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Wednesday, December 1, 2021

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The gig economy is expected to grow from $14 billion in 2014 to $335 billion in 2025. The gig economy is expected to grow from $14 billion in 2014 to $335 billion in 2025.

Does the Gig Economy Exploit Independent Contractors?

Research indicates that independent contractors/freelancers may be subject to mistreatment through unethical business practices.
By Suzanne Finch

The economic meltdown of 2008 led to an explosion of workers participating in the gig (“sharing”) economy by using their skills or personal resources to create an income source. A San Diego State University researcher has found that companies who contract with these workers often exploit them in terms of salary and excess scrutiny relative to their traditionally employed counterparts. 

Research by Mujtaba Ahsan, management professor from the Fowler College of Business, examined the challenges faced by private contractors and the ethical behavior of the companies who utilize their labor. 

Ahsan found the gig economy is expected to grow from $14 billion in 2014 to $335 billion in 2025, and the number of gig workers in the United States is expected to reach 9.2 million by 2021. He also noted gig workers generally fall into four categories: freelancers who have chosen to work gigs as their primary source of income (32 percent); casual earners who willingly use gigs to supplement their primary incomes (40 percent); reluctants who are unable to find traditional work and are forced to rely on gigs as their primary income (14 percent); and the financially strapped who work gigs to supplement other income sources (14 percent). 

Companies such as TaskRabbit, Fiverr, Postmates and Uber, who hire many of these workers, call them “partners” or “micro-entrepreneurs” and emphasize the fact that they can set their own hours and work as much or as little as they choose. 

Ahsan’s research found evidence of exploitation in this practice, particularly in the case of Uber.  

“Drivers might be free to show up for work or leave at a time of their choosing, but once they report for duty, their actions are scrutinized, monitored, tabulated and controlled with great precision,” he said. “Decisions are set by an app controlled by Uber, which determines performance metrics, monitors the number of rides accepted or cancelled, and sets pay. Very little is left up to the driver.” 

Ahsan also noted that drivers are required to maintain a customer rating of 4.6 stars out of a possible rating of 5 stars. 

A survey released in 2018 by the Economic Policy Institute indicates 90 percent of all wage and salary workers earn more than Uber drivers,” Ahsan said. 

“The income Uber drivers earn after deducting Uber fees and vehicle expenses is only $11.77 per hour, approximately 65 percent less than the hourly compensation of private-sector workers and 20 percent less than the hourly compensation in the lowest-paid major occupations.” 

Ahsan said there is evidence to suggest that the rise of the gig economy could increase income inequalities as company founders and investors are appropriating more “value” at the expense of independent contractors carrying out the required labor.  

“The challenge now for entrepreneurship scholars is to better understand how certain entrepreneurial behaviors further income inequities and to develop programs and shape policies that encourage entrepreneurial behaviors that go beyond self-interest to promote societal benefits.”