“Sharing Economy” and a Nation of Contractors

UberI remember several years ago, Paul Krugman was in the UK debating a couple of conservatives on a television show there. At one point, Krugman said, “Well not everyone is going to start their own business.” And a female PM said, “Why not?” Krugman didn’t even respond because it was such a ridiculously stupid thing to say. But I noted at the time that if everyone went into business for themselves, there would be no businesses — just contractors everywhere. One can hardly imagine a more inefficient system. There would be no way to improve productivity by scaling up. But of course, conservatives like the idea of everyone starting their own business so they can label workers as less worthy than business owners.

But among a lot of younger computer types, this idea sounds great. A nation of contractors, that’s the ideal! But the laws of economics have not changed. Business management has not changed. But the public intellectual space has changed to allow the myth of contractors to be used by big businesses to take on none of the traditional responsibilities of having employees while at the same time not having to pay the large cost premium of actual contractors.

This, of course, is what is going on with companies like Uber and Lyft. The drivers are just small business people, not employees! As Michael Hiltzik put it last week, “That concept is so alluring, on the surface, that it has spread to house cleaners, launderers, delivery persons — you name it.” The California office of the labor commissioner found that Uber drivers are actually employees and not “independent contractors.”

This case has a special relevance to me. Right now, I’m working for a company out of London. I’ve never met the owner or my main contact. I get paid for work done, which I do on my own time frame using my own tools, working in my own office. I am, in other words, the very definition of an independent contractor. And I’m very happy with that. But I’ve had employers in the past who wanted to claim that I was an independent contractor. There are lots of reasons for this, but one of the biggest is to avoid costs like payroll tax contributions. But at the same time, they wanted to dictate how I dressed, when I worked, where I worked, and generally wanted to micromanage me. I was not an independent contractor in those cases, although I was often so desperate for work that I went along with it.

The commissioner’s office found that Uber was far too controlling of what its drivers did for them to be considered independent contractors. What’s more, it noted that Uber is wrong to say that it is just a technology company. If it weren’t for the drivers, it would have no business. But consider this: Uber requires that drivers pass a background check. How does that make any sense if all that Uber is doing is hooking up drivers and fairs? Well, of course, it doesn’t.

In another case, US District Judge Edward Chen noted, “Uber does not simply sell software; it sells rides. Uber is no more a ‘technology company’ than Yellow Cab is a ‘technology company’ because it uses CB radios to dispatch taxi cabs.” And that really does reveal the whole game. The only reason that Uber has been allowed to get away with its shenanigans is because the technology that it uses is newer than other technologies. But there is nothing new about what Uber is doing to maximize its profits.

Amazon was created just shy of 20 years ago. For most of that time, it did not collect any state sales tax. It still doesn’t collect sales taxes in 19 states that have them. And the one thing we all know is that Amazon’s profit margins are razor thin. So it has used this illegal subsidy for many years, destroying local book stores who could not get away without paying sales tax. In California, the sales tax is at least 7.5% and where I live it is 9.25%! How many local bookstores now gone would still be in business if they had been able to grab almost as much as 10% in profits off the top?

Where Amazon Collects Sales Taxes

All this nonsense of the “sharing economy” and the “new economy” has to stop. We are not a nation of contractors. We are not a nation of people who only want to buy stuff online. We are pretty much the same as we’ve always been. It’s just that the rich and powerful are using new technologies to trick us into taking even more away from us.

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