The gig economy has come under scrutiny in the last couple of years. Critics have raised concerns as to whether enough hours are available for gig workers to earn living wages -- let alone the high wages many of the new technology-enabled marketplaces claim to offer. The question gets even more heated when you factor in financial responsibilities like maintenance, supplies, insurance, tax withholdings, liability coverage, on-the-job injuries and illnesses.
But it’s difficult to accurately make broad generalizations when the gig economy includes jobs as varied as courier, handyman, lawyer, interior designer and more. Even within one position, the variety of hours worked makes it difficult to paint gig economy employees with a single brush.
Besides that, it’s often a challenge to look at the gig economy outside the context of the overall U.S. workforce.
Take Uber, for example. The estimated average car cost for a ride share driver is roughly $965 per month. Assuming a 40-hour workweek, that’s a cost of $6.03 per hour. With an estimated wage of $25 an hour, you’re looking at a net of $18.97. This wage is still higher than traditional cab drivers in Chicago who average only $12.39.
Even after deducting costs, an equivalent job outside of the gig economy can be lower paid.
Another issue with the criticisms surrounding the gig economy is the focus placed on the main players like Uber. Tech startups account for a fractional minority of 1099 workers, with Uber employing less than 5 percent in most metropolitan areas. Making a blanket statement that gig workers aren’t able to earn a living wage is flawed.
In many ways, the gig economy is still a strong and completely valid method for workers to obtain a living wage. Does this mean there aren’t potential problems? Of course not. As the 1099 economy continues to grow, contractors need more structural support, increased education around the gig economy and tools to make jobs easier and more efficient.
To help achieve this, I recommend companies with 1099 workers do the following:
1. Take full advantage of the onboarding process.
When onboarding contractors, clarify expectations for both parties. Explain exactly what you’ll provide during the terms of service. Equally important is to disclose what’s not part of the arrangement. Be honest from the get-go to ensure not just a good working relationship, but also a good reputation.
However, that doesn’t mean you can leave contractors hanging once they’re onboarded. Direct contractors toward beneficial resources, like Painless1099, which automates taxes, or Peers, which provides a community with info on the gig economy. If you run a service similar to Uber, Metromile offers mile-by-mile auto insurance coverage specifically crafted to work with ride sharing contractors.
2. Cultivate a community.
Opportunities to connect with colleagues in the gig economy can be few and far between. Look for ways to cultivate a community for your contractors to boost their chances of success.
Lyft is a great example of a positive community system. It created The Hub to provide a community forum for its drivers to “talk” with one another, share tips, arrange meet-ups, etc. The space allows drivers to leverage their shared experiences and help each other succeed.
3. Weigh 1099 vs. W2.
Many startups, depending on the company and the marketplace, opt for W2s over 1099s as they build out their businesses. Shyp, for example, chose to categorize workers as W2 rather than 1099 contractors to provide a more streamlined customer experience and “invest in a longer-term relationship” with its couriers. Just because you’re working in an on-demand industry doesn’t necessarily mean 1099 is the only option.
Providing additional support and resources isn’t just in the best interest of gig workers, but also in the gig economy as a whole. Even when your entire workforce is made up of 1099ers, it’s still your workforce, and you should take it upon yourself to improve the likelihood of their success. When your employees are successful, you are be, too.