"There’s a mythical person created by people in Washington,” Uber policy spokesman David Plouffe said in November. "They drive for Uber, they drive for Lyft, they rent their house on Airbnb, they maybe do a little Handy or Instacart on the side. That person doesn’t exist. Most people are using one of these platforms to supplement existing income."
That argument begs a big question that the on-demand economy will face in the coming years: What happens if wages return to a level at which people don’t feel the need to work during their off hours to boost their income? Will pay and benefits adjust to make platform work appealing enough to compete with a traditional job?
The answer is, it’s happening already — but slowly, and not for everybody. The on-demand labor market isn’t a monolith, after all. Not everybody can do every task, and specialized skills will command a higher price.
First, it’s worth noting that Plouffe’s analysis of the moonlighting nature of on-demand work appears to be correct. According to a new analysis by JPMorgan Chase of one million Chase users, while the number of people participating in the on-demand economy has increased dramatically between 2012 and 2015, reliance on earnings from labor platforms is low and hasn’t increased over time.
In addition, people who had platform income earned more in months when wages from their steady jobs were lower, indicating that people were using the services to smooth out peaks and valleys in their take-home pay.
The steadiness in the degree to which people rely on platform earnings may have to do with the fact that rates haven’t increased much over time. In fact, in Uber’s case, they have been repeatedly cut in order to stimulate rider demand during slow periods, or to compete with rival ride-sharing service Lyft. Drivers keep signing up because the pool of labor is still large for low-skilled gigs that have essentially no barriers to entry, which makes workers easy to replace.
Oisin Hanrahan, chief executive of the home cleaning platform Handy, says he offers rates that average $18 per hour before taxes and expenses to attract workers — but hasn’t had to boost those much over time, even as the economy has improved and on-demand platforms have proliferated.
“I don’t think we’re in a place where we're seeing a huge shift,” says Hanrahan. “If those engagement levels change, we would look and say we need to adjust, but this is a standard labor market with very little restriction in terms of how people can flow in and out."
That isn’t the case, however, with an emerging class of platforms that are looking for a specific type of person to provide a higher level of service. By hiring workers as employees rather than Uber and Handy's independent contractors, they're able to offer more training, while maintaining the flexibility that attracts people to on-demand work in the first place.
Take Alfred, a platform for personal assistants whose chief executive, Marcela Sapone, has become something of an evangelist for treating platform workers with dignity. Early on, Sapone and co-founder Jessica Beck decided to hire “Alfreds” as full employees, which costs 20 percent to 30 percent more in taxes and benefits like unemployment insurance and workers compensation. They did so to maintain a high degree of control over the way in which workers carry out their tasks — which is illegal when workers are independent contractors — and because her labor pipeline is actually quite narrow.
“Across all of the startups, you have to ask: Is there enough supply for the specific types of people we’re looking for?’’ Sapone says. She thinks workers in the on-demand economy divide themselves into basic tasks, like home delivery or taxi services, with little overlap between them. “Our supply pool is two groups of people: moms and people in the hospitality business who might go work at a restaurant or hotel.”
That’s why Alfred doesn’t take students — they want people to stay for at least a few years and spend as much time on the platform as possible. “We just don’t want turnover, and we’re trying to get you a full-time load,” Sapone says.
A similar dynamic is at play with Honor, a platform that provides nonmedical home care aides — the people who would take care of an injured or elderly person’s daily needs outside things like giving injections or changing bandages. Honor’s value proposition is skilled, trustworthy people delivered in a seamless way, for what can be shorter increments of time than traditional home care agencies offer.
To provide that, Honor’s chief executive, Seth Sternberg, figured they would have to use employees rather than independent contractors and pay them "above industry average." Honor’s “care professionals” even get an ownership stake in the company, which is rare for people “below the API,” as on-demand workers are sometimes called to distinguish them from the engineers and administrators at platform headquarters.
According to Sternberg, the company only accepts about five percent of its applicants, has extremely low turnover, and takes the place of whatever other job the worker had before joining Honor. He’s also developing an in-house training system for giving workers in-demand skills, like coping with dementia or incontinence. And he’s doing it while preserving the workers’ desire to pick their own shifts, which Uber and Handy have said isn’t possible with the employee model.
“Allowing for that flexibility is a huge advantage, and we’re not giving that up at all,” Sternberg says. "People think you are, but they’re wrong.” The Department of Labor has also emphasized the fact that the law regarding employee status doesn't hinder flexibility either.
Palak Shah, the social innovations director at the National Domestic Workers Alliance, is trying to help service platforms like Alfred and Honor provide jobs that provide stability and solid pay through emphasizing the value that qualified, dedicated workers provide. Then, since online platforms can be operated with lower overhead, more of the sticker price can go to workers.
“Because this industry and work has been so devalued, to put them on the same level as people who are writing your apps and your software, I think that’s a really important and valuable step,” Shah says. "If they can figure out how to scale their model and raise wages, how to use technologies and the kinds of efficiencies that we’re starting to see as real benefits — I think there’s a lot of promise here.”
Correction: This story originally incorrectly referred to Honor's hourly rates. The reference has been removed.