03.26.14 5:00 PM ET
Is Crowdsourced Labor the Future of Middle Class Employment?
Dolly Parton’s 9 to 5 anthem may need a 21st century reboot. In 2013, 75% of the almost 1 million new jobs added to the US economy were part time according to CNBC. Obamacare, a weak recovery, and global unrest are just some of the reasons cited for this phenomenon that contributes to the hot button issues of inequality and poverty. However, one nascent winner has been the rise of crowdsourced fractional labor. With services like Airbnb, Uber, Fiverr, almost anything can be outsourced with the click of an app. Will the same technology eating and automating jobs also prove to be an entirely new path to the middle class?
In 2008, 54% of adults age 18 to 29 felt they were middle class. In 2014 that number has shrunk to 40%. The number who feel lower class has swelled from 25% in 2008 to an almost doubled 49% in 2014 according to CNN. Why the shift? Jobs that were cut during the 2008 recession did not come back in many areas, with technological advances filling the void and proving to be fairly adequate at jobs like receptionists, doormen, and factory workers, while needing none of the benefits or oversight of their flesh and blood predecessors. In the coming decades, broad swaths of jobs such as bank tellers and accountants will be automated, leaving less in the way of traditional full time employment.
Airbnb, the home rental hotel alternative, says a full two-thirds of their hosts worldwide are not employed full-time. The Wall St. Journal recently delved into the trend, noting that rates of unemployment are particularly high in places like crisis ravaged but tourist friendly Europe. Having an asset to sell in downtimes has long kept pawnshops in business; now the twist is that people are selling pockets of time rather than the items outright. Would sharing space on Airbnb have kept some 2008 mortgages above water? Possibly. Of course, sites like Homeaway have been around since 2005, but they cater to a second home clientele. Many on Airbnb are couch surfing, business traveling, or staying with significant others while they pay the rent by renting out their digs.
Another example of this trend is WunWun, the New York based startup that delivers anything via slick iPhone app. Delivery from stores is free, and according to founder Lee Hnetinka, it’s a great deal for the delivery “helpers.” He says the helpers sign up for a variety of reasons and revenue goals:
“I think for the first WunWun's we were filling downtime people had, especially the college students. Now for some of the WunWun [helpers] it's their full-time job. I know some who hop on the system whenever they have extra time and… they've made the switch over to WunWun as their full-time job. Flexibility is what's attractive. With WunWun they're their own bosses. They can work as much or as little as they want [and] they can make a lot of money. It's not uncommon to get a $10 or $20 tip and they get paid $8 per order. I think the attractiveness to create your own schedule and work as hard or as little as you want becomes a theme more and more in sharing economy companies like WunWun. I know some of our guys have a set number of hours they want to hit per week and they stop working, others I see are on as much as they possibly can be.”
Making $8 an hour as a base actually beats the government mandated $5 an hour for tip paying jobs in New York State. Of course, few look at waiting tables as a path to a living wage, but assuming one manages to work 40 hours a week and average $12/hour with tips, the annual take of $23,000 is well over the poverty line.
Getting to full time employment with these services is a still elusive goal for many. Sarah Kessler’s recent article in Fast Company highlighted the challenges of full time work in the sharing economy, especially for those without cars and spare bedrooms. On the lowest ends of the spectrum, Amazon’s Mechanical Turk pays pennies per hour for crowdsourced work. Kessler says, “Only 8% of workers surveyed by researchers at the University of California, Irvine said that Mechanical Turk income always helped them meet their basic needs.” That’s of little surprise when jobs listed on the site start as low as $0.04 for a five-minute task, or $0.48 an hour. Postmates advertises a $20/hour haul but the fine print points out that pay is a 75% commission, meaning that Andrew Jackson might be a long time coming.
With Obamacare decoupling employment and health insurance, over 2 million Americans are expected to voluntarily leave their jobs to pursue anything but a cubicle by 2024. Most will still need a source of income. Is selling on Etsy, where the average seller makes less than $900 a year, going to truly supplement an income?
For Union Square Ventures general partner Albert Wegner, the answer might lie is a decidedly less capitalistic place. His take on a possible solution starts with first looking at what modern society defines as a “job,” and then finding ways to provide those benefits to those displaced from full-time jobs.
“I think it is extremely important that we separate health insurance from holding a ‘traditional’ job as those are rapidly declining. [People] voluntarily leaving the workforce once they are able to get health insurance shows how bad the previous bundling was. My concern about downward pressure on wages is not specific to Uber or any other labor marketplace company, nor do I think it is necessarily the responsibility of those companies to address this. This is really a problem we need to address at the political / social level.
There is excess supply in the overall labor market for all but a few categories of employees. All the macro statistics bear that out (percentage of people employed, real wages, percentage of GDP going to labor, etc.). As we use technology to open up labor / service markets to new entrants that were previously constrained, e.g. taxis, that extra supply has the potential to drive down the price of labor in those markets also.
Mind you that is not an argument for the kind of protective legislation that is being considered in places like Seattle. Letting people share their cars or offer individual rides is an important innovation with great potential. And "on demand" labor goes far beyond that and is even entering markets such as healthcare. This is instead an argument for either a basic income guarantee or a negative income tax.”
Noted thinkers from Martin Luther King Jr. to Milton Friedman have advocated for a floor on income and in a way, the earned income tax credit is one such resource. However, few suggest fully funding those who are out of work, so Ubering around while Airbnb users stay in the guest quarters may be the new reality for many in our automated future.