Saturday, November 27, 2021

The Sad Joke of the Gig Economy

The recession of 2008 forced an entire generation to give up on their dreams.  I wonder what the next recession will bring?  Probably don't have to wait long to find out.

Stable economies are boring economies for the wealthy.  You would think the very wealthy would want a stable economy where "bank interest" was the norm, and loans were generally paid back at nominal interest rates.  You'd think that, but you'd be wrong.

Wild swings in the economy - from booming double-digit growth to sagging recession and even depression - allow a very few to make an awful lot of money in a short period of time.  Since you can "bet" on the economy using derivatives or futures, you can leverage a small bet into a big fortune, if you can time it right.  You can even make a fortune just by selling out in time.  I did.  Maybe not a fortune, but I managed to do well.  Joseph Kennedy sold out before the 1929 crash.  The folks who did "The Big Short" saw the writing on the wall about the 2008 crash.  A lot lose a little, a few win a lot.  

But beyond making money on stocks, these wild swings also are a way of enslaving millions.  During the boom times, you can snooker the small investor into betting on IPO stocks (that you are selling) or today, Bitcoin or "Stonks" that are hyped online.  Today it is getting so bad, that people are once again hyping penny stocks (quite literally!) such as Sears, which was selling for a penny a share until someone posted something online and it "soared" to 2 pennies a share - a 100% gain!  And the plebes buy into this.

When the crash comes, they become desperate for money.  First, they sell off all their stocks at a great loss.  Then, their house, their hobby cars and toys, and then their more intimate possessions, until they are left with nothing.  During the 2008 crash, people were cashing in their 401(k)'s to pay the mortgage on a house that would never be worth what they paid for it.  By the time the 401(k) was tapped out, the house was foreclosed upon and they were left with nothing - which is stupid, as that that 401(k) or IRA would be protected in bankruptcy!

But the plebes are not smart with money, which is why they remain plebes.  About the same time as all that went down, the idea of the "gig economy" or "side hustles" came to the fore.  Financial advisors would say things like, "Work that side hustle!" or "In this gig economy, you have to have a number of irons in the fire!"  They acted like this was some great new thing, as opposed to full-time employment with benefits.  The very rich were turning us from salary slaves to literal slaves.

Let's take a look at some of these "gigs" and maybe you'll understand what I am talking about.

Uber (and Lyft et al) started out as a "ride sharing" app that allowed college students to share rides home from school.  But it quickly morphed into an illegal taxi business.  I actually signed up for Lyft just to see how it worked.  I was appalled.  In order to drive for these services, you have to have a late-model car.  Don't have one?  No problem - they'll loan you the money to buy one!  So now you owe money to "the company store" and you drive all night, picking up drunk passengers who puke on the floor or worse, just so you can make payments on the car.  And in some instances, the folks doing this are living in their car.

It gets worse.  Since these "ride sharing" apps have taken off, they have basicially bankrupted many taxi companies and individual taxi owners.  People who got bank loans to pay a million dollars for a New York City "Medallion" are finding that the Medallions are now worthless - but they still owe the money.  Overseas, locals are finding their taxi companies are going bust, but their fellow citizens are now working for a taxi company headquartered in Silicon Valley.  The upshot is, this new generation of taxi drivers makes half as much as the old generation - and a huge portion of the proceeds are being siphoned off and sent to Silicon Valley.  A few foreign countries have seen through this ruse and outlawed Uber et al.

In a pattern we will see repeated again and again, the amount of money drivers made started to fade over time, as policies and pay rates were "adjusted" by the operators of these "apps" and as more and more people became drivers.  A common complaint among drivers was that in the early days, it was a good gig, but then they tweaked the rules and flooded the market with drivers so that you spend hours just sitting, waiting for fares.  This was not by accident.

Of course, you can't live on Uber earnings - it is a "side hustle" designed to bring in extra income.  In order to survive in the "gig economy" you have to have two or three of these "hustles" going on.  So, why not work for Amazon?  They are always hiring at the warehouses, and the company is a behemonth at this point.  Jeff Bezos is getting heat lately (in addition to other heat) for proposing building "Company Towns" to house his workers.  The problem with this model is that it was tried in the past in the coal mining regions of Appalichia and even at the Pullman factory (which made railroad cars).  When you lived in a company town, you rented your house from the company, bought your groceries from "The Company Sto" and were often paid in fake money - scrip - that could only be spent at company-owned outlets.  You never get ahead in such a scenario - in fact you don't even break even, you just fall further and further into debt.

But Bezos need not build his "Company Towns" as he already has them, in effect. I mentioned before how we stayed at a campground in California where half the residents were living in dilapidated RVs and walking across the street, twice a day, like zombies, to the Amazon warehouse that loomed over us like the Death Star.  These folks weren't getting anywhere in life.  Every dollar they made, they spent on lot rent, food, beer, drugs, and tattoos.  Granted, they were making poor life choices - just as a person "investing" $100 in Bitcoin is making a poor life choice (and enriching others, not himself).  But the entire system was designed to exploit people who make poor life choices.   And there should be something fundamentally wrong about that.

I mentioned also that in another campground, they had a sign up offering campers a chance to work seasonally at an Amazon warehouse - they would even pay your lot rent (some restrictions apply - natch!).   It was a chance to snare some elderly or retired folks as well - maybe more people who were making poor life choices, or had made poor life choices in the past, or were just victims of circumstance.

Again, the whole point of this "gig" economy thing is to make sure that everyone is classified as part-time, which is why you need two or three of such jobs to survive.  Since full-time employees have to be provided with benefits, it is far cheaper to hire two part-time "associates" than to pay one full-time one.  In fact, you can hire three part-time "associates" and work them for 20-30 hours a week, for less money than one full-time 40-hour "associate".

Part of the problem is the staggering cost of benefits. Obamacare has forced employers to pay for healthcare for full-time employees, and the costs are pretty high - $1500 a month or so, depending on the plan.   And then there is competition from overseas, where labor rates are measured in pennies.  Combined, well, it makes more sense to either move production overseas, or to pay people as part-time workers.

It hasn't happened yet, but I suspect Bezos will realize that even warehousing can be outsourced to overseas.  Why ship things over in bulk in containers, warehouse them, pick orders, package, and then ship, when you can do all that overseas?  Just fly in pre-prepared packages and put them on the delivery trucks!  I am sure someone, somehere, is thinking about this right now.  It already is happening on eBay with these "China Post" sellers shipping thing from Hong Kong - but that takes weeks to arrive.  They just need to get the shipping time down and it would work.

But I digress.

The gig economy isn't just victimizing the very poor - the middle-class get ensnared as well.  Amazon started out with amazing low prices, but over time, prices crept up to the point where today, well, they are higher than most other outlets on the Internet.  They count on the laziness of the users, who crave the "convenience" of buying on Amazon (with "one click!") over shopping on price.  Paycheck-to-paycheck at any income level!

And hey, why not rent out that spare room or your vacation condo on AirBnB? Never mind that you are turning a residential district into a hotel zone, just to satisfy the needs of some Silicon Valley "entrepreneur"   Your neighbors will love it!  In the name of "progress" we are all turned into shysters and hustlers and this is supposed to be a good thing.

Food and package delivery is another "gig economy" job that combines the worst of Uber and Amazon.   You can be an Uber driver and also deliver food - for Uber or for Grubhub or any one of a number of such services.  I am not sure why this has taken off in recent years (other than the pandemic) but it has been growing steadily since, well, since I used to do it when I was in my 20's.  Back then, it was mostly Pizza Hut and Domino's and the target market was college students (and often the labor pool as well).  Since those days, though, pizza (and food) delivery has expanded to suburban areas.  People come home from work and send out for food, "too tired" to make food of their own.

This victimizes two classes of people.  First, you have the middle-class workers who are making "good money" but still living "paycheck-to-paycheck" on $100,000 a year.  They wonder why this is - after all, their neighbors all send out for pizza or Chinese, at least 2-3 times a week as well, right?  And then there is the poor fellow who delivers - the guy working the "side hustle" and selling his car to Domino's one fender at a time.  I've been both those persons at one time of my life or another, so I know of where I speak.

If I had been better with money as a youth, I wouldn't have had to deliver pizzas to make ends meet.  If I had been better with money as a middle-aged lawyer, I wouldn't have sent out for those pizzas, either.  The system exploited my weaknesses - my desire to have "things" and convenience, both as a youth and as an adult.  Pretty slick system - but in both cases, I willingly played the game, I guess.

Food delivery not your thing?  Well, drive your Uber over to Amazon and you can deliver packages for them during your down time.   You sit in the parking lot at the warehouse and wait for jobs to come along, bidding against your fellow drivers for the privilege of wrecking your car for the glory of Jeff Bezos - so some suburbanite can have his package pirated from his porch!  Meanwhile, a union UPS driver is laid off for lack of work.

The list goes on an on.  These "side hustle" or "gig economy" jobs have one thing in common:  They pay very little and offer the employee contractor little or no hope of advancing over time.  At best, you are treading water, staying in place.  At worst, you are going further and further into debt, over time.

In a way, the situation today reminds me of another Heinlein story, Logic of Empire.  In that story, two well-off upper-class men get into a drunken argument as to whether the emigrants to Venus (which in the story is a habital world) are indentured servants, or actual slaves.  They get drunk and make a bet and sign on for a trip to Venus, much to their regret.

The "workers" end up on plantations, beholden to a plantation owner who himself is barely making ends meet.  The workers spend what little they have on drugs, just to keep going through the daily grind of manual labor on a harsh planet.  They have a choice - to save their money and buy their "freedom" (by paying off the debt from their passage) but most choose to wallow in drug use, which ends up increasing their debt load.  In theory, they could buy their freedom.  In reality, few ever do.  It is an interesting analogy to today's "gig economy" workers, who could be faulted for making poor life choices, or could be pitied for falling into an economic trap.  A well-laid trap.

Now, granted, with the so-called "Labor Shortage" today, maybe some of these things will disappear.  Unions are trying to break into Amazon and courts are deciding that gig workers are employees and not "contractors".   Is the gig economy on the verge of being reformed?  Maybe, maybe not.

Remember how we got here - and what I started out with at the top of this page.  It was a recession that ushered in the era of the gig economy and the side hustle.  A recession that was preceded by a labor shortage as well.  An overblown economy based on wild valuations of housing and investments in nonsensical things - and even sensible things that were wildly over-valued.  It all collapsed overnight and those that had money snapped up all those houses at foreclosure.  They snapped up all those dying and ailing companies and stripped off the liabilities, decimated the pension plans, and then paid themselves handsomely, leaving nothing but wreckage behind.  Hell, one of them even ran for President, arguing they were a "jobs creator!"   And people believed it, too.

I can see the same thing happening again.  The "gig" economy worker and the middle-class software engineer, both losing their jobs and what pitiful saving they have - as well as their speculative investments in "Crypto" and "Stonks".  Talks of unionization will evaporate as it becomes "every man for himself!" and once again, people bid against one another for the privilege of making negative income at an Amazon warehouse.

Or something like that.

So, what can be done about it?  Probably not much.  The idea that a Leftist revolution will save us all is probably a wild fantasy.  Even if the Bernie Bros could win the White House, the House of Representatives and a filibuster-proof majority in the Senate (and a majority of the governorships) - like that could happen - the result would not be a Leftist Shangri-La but a Socialist nightmare.  But we need not speculate about that as it will never happen.  We have people in this country - in the medical field no less - that think medicine is fake.  It is akin to working for NASA as a flat-earther.  I am sure there is at least one, too!

Revolutions are fine and all, but you can't count on one to save your personal situation.  Besides, they tend to end up not working out as planned, for the individual, particularly if the individual picks the wrong side.  And often, you don't know until the smoke clears, which is the right side to be on.

There is another way.  Maybe it isn't the easy way, nor is it guaranteed as a means of success.  But an awful lot of folks follow this path, over time, and while they may not end up Bezos-rich, they end up pretty damn well-off.  If you can resist the urge to spend all your money on stupid shit like Jet Skis, Tattoos, drugs, fancy cars, and other "status" or self-destructive things, you may just come out ahead.  If you invest some money in logical things - as opposed to  gambling in long-shot scams, you may end up accumulating wealth, over time.

It's a crazy idea, I know.  But it beats the alternative, I think.