The last decade has seen the growth of “gig” companies like Uber and Lyft which rely on on-demand labor to provide services to customers, usually at low cost. Using the case study of opposition to California’s Assembly Bill 5 which enshrined gig workers as employees, Ashley Baber looks at efforts by gig companies to manipulate markets by controlling workers, influencing regulations, and changing the way people think about on-demand labor and flexibility.
Leading up to the 2020 November elections in the United States, gig industry giants Uber, Lyft and Doordash spent over $200 million dollars on a ballot campaign in the state of California to prevent the classification of gig workers as employees of their respective platforms. The ballot measure was a response to the passage of Assembly Bill 5 (A.B. 5) which implements specific requirements for the categorization of a worker as an independent contractor, a classification that gig companies use to avoid employment related laws and benefits such as paid time off, overtime and worker’s compensation. A.B. 5 stated that workers should be considered employees if they conduct work that is central to the company’s business. This distinction is hard for gig companies to disprove as there isn’t really an Uber if you don’t have Uber drivers. At least not yet.
The campaign against A.B. 5 included aggressive in app advertisements and pop ups warning customers of a loss of service and gig workers of a loss of flexibility. The pop-ups also provided methods for users to contact their local representatives. The opposition to A.B. 5 ultimately won maintaining gig workers as independent contractors. Although the ballot measure was challenged in court, a California appeals court affirmed the ruling in March 2023. The ballot measure campaign was reported to be the most expensive in the state’s history and signifies the gig industry’s decade long goal of avoiding employee related costs through the use of worker misclassification. The blatant use of hundreds of millions of dollars to create favourable regulatory landscapes has drawn concern of labor advocates, scholars and law makers alike with particular attention paid to what this means for the future of work and labor laws in the United States.
The example from California highlights a crucial piece of the gig economy, labor market manipulation. I argue that firms of on-demand labor (e.g., gig firms such as Uber, Lyft and Doordash but also temporary help firms such as Manpower and Adecco) engineer markets by extracting value and controlling workers through a triangular employment relationship, manipulating regulations, saturating the market with workers, and manipulating the cultural understandings of on-demand labor. As such, I term firms of on-demand labor, labor market engineers, which intervene and manipulate workers from multiple angles while shaping local labor markets.
Triangular Employment Relationship
The first important way that firms of on-demand labor engineer markets is through their position in the triangular employment relationship (Figure 1). These firms use their position situated as the intermediary between worker and work to avoid labor regulations, extract value, avoid risks and to control workers. As an example, an Uber driver provides a ride to a customer from point A to point B. Uber takes a cut of the cost-of-service provision from the driver and charges fees directly to the customer for use of services. If the driver happens to get into an accident, the responsibility and cost falls to the driver rather than Uber since the driver is an independent contractor rather than an employee. Likewise, in app surveillance of workers is used to control behaviours. For example, if a driver’s rating falls below a certain level, they can be kicked off of the platform (essentially fired from their job) with little to no route to contest the decision.
Figure 1 – Gig Economy – Triangular Employment Relationship
The second way firms of on-demand labor make markets is through regulatory manipulation. The manipulation of regulations by firms is certainly not a new phenomenon. Companies across a variety of industries such as oil and electric in the United States have been known to lobby regulators for favourable rule making. Firms of on-demand labor stand as no exception. As the California case shows, gig firms spend large amounts of money campaigning against employment laws. Historically, temporary help agencies have done the same, lobbying regulators to limit employer provided social provisions across markets in the United States. Gig firms lobby, build alliances with political elites and garner support through their marketing campaigns. For example, in Austin, Texas, as Uber and Lyft were fighting a city run background check requirement, Uber deployed a “horse and buggy” feature in their app which suggested if the requirement passed, passengers would be relegated to this archaic form of transportation. These strategies support the underlying business model of firms of on-demand labor to operate as a deregulated alternative. Uber and Lyft as deregulated taxi-cabs and temporary help agencies dispersing deregulated workers. This, of course, also avoids the costs and risks associated with traditional employment.
Photo by Robert Anasch on Unsplash
Another key component of labor market engineering has to do with market saturation. Gig companies rely on an overabundance of service providers in order to supply quick services across a locality. For your Doordash order to show up within the hour and your food to remain hot, there must be numerous drivers waiting to accept the task when their app pings. This saturation, however, drives wages down for individual workers and competing industries. For example, in the case of many US cities such as Chicago, the number of taxi-cabs on the road at any given time are fixed by regulations as are the prices they can charge. In most instances, this is not the case for Uber and Lyft vehicles. As a result, Uber and Lyft can oversupply vehicles on the road and offer cheaper rates undercutting taxi-cabs. Additionally, reports have shown that gig companies employ gamification strategies to lure more workers onto the road and into particular areas in order to provide quick services to customers. As a consequence, this drives down take home pay for individual workers as the cost of service declines when there are more service providers available. Likewise, the saturation of ride-hailing markets has caused immense congestion issues in major metropolises such as New York City.
The last component of labor market engineering is the way on-demand labor firms carefully craft cultural understandings of flexible labor. In US markets, they tap into the “side hustle” narrative that has become prevalent encouraging people to work an extra job to supplement their income. The key marketing strategy for luring workers onto platforms is to really push the allure of flexibility – that workers can make their own schedule. This purposeful framing parallels strategies deployed by the temporary help industry following World War II. Companies such as Kelly Services worked to convince firms that temporary workers were a preferred option to full time employees. An example which particularly resonates is a 1971 advertisement referring to temporary workers as the “never–never-girl.” The worker who never gets sick, never takes a vacation and does not carry the risk associated with full time employees. Instead, they are temporary workers that can be let go when they’re no longer needed.
The guise of flexibility is sold to both the worker and the client (individuals or firms). Contemporary gig advertisements often sell a “make your own schedule” or “be your own boss” narrative. Of course, studies have shown that many gig and temporary workers participate in this labor out of necessity to supplement low-wages rather than as a ‘side hustle’ to save up for a vacation or material indulgences. The framing of flexible labor arrangements as highly desirable has become politically expedient for gig companies looking to avoid classifying workers as employees. Gig companies use this framing to threaten that if workers become employees, they will then lose the ability to work flexible hours. This does not necessarily need to be the case, but it does ensure that firms do not legally have to provide overtime pay, health insurance and paid time off.
Precarious labor arrangements are rising in the United States. This is not, however, a natural outcome of technological changes or advancement. Instead, firms of on-demand labor engineer markets through particular strategies. This practice has been on-going since the rise of the temporary help industry in the late 20th century. Firms triangulate the employment relationship to avoid responsibility and extract profit, they shape regulations through the weaponization of their technology and lobbying regulators, they oversupply services creating insecurity across industries and they craft cultural narratives to drum up support. Firms of on-demand labor adapt strategies, pulling from a wide repertoire to control and exploit workers and engineer labor markets.
- This article is based on the paper. ‘Labor Market Engineers: Reconceptualising Labor Market Intermediaries with the Rise of the Gig Economy in the United States’, in Work, Employment and Society.
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- Note: This article gives the views of the author, and not the position of USAPP – American Politics and Policy, nor the London School of Economics.
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