Rebooting the Gig Economy

COVID-19 escalated two problems festering in the gig economy.

First, most gig workers had to juggle two or more apps to earn a living (e.g. Uber and Lyft).

Second, gig workers were ineligible for benefits — even those working full time on a single platform.

Years of back and forth between workers, tech companies and the government had only entrenched the stalemate.

Enter the black swan of COVID-19. Overnight, it blew up the companies’ delicate balancing act classifying workers as contractors instead of employees.

Trump took the monumental step and made gig workers eligible for federal unemployment.

And the economic fallout has forced those who still have work to patch together jobs across an even higher number of apps than before.

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Winner take all

Companies thought the winner would take all the workers. So they competed for workers with high signing bonuses.

They set goals just beyond reach so workers could only achieve them by working exclusively on their app.

It was hard to understand how much you were really making per hour and thus also hard to compare which app had the best pay.

Dual-apping became the norm. It’s when workers work on two competing platforms at the same time. We’ve all gotten used to drivers brandishing both Uber and Lyft stickers.

But dual-apping was hard to master and companies cracked down on the few grassroots tools built to make it easier.

There was also a dichotomy on many apps. While the median worker had worked just a few hours in total, a small percent of power users contributed an outsized percentage of work hours.

The majority want flexibility and worked ad hoc and part time.

Uber’s CEO petitioned for a third classification, and California passed legislation effectively classifying most gig workers as employees.

Enter COVID-19

Uber and Lyft rides dropped 70 to 80 percent overnight.

Many gig workers rightfully decided it was too risky to work. But everyone still had bills to pay.

It seemed like help was on the way. Independent contractors were suddenly eligible for unemployment benefits and other government relief programs as part of the CARES act.

This was unprecedented. But the bright moment quickly clouded over and things descended into chaos with different application dates and processes.

Even those who knew what they were eligible for had to learn a broken system. Unemployment insurance was administered by each state with different dates and application processes. Banks processing PPP applications gave priority to large companies, and when small businesses couldn’t get time or attention, how were gig workers expected to? What a mess.

Most independent contractors and gig workers have yet to receive any relief. Many states only recently got their Pandemic Unemployment Assistance systems up accepting applications and fewer than half of them have started paying out benefits.

This has been too hard and has taken too long. It shouldn’t be like this — stuck in limbo between keeping safe or putting food on the table.

So what has changed?

On-demand apps are consolidating. Uber is in talks to buy Grubhub.

But on the supply side gig workers will continue to juggle jobs on multiple apps. After COVID we’ve seen the average gig worker move from using 1.6 apps to 2.53 apps. A large part of this is driven by rideshare drivers diversifying into food delivery and Instacart.

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The pains of working across different apps are still there though, now with even more apps to juggle:

  • Repeatedly entering the same information on multiple apps
  • Prior work experience is not recognized. A driver who did 20,000 trips on one platform shouldn’t have to fight to be accepted on another.
  • Different processes and flows
  • Keeping track of inbound requests, document uploads, job rejection rates etc.

After dealing with all this, workers go home and still struggle with unemployment applications.

The mandate for gig workers’ benefits came but the reality is yet again falling way short. And no one knows if it will get pulled once the economy recovers.

Even though the federal government will pay gig workers an additional $600 per week in unemployment benefits through the end of July, the majority of those surveyed (55%) have indicated that they expect to start working again in June.

The new normal

This new normal doesn’t have to be just a worse, more fragmented version of the already broken gig experience.

Even as the big platforms consolidate into duopolies, new entrants in other categories are entering the market: general labor (Wonolo, Gigwalk), last mile delivery (Amazon Flex, Shipt, Roadie).

Then there is human psychology. Many gig workers feel trapped on one platform. They like to keep their finger on new, perhaps more lucrative or more enjoyable gigs.

Workers are entitled to:

  1. A Cross-Platform Resume. Up-to-date record of your gig work history from different apps.
  2. Cross-Platform Benefits
  3. A Cross-Platform Marketplace. Enter your vehicle inspections and other info once and apply for jobs at any app. Compare your earnings between apps.

This time around, the winners will build trust with workers through transparency and interoperability.

Rising from the ashes

Recovery will look different in each region.

The gig economy will play a key role, providing earnings opportunities for millions while also delivering crucial services to consumers.

But gig work won’t be the same.

The majority of gig workers aren’t actually working now. They’re staying safe and collecting UI benefits. The additional $600 per week ends on 7/31, with a huge wave of expected supply coming online just prior to that.

When that happens, earnings will take a hit.

We’ve already seen it happen with Instacart. Outsized earnings drove a big supply wave, which caused earnings to drop in the past week. Also, bots.

The type of apps gig workers decide to return to will also be influenced by personal risk tolerance. Rideshare is inherently more risky than food delivery, which in turn is inherently more risky than delivering packages.

With multiple factors at play, workers will continue to juggle apps to make a better living — even as the big platforms consolidate into duopolies. A new generation of tools will be built to smooth out this experience. A new marketplace with tools built for gig workers might even emerge as a powerful supply side aggregator.

And a national conversation about benefits is still needed.

So let’s reboot.

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We’re playing a part to solve this problem, launching a site to:

  1. Help gig-workers understand their COVID relief options,
  2. Determine when it makes sense to start working again,
  3. Maximize their earnings across apps when they do.

Check it out:

Any and all thoughts appreciated:

Written by

Early stage investor at Yes VC. Ex-Uber. Harvard ’13. Born and raised in Hong Kong.

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