The economy is being led by new companies that are pushing the boundaries of how we think about the service-based economy.
That’s the impact of technology on employment.
Here’s another example: When you hail an Uber ride on your smartphone, a nearby driver gets the notification and arrives in his or her own vehicle. There is no live taxi dispatcher involved, no fleet of vehicles maintained in a garage. Customers request a ride and track its arrival on the Uber app, which provides the driver’s name, photo and license plate info. Rather than a taxi service, think of Uber as a digital matchmaking device for people who need a lift.
Are you horrified by this automated vision of the economy?
Fear it or embrace it, an employment shift is under way because technology is too efficient in too many ways to be impeded. As the old world (taxicabs, hotels, flea markets) makes room for the new (Uber, Airbnb, eBay), jobs will come and go, and so will job classifications. When, for example, was the last time you used a travel agent?
The unresolved issue is how much to encourage new ideas and competition that disrupt the work world, and how much to keep a rein on the transformation. If you accept that innovation improves lives and creates wealth, then change is crucial to the future of the American economy. It should be embraced, though not at the cost of exploiting individual workers.
Uber is at the center of this debate in California, where legal challenges put the company’s business model at risk. Uber drivers are independent contractors, but several are plaintiffs in a lawsuit arguing that they should be classified as employees. That would entitle them, among other things, to be reimbursed for expenses, including vehicle wear and tear.
U.S. District Judge Edward Chen in San Francisco gave an early victory to the drivers by granting their request for class-action status, allowing a pool of thousands of drivers to pursue their claims together. While the judge didn’t rule on the merits, his decision explored the crux of the dispute: The difference between a contractor and an employee, he said, citing legal precedent and California law, is both how much control a boss actually has over a worker and how much control a boss has the right to exercise.
There’s plenty of tension, and plenty of history, involved in the distinction between employee and contractor. Chen quotes a California court decision from 1926, and the taxi industry is still fighting over this. The conflict is about money, of course. It’s smart business to keep the payroll small but not always ethical. It might not be fair to compensate someone working full time, who should be eligible for an hourly wage and benefits, like a freelancer, who is paid a flat amount and gets no benefits.
In the digital age, however, the definition of “control” gets slippery. Uber drivers seem independent because they set their own hours and interact with the company through an app. They can turn down ride requests and drive simultaneously for a competitor like Lyft. Hmm, sounds like they’re contractors. On the other hand, drivers have to meet company standards — as do the vehicles — and they must follow all kinds of rules or they’ll get dismissed. In one case this year, California’s labor commissioner ruled that an Uber driver was an employee because the company was “involved in every aspect of the operation.” Uber is appealing.
A lot is riding on the resolution for Uber, for all companies in the “shared economy” and for customers. If these businesses must compensate workers as employees, the efficiency and value of their concepts may not survive. That will destroy wealth and jobs.
One way to sort out this dispute is to go back to the quinoa restaurant. The founder, David Friedberg, offered a savvy appraisal of the world we now inhabit. He told The New York Times that Eatsa needs to be thought of as a new category of business. “I would call it different than a restaurant,” he said. “It’s more like a food delivery system.”
And so Uber and Lyft and other such businesses are different, too, and could be legally classified as such. “Technology allows us to completely rethink how people get food,” Friedberg said. What goes for quinoa goes for getting you from here to there and for many other services.
©2015 Chicago Tribune. Distributed by Tribune Content Agency, LLC.