Economy

The Gig Economy Is Ripping Out Floor Below Middle Class

Gig economy profits are mostly going to wealthy executives.

Photo Credit: Image by Shutterstock, Copyright (c) tostphotos

The latest tech-driven gyrations upending traditional employment and increasing the divide between the haves and the have-nots are as profound as they are poorly understood by the public and federal lawmakers.

In what's called the gig economy, companies like Uber hire people to use their own cars as taxis; property owners use firms like AirBnB to rent homes and rooms; and the well-off use firms like Instacart for on-demand shopping. While this may seem to offer more freedom of choice to all, some say the gig economy not only erodes wage-based work and benefits, it poses systemic risks to the economy as income becomes more erratic.     

That was the takeaway from a talk by David Cay Johnston, the renowned investigative business reporter, at San Francisco Public Press, an independent non-profit outlet. Yet according to just-released findings by Pew Research Center in the first national survey about this corner of the “new digital economy,” most Americans have little idea of the changes underway.

“Imagine that you are a mortgage lender. Are you going to lend people money for 30 years if they don’t have the security of employment?” Johnston said, offering an example of how the successful push by the technology sector to undermine and overturn the labor laws created during the New Deal are tilting too far toward piecemeal purveyors and will create new instability.

“People are working without salary, benefits and the stability to buy a house and raise a family,” he said, saying that the blame can be placed at the foot of high-tech lobbyists who have donated to congressional campaigns and federal officeholders who subsequently loosened federal laws to their benefit.

Meanwhile, according to Pew’s New Digital Economy report, 61 percent of Americans have never heard of “crowdfunding,” 73 percent are not familiar with the “sharing economy,” and 89 percent have never heard of the “gig economy.”

Johnston is a registered Republican but schooled in the belief that business prospers when wages and benefits are reliable and income is spent locally. He described how the fundamentals of middle-class stability are being further eroded by a new technology-based oligarchy. Despite all the hip apps and marketing, gig economy profits are only going to executives while the jobs offered are intrinsically unstable, fiscally unpredictable and most of the risk and expense are placed on contract workers.

During Johnston’s presentation, he said the protests against companies like Uber are not going to be enough to address the underlying disparities became they are based on federal law—or an absence of regulation—to create a healthier balance for employers, workers and the economy. Johnston believes these underlying issues and resulting shifts in the economy are neither recognized nor understood by 2016’s presidential candidates.   

I spoke with him after his talk to further elaborate these points.

Steven Rosenfeld: What’s really going on with the gig economy?

David Cay Johnston: The gig economy is really about pushing down the costs of labor. And it’s government rules that help corporations pay less for labor and therefore make more profits, unless they push so far that they don’t effectively run the business. And they’re going to push them down and down because government policy lets them do it. When you pay people as employees, they get a regular paycheck. That means the employer takes more of the risk and the worker gets reliability. And that’s a much better system, because most people can’t live in a world of unreliability. How are you going to finance a mortgage if you don’t have a reliable income?

SR: You said these protests on the street against Uber aren’t really going anywhere, and neither is a litigation strategy because the federal courts are stacked with judges who are anti-labor, so where’s the pressure point?

DCJ: Demonstrations like shutting things down can be very beneficial, but they are a tactic, not a strategy. The strategy is we have to break the campaign finance system. We have to vote out of office those politicians in both parties who are rigging the game in favor of the oligarchs, who are feeding them and against everybody else. And how do you do that? Well, a lot of people were elected to Congress because they went door to door in their district and knocked on every door for a year—things like that. Or they got other people to do it with them. And they repeatedly went to people with a message and they got it across.

SR: The thing that I see as a reporter is that what unites the Bernie people and what unites the Trump people is they feel vulnerable. They feel unprotected against big systems—some big systems are government. Most big systems are corporate and private. And the gig economy is part of that, because people are not empowered and have fewer choices. So what do people do? 

DCJ: The underlying problem here is in the law. We’re getting the law wrong and we’re getting the principles wrong. People don’t understand that at all. First, of all, you can’t be too abstract. I am in this bizarre position in the people I champion in my books are the people going with Bernie or Donald. And I’ve written the toughest pieces about both of them that have been in this campaign—to the point where Donald called and threatened to sue me. And yet neither of these people is capable of doing anything.

Bernie Sanders is not capable of making any change. He doesn’t know how to run anything. And Donald, if he gets elected, he doesn’t care about any of this. He’s a narcissist.

So fundamentally we’ve got to find ways to build organizations that aren’t necessarily the organizations that are for people at their work. We’ve got to create social movements and find people who are leaders—this is not me. This is not my area—who will get across messages that will unite people and get them to say, Yeah, we’ve had enough of this and we are not taking it anymore, and elect different people to office.

SR: Everyone agrees with that. But we have a political culture whose language, whose rhetoric, whose understanding seems so dumbed down.

DCJ: My simple answer to that is I am in the diagnosis business. I am not in the solution business. I wish I was. But I have spent my whole life exposing problems and I have offered here and there solutions, but the fundamental solutions of how do you organize this society and a culture to change—I don’t know how to do that; it’s not what I do.

SR: But I’ll tell you what you do do—you analyze the money. Where it goes. You analyze how it’s structured. You analyze whether there is enough to be shifted from a column here as a tax break and giveaway, to a column here as a public benefit that could be a safety net. And as you said earlier tonight, there is enough money there to really have people lead more assured, confident and economically secure lives.

DCJ: So one of the ways to do that is nobody needs or can spend enormous huge incomes. My thought is a couple of reforms that we need is that even high income should be taxed at a much higher rate to discourage those high incomes. Secondly, if it’s wealth—you’re not spending the money, you’re building wealth—you should be able to build all the wealth you want, but when you die we should heavily tax it to take it away. And you shouldn’t be able to borrow against that wealth to live on—that’s how super-rich people live tax-free. If you had $1 billion and are spending only $10 million a year, you can borrow and get richer and richer without paying taxes. We need to stop that. We need to recognize that there is no utility to this.

You know, if you invent something and it makes you $10 billion, god bless you. You keep the $10 billion until you die. And then we should heavily tax that. We have gotten the idea that somehow this is wrong. The only reason you made the $10 billion is because you live in the United States of America. We have the market and the technology that taxpayers have invested to make it possible, and now we’re going to go harvest it. And if we don’t do that, here’s what we’re saying. We’re going to let that rich person who benefited from all that public investment and spending keep the money, and you’re going to be taxed so they can pay less. That’s crazy.

SR: Do you think there is an opening now because millions of Americans are looking to Bernie and looking to Trump to address deep anxieties?

DCJ: No, I think this is evidence of people’s panic. People know that the promise of the Reagan revolution, that it would make them rich, hasn’t worked out. They don’t know why. They don’t know what to do about it. So they have gone to two false prophets. And the difference between them is people who are motivated by racial animus or other bigotry are going to one, and people who have a better—in my view—or more reasonable understanding of society are going to the other. But they are false prophets. They can’t fix anything. They don’t know how to fix anything. And they don’t really care.

Leading members of Congress will tell you that Bernie has never accomplished anything and doesn’t know how to, and he’s a miserable human being if you ever meet him. I know that about him. But he has never accomplished anything. He’s a rabblerouser. We need rabblerousers. But he shouldn’t be president.  

Steven Rosenfeld covers national political issues for AlterNet, including America's democracy and voting rights. He is the author of several books on elections and the co-author of Who Controls Our Schools: How Billionaire-Sponsored Privatization Is Destroying Democracy and the Charter School Industry (AlterNet eBook, 2016).

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