The Uberization of Work: Is It Real? Is it Good?
Posted on April 22nd, 2016.
Today Uber annnounced that they were paying $100 Million to drivers to settle a law suit requesting additional benefits and expenses as contract workers. This move, coupled with dozens of other similar trends around the world, begs the big question: are we becoming a contract work economy or not?
For 3+ years I’ve been studying this, and despite many studies which show that nearly 40% of US workers are contractors (many articles cite this number), the Bureau of Labor statistics and other analysts seem to show that true “gig workers” make up much less.
Here is the breakdown of all workers labelled “contingent” by the Bureau of Labor Statistics study:
- Agency temps: (1.3%)
- On-call workers (people called to work when needed): (3.5%)
- Contract company workers (3.0%)
- Independent contractors who provide a product or service and find their own customers (12.9%)
- Self-employed workers such as shop and restaurant owners, etc. (3.3%)
- Standard part-time workers (16.2%).
More Contract Work, But Not All Positive
This overall percentage has gone up by almost 1/3 in the last ten years, so this workforce segment is definitely growing. However, despite your idea that these people are all having a great time doing “gig work,” it’s not all good growth. The BLS study concludes that these people are making 10.6% less per hour than standard workers, 28% less per week, and 47% less per year than regular workers. So one could argue that one of the reasons we have low unemployment but low wages is that people have jobs, but these jobs just aren’t paying as well.
If you look at the historic data on contract and contingent work, you see a very repeatable trend: when the economy grows the % of contractors goes down, and when the economy slows, the % goes up. So while companies like Uber, Instacart, and many others are making it easier to find gig work, there are much bigger economic forces that take place. Many Uber drivers I talk with tell me they would like a more full-time job (hence the lawsuit) but simply haven’t been able to find it.
And before you glorify this “gig economy” think about the fact that most of these workers get no vacation days, no sick pay, no health care benefits, and no expense reimbursement for other business expenses. So in many ways the “gig economy” is a lower wage economy filling a need for jobs when full-time, better paying jobs just may not exist.
In the Deloitte 2016 Human Capital Trends study we looked into this, and it turns out that employers sense a big growth in this segment of the workforce.
As you can see from the findings, 71% of companies (7,000+ respondents) see it as a big issue and more than half believe there will be significant growth in this segment of the workforce.
What Should Companies Do?
I was just on a call with a set of senior HR leaders from Europe and they were asking me several important questions:
Should we be providing more training and development for part-time and aging workers?
What percent of our workers should be part-time or contractors?
What criteria should we use for gig-type work?
What I essentially told them is that our research shows that gig-type work is definitely growing, driven largely by digital tools that make it easier than ever to time-slice, work-slice, or location-slice work that is needed. Delivery drivers, service workers, and other similar roles can be managed in great detail now, through the use of digital tools.
While this trend is still small (WSJ believes that only .37% of the US workforce wages now go through companies like Uber and Taskrabbit), clearly the trend is growing.
Will it take over the entire workforce? I seriously doubt it — we, as people, are tribal animals and most of us like to be part of a team, so we tend to “join” companies to make work more fulfilling. Many of the “uberized” workers are people in school, between careers, new to a city, or for some other reason just not able to work full time.
For companies considering “uberization” of their workforces, let me list a few of the considerations I talk with clients about:
- Are you comfortable or ready to share internal confidential business practices and processes with these workers?
- Do you have the right contractual relationship so you are not actually “employing” them full time? (Read the IRS “20 Factor Test” to make sure!)
- Do you have a way of training them so your customer/employment brand is maintained as they come and go?
- Do you have a way of vetting them so you don’t inadvertently hire people who are dishonest, illegal residents, or otherwise unsuitable?
- Are you ok with people continuously leaving and entering your network on a regular basis?
Areas where such contract work has been well proven over the years include:
- Specialized skilled workers (IT, engineers, scientists, mathematicians, etc.) who are hard to hire and may work in specialist labor pools
- Industry consultants who chose to be independent to make more money and have life/work flexibility
- Delivery, service, and repair workers where the jobs are highly repeatable
- Innovation networks (ie. P&G Innocentive) where companies crowd source suppliers to get new ideas
- Roles where the skills are so hard to find that you will use a contractor or part time worker (ie. marketing experts) simply to get this person’s unique skills.
Let me add one more piece of advice from my own research: when you hire “part-time” or “gig” workers you may be saving money, but you are also losing something important: these contract workers are not as loyal, you can’t ask them to pitch in and do other things when times are tough, and you can’t move them around from place to place as the business changes. So before you think “uberization” is good for your company, remember that the “uber-like” workforce can be much harder to manage. And if you’re really underpaying them, you could face a lawsuit like Uber. (Lyft prides itself on paying its drivers more, and presumably they are more loyal.)
In my business, Bersin & Associates, we started with lots of contractors. (We founded the business during the 2000 recession.) We hired some amazingly talented people part-time, and most of them were excited to find work because full time jobs weren’t available. But as we grew I learned quickly that they wanted to be more engaged in the company and they wanted the company more committed to them. So as our business grew we increased benefits, raised wages, and created many happy full time employees. (Most of them are still with us today!)
So my point in this article is just to be real: we aren’t going to “uberize” every job, and it’s not always a good thing. The use of technology to outsource work has been a big topic for decades, and in some sense all the new delivery companies, transportation companies, food service companies, and even shared housing companies are pushing this trend to new limits. While we don’t see the entire workforce moving in this direction, the opportunities to innovate are endless. Just do it with your eyes wide open.
Each year we study this the trend seems to get bigger, so in 2017 we look forward to seeing where this has gone next, and as always I welcome your perspectives and examples of where you have outsourced or “uberized” work successfully in your company.
Originally published at joshbersin.com on April 22, 2016.
