From Linear to Triangular: Redefining Business in the Gig Economy
This piece was a submission from Clare McLeod, and it received fourth place at the 2018 International Conference’s Writing Conference. Congratulations, Clare!
In traditional employment relationships, the employer and employee were explicitly linked. An employee’s labor would add value to the employer’s product, whether that be a good or service. In today’s workforce, however, technology has rearranged this linear relationship.
Now, the gig economy encompasses workers untied to the company, or employer, they “work” for. Companies in the gig economy such as Uber and Lyft (increasingly referred to as Transportation Network Companies), in addition to other service platforms such as Handy, are anything but traditional employers. Instead, these companies capitalize on their roles as connecters. By linking consumers with service providers, these tech-based companies churn profit by facilitating a simple connection, time and time again.
This new economy has replaced the linear relationship in traditional business transactions with triangular ones, wherein the company links the provider to the buyer yet remains relatively unseen by both. While different, this economic set-up is not necessarily better or worse – though critics on each side argue their respective cases.
In favor of these tech platforms, business enthusiasts, freelancers, and consumers argue the more informal gig economy creates opportunity. Workers, or service providers, can access a base of consumers otherwise scattered; consumers, or end-users, have access to an ever- widening range of providers and options; and companies make money off each provider-consumer connection they facilitate.
Yet the gig economy and its reformation of the employment relationship has not gone without scrutiny. Just as workers in the gig economy have gained the flexibility to choose their own hours and work for several companies at a time, some claim that workers have simultaneously lost the benefits and stability offered in more formal employment relationships.
Companies in the gig economy often assume less responsibility for their workers, especially if able to classify them as independent contractors rather than employees. Lydia Depillis, from CNN Money, explains that the independent contractor classification frees companies from having to pay workers’ compensation, unemployment taxes, and minimum wage – while also freeing them from federal labor standards and anti-discrimination laws.
The benefits reaped from this classification have in turn caused many companies in the gig economy to pressure policymakers to pass legislation that allows them to classify workers as independent contractors. Those opposed to this classification, such as the Partnership for Working Families, deem the actions to be part of a broader “state interference” scheme. In their January 2018 Report, titled “Uber State Interference: How Transportation Network Companies Buy, Bully, and Bamboozle Their Way To Deregulation,” the Partnership presents four case studies from states where TNCs have successfully pushed legislation that deregulates the gig economy.
Still, not all states, nor all governmental bodies, have been so swayed by companies’ lobbyists. In May 2018, the California Supreme Court ruled in favor of workers. In a lawsuit brought by delivery drivers against the company Dynamex Operations West, the court adopted a broad definition “employee.” This ruling not only impacts Dynamex but limits other companies, such as Uber and Lyft, from classifying workers as independent contractors. While California- based cases will still be decided on a case by case basis, labor advocates considered the decision a big win for workers’ rights.
The UK has similarly placed restrictions on the gig economy. In September 2017, the city of London refused to renew Uber’s operating license based on their treatment of workers, among other issues. Uber quickly appealed the decision and subsequently operated in London during the appeals process. In November 2017, however, and much to the chagrin of Uber executives, the company lost the case.
Still, Uber fought on – appealing the case to the Westminster Magistrates Court. Here, in June 2018, after just a two-day trial, the court renewed Uber’s legal access to the London market. By admitting its past mistakes and agreeing to better follow regulations that support workers, Uber was granted an 18-month operating license. While some speculated as to whether the company deserved the renewal, Uber had a base of resident allies in London – 600,000 strong. Many residents who do not have cars rely on the ride-sharing app to get around and thus signed a petition in support of the company.
On the other side of the fence, labor advocates argued against Uber while entrenched transport businesses criticized the company for ignoring taxi regulations and safety standards. During this court battle, spanning from September 2017 to present, policymakers in the UK pushed yet another agenda. In July 2018, UK legislators’ new “Good Work Plan” set out to protect “vulnerable workers,” including those working within the gig economy on “flexible contracts.” The most prevalent initiatives in this plan include a push to define “working time,” entitle workers to the national living wage, and allow them access to paid holidays.
These varied responses – by states, courts, cities, consumers, labor advocates, and business lobbyists – demonstrate the mix of benefits, setbacks, and opportunities that exist in the new space created by the gig economy.
In response to this shift from linear, well-defined employment relationships to triangular, connection-based transactions – governments, courts, and legal experts must understand the interests of all parties: companies, workers, and consumers. When assessing how, and if, to respond to cases of disagreement, decision-makers must shift from fixed-pie perceptions. Instead, they can and should brainstorm integrative, mutually-beneficial solutions.
For example: to address the instability of drivers’ income, companies could develop algorithms within their applications (such as those that already maximize profit based on surge pricing during rush hour) that clearly display the predicted workflow needed to reach a minimum total income on a daily basis. This effort would demonstrate companies’ interests in protecting workers’ welfare while legitimately benefitting drivers.
Though some view the gig economy as discordant, the new tech-facilitated market can be hugely beneficial to businesses, workers, and consumers – all by marrying the flexibility on which it was built with the stability and standardization it requires.
Clare McLeod was born and raised in beautiful Portland, Oregon before she moved to New York for college. She studies Industrial and Labor Relations with focus areas in business, international relations, and communications. She plans to work full-time after graduating in an innovative and creative start-up - hopefully abroad. After working for a few years, she will either pursue an MBA and remain in the business world or pursue another advanced degree and remain in the education field. When not working or studying, she teaches yoga at Cornell's fitness centers, travels, hikes, and frequents farmers' markets.