The Importance Of Side Income As W-2 Jobs Become Unstable

This story is part of a series from Tech4America on the future of work

As policymakers in California fiercely debate the future of independent contracting, I think it’s important to look at the evidence surrounding the major reason why so many pursue gig work in the first place: extra income. The number of Americans filing both employer and independent contractor forms with the IRS skyrocketed after 2008.

Why are so many people seeking supplemental income? A review of the evidence suggests a few reasons, including the rising costs of big expenses like healthcare and higher education.

But, perhaps the most important reason is that W2 work has become less secure. According to a report by the liberal think tank, the Economic Policy Institute, fully 83% of workers surveyed report having “unstable” work schedules, with nearly half (45%) of employees reporting feeling little control over who sets their schedule.

The upshot from the evidence, detailed below, is that computerized scheduling is making W2 more erratic, and this is hitting low-wage minority workers the hardest. But, first, I think it’s good to frame the evidence in an anecdote from the gig economy.

A notable example

In one very active online forum where gig workers share tips and experiences, Uberpeople, posters were asking about what it’s like to drive for Eaze, the cannabis delivery company because, under California law, they must be treated like employees and not independent contractors. That is, in many ways, cannabis delivery is a living laboratory for what life would be like should Uber and Lyft be forced to reclassify drivers as employees under California Assembly Bill 5 (AB5). So, naturally, gig workers are quite curious about the experience of drivers who get treated as employees.

One Eaze delivery person chimed in on the discussion and noted that he works as an employee, but he supplements his income as an independent contractor with food delivery platforms, because, as an employee, Eaze can restrict when he works depending on consumer demand. He wrote:

“It varies depending on tips that day, the shift you work (day vs night shifts), number of orders you get per day and if it’s a weekend or weekday. But you can expect to average between $140 to $220 per shift. And on the slower days I keep GH [GrubHub] and Caviar on too [Emphasis added]”

That is, a worker who is supposedly “lucky” enough to get one of the relatively few slots available as an employee delivery driver still supplements their income on other platforms that allow independent contracting.

The Evidence

The major reason unstable work hours are on the rise is scheduling technology, which might have been rapidly adopted after the 2008 recession.

“Computerized scheduling systems in service and retail establishments predict customer demand down to 15-minute intervals or less, often resulting in irregular employee schedules to match. Once in place, firms’ investments in these systems likely create permanent changes in scheduling practices,” concludes an overview of the literature in the Journal Of Social Science Research.

Advanced forecasting can predict consumer demand with extreme precision, while algorithms can manage the otherwise impossible Tetris-like challenge of employee scheduling. As a result, employees are often told the night before whether they will have work, or sent home early while at work.

“Most of the time I leave my kids alone with my 16-year-old daughter,” one retail worker told CNN. “No mother wants to be in that position, but often the alternative is missing out on income we need to put food on the table.”

Researchers from the Shift Project of the University of California, Berkeley argue that Black and Latinx workers are more likely to experience erratic scheduling than their white counterparts.

In addition to technology, the report concludes that “if managers’ conscious or unconscious racial bias affects work schedule allocations, then non-white workers could be at a severe disadvantage.”

Policy Responses

Because technology has played such a large role in the rise of unstable work, it’s no surprise that San Francisco, a central part of the Silicon Valley ecosystem, was one of the first cities in the country to adopt regulations mandating advanced notice and pay requirements.

In 2015, the early results from San Francisco’s ‘Retail Bill of Rights’ regulation began trickling in — and the results were mixed.

Another report by the Economic Policy Institute, which has generally been extremely friendly toward workplace regulations, noted that “The law’s proponents may be satisfied with the unintended consequences of the formula retail law — fewer part-time position, and less flexibility for those that remain — but they appear to be at odds with the preferences of the employees.”

That is, the law caused a trade-off: fewer irregular work hours, but also fewer opportunities for students and caregivers who want flexible part-time work.

This isn’t to say that regulations can’t play an important role in making employee (W2) work more stable, and the government may eventually find a formula that satisfies the competing demands of different types of workers.

But, as regulations figure out how to make W2 work both more stable and inclusive, it seems that flexible independent contracting is filling the gap for those who desperately need supplemental income to make up for lost wages.

*My conflict of interest note is here