After the last recession, people went to work on "side hustles" to make money. Today, there is a labor shortage. What will this mean for Uber, Lyft, Doordash and Grubhub?
A "tick tock" video making the rounds of the Internet, as well as a number of postings, photos, and testimonials, indicates that the "Gig Economy" may be finally melting down. Sites (and that is all they are, websites) like "Door Dash" are squeezing their drivers as well as restaurant owners, and as a result, some drivers make little or no money on deliveries, unless you tip generously - on top of the delivery fee. Why drive ten miles, burn gas and waste your time, for nothing?
As a result there are videos and photos of undelivered food - drivers just refuse to pick it up if there is no tip pre-paid on the order. Customers are outraged as their food sits for hours (at which point, it is inedible) and eventually they give up and request a refund from DoorDash. Maybe they need to get up off their lazy ass and make a meal at home. But that's just me. At age 62, I dearly wish I had every penny (and every pound gained) back that I spent on delivery and take-out foods. No one will wish, on their deathbed, that they spent more time in the office. They won't wish they ate more pizza, either.
I digress, but who orders McDonald's food delivered? I mean, cold french fries and a $20 delivery fee? I don't think so. In the time it takes to do that, I could drive to the grocery store, buy food, take it home, and cook it. Sheesh! I feel no empathy for people who are ordering fast-food delivered and it doesn't get delivered. If anything the drivers are doing you a favor!
What is going on here? Well, I have some sympathy for the drivers, as I used to deliver pizzas, chicken wings, salads, and yes, even beer, when I was in college and doing several "side hustles" including working at UPS and Planned Parenthood. For some reason, when I worked at Acropolis Pizza in Syracuse, the owner (or his brother, anyway) "Ari" would not pay us to deliver salads. We got a portion of each sale as a delivery fee, in addition to our hourly rate, but not for salads. So if two young girls on South Campus (as far as we would deliver to!) ordered two salads and didn't tip, it was a loss-leader.
One of the other drivers, who was South African (they called him "Chicken George" and he seemed to like that moniker - different times) always said, "Never deliver to South Campus! They order CHEAP PIE, leave NO TIP!"
So yea, I get it - there is no point in losing money and wrecking your car, for nothing.
When the market crashed in early 2009 and everyone got laid off (remember extended unemployment? Yea, we had that back then, too!) these "gig economy" things started showing up. What they amounted to, as I have said all along, is exploitation. Take some menial low-wage job, pay people under the table (as contractors) illegally to do it, don't bother with permits or insurance, disobey regulations and laws, and go big, fast. Things like food delivery and taxi drivers - traditionally some of the lowest-paid jobs in America, were re-made as "apps" and a hefty sum skimmed off the top and sent to silicon valley.
Early on, when they were trying to "go big, fast!" they paid OK - and a lot of people got into it. If you drove for Uber, you could make some decent money, but of course, you had to have a new or newer car and Uber would help you buy that. So in a way it was chasing your tail. You owned a car so you could work, and you worked so you could own a car.
But it got worse. Over time, they hired more and more people and as a result, you had more and more "downtime" between rides. And all these "Gig" economy apps changed their terms, each time making it a little less attractive to work for these companies.
A whole generation - the Millennials - gave up on careers and real jobs and ended up with multiple "gigs" that paid little and had no benefits whatsoever. They must choke on their own vomit when they see their younger brothers and sisters getting real jobs that pay real money, doing Internet thingies - probably writing the "code" for the "app" that is exploiting their big brothers and sisters.
It doesn't end with apps. Companies like Amazon and Walmart pay people part-time and as a result, you have to have multiple jobs (with conflicting schedules) to make ends meet. And don't get me started on fast-food and retail. There is no such thing as a career barista, but many folks seem to have no other choice.
Until the labor shortage. I see now, online, ads for Uber, imploring me to sign up for the Gig economy. I did sign up for Lyft as an experiment, but it just wasn't practical. I live 10 miles from the city center, and many people want rides from the neighboring island (a 20-mile drive, but I could swim there in a half-mile, if not for the rip-currents). So it would not really be profitable, and I would have to be "on call" for huge blocks of time to make it work. I recall I saw only one ride request, and that was by a young lady who wanted a ride from a very bad neighborhood to the Dunkin' Donuts by the causeway. I guess she worked there (or was very hungry) but the amount I would have made for driving 30 miles, round-trip wasn't worth it. I noped out of Lyft - not that I was ever serious about it to begin with.
The "Gig Economy" model depends on an endless supply of desperate people - and today with inflation and the mass-retirement of the Baby Boomers, we are seeing fewer desperate people. "No one wants to work anymore!" is the cry of the McDonald's franchisee. No one wants to work for you is the real message, not at the shitty wages you are paying, not when someone else is paying more.
But labor shortages precede recessions, and we could be seeing a whopper of one in the coming years, unless we switch over to a war economy (which would make labor rates even higher). If the economy does blip, well, more people will get laid off, and once again, they will seek out these "Side Gigs" to make ends meet.
Saaaay..... you don't suppose intentionally crashing the economy works in favor of certain companies and wealthy individuals, doya? Probably not intentional, but the economic cycle of boom-and-bust tends to favor those who have, and screws those who do not. It really screws those who are trying to get ahead. Like I said before, I knew, personally, a lot of middle-class people in Florida who were buying-and-flipping houses in the early 2000's and making some money at it. They thought their ship came in, but failed to see it was the Titanic. A few smart or lucky ones (including me) thought it was too-good-to-be-true and got out in time. The raging true-believers held on and lost it all.
But the people with real money scooped up the resultant foreclosure houses for pennies on the dollar and still own some of them today - or are selling them at inflated prices to chumps like you and me. Look for another recession to take out the people paying premium prices today, who will be forced to rent from the Oligarchs who buy up the foreclosure properties the next time around. I've lived through this twice, now. The only hard part is in the timing - this shit could crash tomorrow or go on for a few more years. It depends on so many factors - many of them emotional and psychological, not financial.
But I wonder if people will go along with this yet again. When the market blips again (and they always do) and people get laid-off, will they be willing to swallow their bile and drive for GrubHub or Uber again? Or will they realize the whole thing is an exploitative scam and said "fuck this shit!"
I am not sure what the answer is, only that many of these "side hustle" apps have yet to make dollar one. And many of them (meal kits, delivery services, online shopping) were enhanced by CoVid. If the pandemic ends (and all pandemics end, one way or another) will people still want their groceries delivered?
I was at the "big" Walmart the other day and we left because the parking lot was full. People were shopping in person, en masse. Walmart recently set aside two rows of parking spaces for "curbside pickup" including our favorite space way out in the far corner (we need the walk!). But most of them were empty. And when we went to "Ghetto Gourmet" the blue totes of the "curbside pickup" pickers were all stacked in a corner and I only saw one picker and one car in the "pickup" zone (again, in our favorite spot near the pharmacy drive-through). I never really understood the advantage of curbside pickup or having groceries delivered, unless you are an invalid. But that's just me - I am so behind the times and out-of-it.
You connect all these dots and it seems that something is changing. Pandemic's over. People are going back to work and going out again. Wages are up, and business models predicated on cheap labor are going to have trouble - big trouble - going forward. And once your Micky-D's order sits for three hours without being delivered, well, chances are, you aren't going to order again (Is there really someone so desperate they would actually wait that long? They would actually eat that food? Gross!).
This does not bode well for the stocks in these "Gig Economy" companies. But then again, they never were much to begin with - a website and an app, a business model calling itself "tech" when it was not "tech."
In 1969 we landed on the moon. In 2019 our big tech accomplishment is delivering hamburgers. Yea, something had to give....
UPDATE: A reader notes that Grubhub was sold last year to investors for a tidy sum. This year, they want to unload it, as the pandemic is over and sales are down. This "tech" was never tech, and the business of delivering food is one of thin margins. You don't get silicon-valley rich delivering pizzas!
