uber and the freelance economy

The meaning and nature of employment is changing in the US, and as it does, new contests are arising over what it will become. The recent ruling in California in favor of Uber drivers, for example, enables some 160,000 drivers to open a class-action lawsuit against the company. Drivers claim they are treated as employees, not contractors, and thus should receive benefits, such as health, vehicle insurance, and mileage. Uber’s success, of course, has been built on the fact that it claims no financial or legal responsibility to its drivers, and that it merely operates the technology and market that connects riders with drivers. Uber calls their drivers independent contractors who set their own terms of work.

Although Uber will be the defendant in the imminent lawsuit, the debate implicates the state of the emergent freelance economy (also called the “gig economy,” “on-demand economy,” and “digital sharecropping”), whereby workers are treated like on-call contractors. Employment once symbolized security, benefits, and high wages for a majority of the working population; but it has now begun to morph into low-paid contractual work with neither stability nor benefits for workers. The model of corporate welfare—where the firm looked after the livelihood and welfare of its workers—has given way to self-employment and self-management through networks enabled by new technology. Ford Motors in the mid-twentieth century is an example of the former arrangement, and Uber of the latter.

Despite the appearance of liberation of individuals from a boss and corporate control, the freelance economy as it exists now is deeply flawed. While some companies such as Netflix are pushing the traditional definition of employee to empower its white-collar workers in new and creative ways, for the majority of Americans, the rise of on-demand, on-call, and freelance work offers only low-pay in low-skill jobs with no opportunity of advancement or further training. Indeed, those with access to educational and economic opportunity are free to invent and prosper in this new economy, while those without must be on call to drive around the innovators or clean their homes.

This contrast of opportunity in the economy today helps highlight the choice that we have before us: will our society continue to be divided into high- and low-skill sets, or will the most advanced production practices and work organization be widely disseminated so that each individual has the opportunity to lead a greater life? It is a choice between exclusive opportunity and inclusive growth and prosperity. Will the freelance economy continue to be an increasingly divergent arrangement whereby only a select minority have full access to the educational and financial resources necessary to take part in maximizing these trends, while the majority of Americans are stuck in low-end, low-paying jobs and treated as if they were independent contractors yet have no possibility of advancement? Or will we open access to advance practices and production so that all can partake in the new economy?

While some companies and entrepreneurs are helping advance the second choice through hiring initiatives and progressive work practices, the state must also be involved. It must do so not as a regulator, but as both an active facilitator of technological development and cooperative networks and mechanisms, and also as an investor in people. To ensure that we as a society can realize the second choice, a program of education, financial access, technology transfers, and coordination among firms, state, and community must be advanced, and must be done as a complete package, as laid out in the Democratic Alternative intervention. Among these proposals, the most immediate in the face of the situation of work today are education and capital. It is essential to offer free education that individuals can partake in throughout their lives, which will enable them to engage in the new economy, whether it be with necessary skill sets, such as coding, or innovation. The cultivation of individual minds and their creativity must also be coupled with access to economic resources so as to be able to realize ideas. This can be achieved through a broad-based financing scheme, whereby the government acts as a venture capitalist in providing capital to fund innovation. By creating a public venture capital fund, we would ensure that everyone has access to necessary start-up capital, not just a select few. These two proposals are at the front of the broader vision of the program that furthers the goal of giving more people more access to greater educational and economic opportunities so that all can live a greater life on their own terms.

This is the Open Economy project of the Democratic Alternative.