Sunday, November 17, 2019

The Gig Economy - The Sweatshops of the New Century?

100 years ago, people were worked in slave-like conditions, often paid for piecework.  Today, we are seeing a new era of piecework, and the leaders of these companies are hailed as "progressives."  What gives?

In the olden days, and indeed even today in places like India and Pakistan, factory workers were paid poorly and expected to work long hours.  Even children were employed as laborers in the mills and textile factories.  In the clothing business - back then or even today in the 3rd world - workers were paid by the piece, and working conditions were unsafe and unhealthy.  The Triangle Shirtwaist Factory fire of 1911 was not dissimilar to similar factory fires (and factory working conditions) in the 3rd world today.

But what about the West?   Have we progressed beyond those primitive days, or are we slipping back into them?   One couldn't operate a "sweatshop" factory in the US, where the doors were chained shut and workers slept next to their sewing machines, working every waking hour of the day.   That would be illegal.

Speaking of which, why do people allow themselves to be exploited this way?   Well, like with other forms of exploitation, such as prostitution, it doesn't start out that way.  No one approaches a young worker and says, "how would you like to work 12 hours a day, seven days a week, for the rest of your life, chained to a sewing machine?"    It may start out more innocuous than that, but the "piecework" mentality allows workers to enslave themselves.

Say you go to work for a company, sewing shirts.  You are paid ten cents per shirt, and once you get good at it, you can knock out a lot of shirts and make some good money.   And since the money is good, you work an extra hour to make more money.   The boss sees that you are willing to work those extra hours, and before long, you are expected to do so.   And pretty soon, the boss says he will only pay you nine cents a shirt.   At first you protest, but then realize that the shop across the street is paying eight cents, so you figure you'll work an extra hour to make up for it.

Before long, you are making five cents a shirt and working twelve to eighteen hours a day, in fact, never leaving the factory.  The harder you work, the more you have to work, and the further the reward is pulled away from you.  In a way, it is a perfect Skinner box, with the reward being offered less and less frequently, and you, the rat, pressing that pellet lever faster and faster.

Today's "tech-that-are-not-tech" companies are trying to do the same thing, here in America, using "contract labor".  The idea is the same as a Pakistani sweatshop or the Triangle Shirtwaist factory. You entice people into these "jobs" with the idea they will make easy money, or extra money as a "side hustle" - a phrase that leaves a bad taste in my mouth.

At first, you make some good money, or so it seems.  But many of these jobs, like pizza delivery, are just selling your car to some start-up company, a little bit at a time.   To be fair, though, the pizza delivery place at least paid me minimum wage - plus some additional amount "per pie".   But young people don't realize it can cost fifty cents to a dollar a mile to run a car, and many of these expenses (maintenance, repairs, depreciation) are not realized right away.   All they see is how much they spend on gas - and not how much on oil changes, tires, and wear-and-tear, and the inevitable insurance increase if they get into a wreck.   And that's not even figuring in how much more the car depreciates being worked as a commercial vehicle.

But as one recent article notes, as more and more "workers" move into this space, you get fewer and fewer fares.  As a result, you have to "work" longer hours to get more fares just to keep your income even.   And if you are one of the unfortunates who leased a new car through Uber or Lyft, you may find it harder to quit, as you owe payments on that car, which are due, even if you are working or not.  In way, it is brilliant genius of exploitation - imagine making those Pakistani girls not only work 18 hours a day, but pay for their sewing machines, too!  For all I know, maybe they do just that.

People start out in this "gig economy" and make some good money.  They don't think at first about the lack of paid vacation, sick leave, or health insurance.  They don't think about the long-term costs of using their personal vehicle for business, or what would happen if they got into a wreck with their car on the way to pick up a fare and find out the insurance company (and the "ride-hailing service" insurance) doesn't cover that.

They may be out of a job, out of a car, in the hospital, and have no way to earn money or pay those hospital bills.   The may end up bankrupt.  But since it doesn't happen to them right way - or happen to them at all (but happens to others) they don't think about the long-term effects, the overall transactional cost and affect to their net worth - something I harp a lot about on this blog.

It reminds me of the old days of coal mining.  You got injured in the blast at the coal mine, and they brought your broken body home.  No worker's comp, no sick pay, no hospitalization insurance.   Oh, and since you are no longer working for the coal company, please vacate the company housing!  Pay up your tab at the company store before leaving, of course.

I thought those days were behind us, but apparently they are not.   A lot of this shiny new "tech" these days doesn't involve fancy silicon semiconductors or electronic devices, but rather "business models" (which briefly were thought to be Patentable) that are executed on a smart phone.   These business models are little more than exploitation models - getting desperate post-recession people to rent out their homes, their cars, and their lives, to some silicon valley billionaire for a pittance.

But that all be about to change.   A new era of reform looks poised to occur.  Maybe it won't be the socialist nightmare of Elizabeth Warren and Bernie Sanders, but it looks like unionism - for all its faults - may be again on the rise.  And after losing money for years, the taxi and hotel businesses are fighting back and taking back their territories.

And in some cases, if you can't beat 'em, join 'em.   I was chagrined to see in Jacksonville a taxi company branding itself as a "ride-hailing" type service, exhorting fares to "download the app!" just like Uber and Lyft.  In a way, it makes sense - have you ever tried to call for a cab?   It was just a nightmare, in the old days.   In some instances, you had to call a day in advance just to get one.   No wonder Uber and Lyft took off like it did.

But that may be about to change.   Drivers are getting fed up with working harder and harder and making less and less.  And despite all the talk about "side hustles" the reality is that many if not most of these "side hustlers" are doing this full-time - or doing a panoply of "side-hustles" to make up one full-time job.

Of course, this does not bode well for Uber, Lyft, and many of these other "tech-that-are-not-tech" companies, which continue to hemorrhage cash.  Even using exploitative labor, these companies haven't figured out how to make a profit, and perhaps never had an intention to do so.  Just "burn" through cash, and take home a nice paycheck and stock option, which will be worth billions once the IPO drops.

As I noted before, I signed up for Lyft, just on a lark, to see what the process was like.  I quickly realized that, viewing the transaction from a net worth perspective, it was a non-starter for me.  Driving 10-15 miles to pick up a fare for another 15 miles (and then having to drive back) would have cost me $15 to $20 in overall cost in using my car.   I would have made little money on the "gig" unless I could charge the fare $100 or more.

But moreover, I realized that if I got into even one minor accident, my insurance company would not cover it (and in some instances, Lyft would not, either) and my personal policy would likely be cancelled, making it hard to get insurance for years to come.  I would have to drive even more to pay for the cost of insurance.   It becomes one of those chicken-and-egg things, like teenagers who take a job at the mall so they can buy a car, which they need to go to their job at the mall.

The tiny amount of money I would make - and the long hours I would have to be available to "work" (mostly waiting around for fares) wasn't worth the risk to me and my finances.   So I took a pass.  Others have fewer options, at least at the present time.   In an era of record-low unemployment, that may be about to change.

What really irks me about the whole situation is that we, as consumers, laud these billionaires as some sort of progressive heroes, because they support our candidates or causes, or claim to be working for us little people.   No one loved the robber-barons of the 1800's and the capitalist strike-breakers of the early 1900's.   Or did they?   Names like Rockefeller, Carnegie, and Vanderbilt still carry currency in this country, and indeed, their decedents today are still lauded as celebrities, politcal figures and media figures.

Today, a new slate of robber-baron billionaires are lauded as celebrities.   Jeff Bezos is deemed a hero, for saving The Washington Post and for promoting "progressive" causes.   Yes, even Transgender Lesbian Eskimos can be exploited at an Amazon warehouse or as a "gig economy" delivery driver.  This is progress!

Maybe this is some aspect of human nature.  We want to elevate one of our own above ourselves.  We need heroes and Gods, even if they exploit or abuse us.  Maybe everyone needs a little S&M sometime.    Perhaps.

But everyone has their limit.  And I suspect a lot of this "new progressive" movement is being driven by a dissatisfaction with the "gig economy" and its sweatshop-like working conditions.