A Better Name For The So-Called “Sharing Economy” Is “The Shareworker Economy”
A Shareworker Is Nothing More Than An Old-Time Sharecropper In Fancy New Clothes
By David Grace (www.DavidGraceAuthor.com)
A Short Description Of Sharecropping
After the Civil War Southern plantation owners needed a source of cheap labor, and freed slaves needed a way to feed themselves. The Sharecropper Business Model solved both problems.
There were technically two slightly different business models here:
(1) The Sharecropper model in which the landowner supplied not only the land but also the seed, the mules and the plow, and
(2) the Tenant-Farmer model in which the landowner supplied only the land and the farmer supplied everything else.
If you were a sharecropper, the landowner took half your crop as compensation for your use of his land, mules, plow and seed. If you were a tenant farmer the landowner took one-third of the crop as compensation for supplying only access to the dirt.
One big problem with the sharecropper/tenant-farmer system (for simplicity I’ll use the term “sharecropper” for both) was that the crop, often cotton, only came in once per year and the farmer needed a way to survive between one year’s harvest and the next.
The one-third of the crop that the farmer gave up to the landowner represented the profit from his labor that he would have otherwise used to get ahead of the game. With that one-third gone as rent, in an average year the crop was generally insufficient to support the farmer and his family at anything above the bare subsistence level. In a bad year it didn’t even do that.
The Company Store
The answer to this problem was the company store. The plantation owner would either advance food, clothing, tools, and the like on credit from his own store or he would partner with a store in town that would make credit sales to his farmers.
Since the farmers had no bargaining power and no cash to shop elsewhere even if there had been another store available, they had to accept the merchandise provided by the company store at the price and on the interest terms demanded.
Whatever slim hope the farmer had of making a profit on his labor was eaten up in interest charges and inflated prices.
Quicksand Debt
Not surprisingly, to a greater or lesser degree the farmers quickly sank into a pool of debt from which they could almost never escape, essentially ending up as little more than serfs or indentured servants. And that’s assuming that the harvest was moderately successful. If there was a drought or a glut the debt swallowed them whole.
The proceeds of the crop’s sale first went to repay the credit debt, then to pay the landowner’s one-third share. Whatever was left over after those payments went to the farmer, but it was almost never enough to feed his family and his animals through next year’s harvest and buy seed for next year’s crop. Back to the company store.
A Great Deal For The Landowner
It was, of course, a sweet deal for the landowner. He got dedicated workers who would kill themselves working his land for free. He had no obligations to them beyond the risk that the harvest would be so disastrously bad that the proceeds would be insufficient to clear last year’s credit advances, but since those advances were repaid first, off the top, that risk was relatively low.
All the landowner gave up was control of land that he had no way to use himself anyway, land that without the sharecroppers would just have lain fallow.
So, the risk was almost entirely on the farmer’s side of the equation while the company-store system put almost all of the bargaining power into the hands of the landowner. Why did it exist? Because there was no alternative employment for the farmers. Their choice was to either be a sharecroppers or starve.
The So-Called Sharing Economy Compared To The Sharecropper Economy
Now, with that background, let’s take a look at what’s now called “The Sharing Economy,” the best example of which, I think, is Uber.
In the sharecropping business model, the landowner owned the physical dirt and rented access to it for a share of the physical crop.
In the sharing-economy business model Uber controls access to the pool of customers and rents access to them to the drivers for a share of the fees paid for the worker’s labor.
The sharecropper/tenant farmer paid all his own costs and furnished all his own tools, and in return was allowed to keep 67% of the money from the crop he raised.
Existing Uber drivers pay all their own costs and furnish all their own equipment and in exchange they get to keep approximately 75% of the money paid for their services, but it has been reported that the new percentage which is being charged to new Uber drivers is 30%, which means that those new drivers will be able to keep only 70% of the fees paid for their labor and equipment.
So, the Tenant Farmer kept 67% of the proceeds from his labor. The Uber driver keeps 70% of the proceeds from his labor.
An Uber Driver Has Less Power Than A Sharecropper
The sharecropper was truly his own boss. He got to run his farm any way he liked and was only responsible for delivering a crop at the end of the growing season.
The Uber driver is required to follow numerous rules and regulations on how he performs his services which rules are unilaterally imposed by the company .
The sharecropper could sell the crop for the highest price he could find.
The Uber driver is not allowed to set any prices whatsoever.
All pricing decisions are solely in the hands of Uber. The driver’s only choice is to work for the fees Uber unilaterally sets or not work at all.
Shareworkers = Sharecoppers
Since the term “sharecropper” means a person who raised a crop in exchange for a share of the harvest he produced, I think we should call the people who provide labor for a share of the fees paid by the consumers of that labor “shareworkers.”
Do you want to be a shareworker? Is that a good way to earn a living?
Some Uber Numbers
The cost of owning and operating a car varies depending on the miles traveled and the type of vehicle. The per mile cost for a medium-sized car, e.g. a Toyota Camry driven over 15,000 miles per year is estimated to be about 58 cents per mile, so let’s use that number.
The Uber website gives an example of a ride in L.A. that takes 35 minutes, covers 9 miles and generates a fee of $15. Under the current 30% Uber charge that leaves $10.50 for the driver.
9 miles X $.58 = $5.22 costs. $10.50 fee to the driver — $5.22 in costs= $5.28 to pay the driver for his labor. If it took the driver only five minutes to get from where he was to the customer then the time he dedicated to providing that ride was 40 minutes.
So, if he was paid $5.28 for 40 minutes of his time he was paid an hourly rate of $7.92/hour. If he was sitting idle in his car for fifteen minutes waiting for that customer to request a ride and if it took him ten minutes to get to the customer that’s 25 minutes plus 35 minutes actually transporting the customer for a payment rate of $5.28/hour.
As of January 1, 2017 the California minimum wage was $10.50/hour, plus employers are required to provide workers compensation insurance, meal breaks, three days sick leave, overtime pay and a contribution to the Social Security and Medicare systems on behalf of the employee.
$7.92/hour bare gross payment is not a good deal for the Uber driver.
The Uber site gives a second example of a 13 mile drive in Chicago that takes 33 minutes for a base fare of $20. Again, assuming that there was only a wait time between fares of 7 minutes this works out as follows: $20 X 70% = $14. 13 miles X $.58/mile = $7.54 — $14 = $6.48 to the driver for 40 minutes of his time or payment at the rate of $9.69/hour.
As of January 1, 2017 the Illinois minimum wage was $8.25/hour.
Keep in mind that since workers in the “sharing economy” are claimed not to be employees these gross pay rates of $7.92/hour and $9.68/hour do not include:
- any sick leave
- any vacation pay
- any medical insurance
- any disability insurance
- any retirement contributions
- any paid work breaks
- any paid meal times
- any paid bathroom breaks
- any employer contributions to Social Security or Medicare
- any overtime pay, or
- any paid anything else.
Also, like the sharecropping landowner, the operator of a “sharing company” provides no training of any sort.
The Company’s Power
At any time Uber can change its pricing formula for any reason. Uber may think it needs to up its trip numbers for some planned stock offering or other Wall Street purpose, so may decide to reduce it’s prices or offer rebates or discounts. Because the pricing and payment systems are walled off from the drivers, they either have to live with the lower hourly and mileage fees that Uber unilaterally imposes on them or they quit and get no compensation at all.
The same is true if Uber decides to increase it’s cut from 30% to 35% or 40%. The drivers’ only option is to quit, just as the sharecropper’s only option was to quit.
What if large numbers of Uber drivers go in strike? That’s easier said than done. Uber controls access to the list of Uber drivers. Unlike workers in a factory who can be physically contacted as they enter or leave the company’s premises, Uber drivers are disbursed and anonymous. But there’s still social media so the strike advocates could probably get their message out, maybe set up a Facebook strike page or something. Would a call for an Uber drivers strike be effective? Maybe, maybe not.
At least until self-driving cars enter the equation. When that happens Uber will need fewer and fewer drivers, essentially decreasing the drivers current small bargaining power to zero.
Huge Advantages For The Company Using The Shareworker Business Model
Unlike the obligations and costs for a traditional employer, the Shareworker Business Model is a great deal for the company. It provides:
- A flexible labor force that can be quickly scaled up or down without material cost
- No labor costs of any kind
- No incidental financial obligations for workers
- No capital costs
- No parts, fuel, materials, or maintenance costs
- No training costs
- Full control of pricing and terms of service
- Full control of access to the customer base
For the workers, not so much:
- No overtime pay
- No paid vacation
- No paid breaks or meal times
- No sickleave
- No medical insurance
- No worker’s compensation insurance
- No pension plan
- No employer’s social security or Medicare contributions
- No guaranteed amount of work
- No control of the pricing or payment structure
- No easy access to other workers
- No access to the customer base
- No preference payment for unpaid compensation if the company files for bankruptcy
- Can be terminated at any time without cause
- All equipment furnished by the shareworker
- All material furnished by the shareworker
- All maintenance and repair costs paid by the shareworker
- All risk of damage or loss of equipment with the shareworker
- All risk of inability to work because of sickness or family emergency with the shareworker
- All risk of on-the-job injury with the shareworker
Services Versus Goods
Now, you might note that a traditional employer usually makes physical things whereas the operator of a shareworker business is principally in the service industry. But, the shareworker model can expand beyond merely rendering services.
The most obvious expansion into physical manufacturing would be to establish a community of operators of three-D printers. Let’s say that you identified a simple product that you wanted to manufacture. If many of its parts could be produced by three-D printers you could buy those printers in bulk, pre-program them with your design specs and rent them to shareworkers .
The shareworkers would also contract with you or a company you partner with for maintenance and repair services. The shareworkers would, of course, furnish the physical working location, all the electricity and all the manufacturing materials, though they would probably buy those materials from you as a variation on the landowner’s company store model.
After the three-D printer shareworkers manufactured the parts, another set of shareworkers would assemble those parts plus any in-house-produced parts into the final product on a piecework basis.
You might need to have a few real employees to provide final quality control checks, packaging and shipping, but you could out-source fifty percent or more of your production to the shareworkers, all without any costs for sick leave, medical insurance, overtime, on-the-job injuries, social security and Medicare contributions, etc. etc. etc.
New Serfs Tied To Digital Networks & 3D Printers Instead Of To Land
Perhaps the industrial revolution will come full circle, returning us to an economic model more akin to serfs tied to the land, except these new serfs will be tied to the New Landowners digital networks that will furnish them with customers or tie them to 3-D printers and piecework orders.
Whether you think this is a good thing or not will likely depend on what you envision will be on your role in the model: Company or Shareworker.
Do you think it will be good for this country to turn 10%, 20%, 30% of its adults into workers without any vacation time, sick leave, overtime pay, medical insurance, medical treatment for on-the-job injuries, or retirement plans, with a gross pay level lower than today’s minimum wage?
Is that going to be good for America or just good for the companies running that system? In your mind is what’s good for these companies automatically also good for the country? Do you believe that something that is bad for a material percentage of the population can still be good for the country?
–David Grace (www.DavidGraceAuthor.com)
