The State of Our “gig” Economy

Hi, how is the local economy doing near you?  I recently toured some areas in California with the Blog Father and was stunned at what I saw.  I saw shopping malls and strip malls opening all over the Sacramento area; however, these are all low paying, barely minimum wage jobs, few of which offer any benefits!

I am old enough to remember when Ronald Reagan, whose modern-day heir is alleged by all you CRA and Tea Party folks to be Theodore Cruz, felt if the economy isn’t adding close 500k jobs a month we were going backwards, not growing!  I find it ironic that the US population is 35 percent more than 1980 and adding half that number of jobs is regarded as a thriving economy. No wonder so many college graduates are living with their parents while they pay off their crushing student loan debt.

In the Reagan era, most jobs were decent paying private sector jobs; think factories, office buildings, etc.  Now the jobs we are “gaining” are low skilled, low paying jobs, and oh by the way, the job numbers now also include a growing number government jobs, so I guess low wage and government sectors are growing nicely in this “service economy”; at least that is what I saw in sunny California. In the Blog Father’s town, several new government buildings have been added and several more are scheduled to be built. I guess if you owned the local Five Guys, BJ’s, Subway, etc. you are doing better but I argue the economy in general is doing poor and we are living in a mirage economy.

Look at how most corporations such as Intel, Apple, or even Comcast organization their employees. For example, I had Comcast install cable at my house; however, I noticed something funny when the technician showed up.  The truck and their identification badges read: O. C. C. Communications, no Comcast logo anywhere.  When I questioned this, not wanting to let strangers into my house, they said they were independent contractors used by Comcast for installs and service work. Since they were the only guys knocking on my door during the time the appointment was scheduled I let them in.

These guys do not work for Comcast; instead, they are contracted out and paid by the job, no benefits, or anything.  Intel does the same thing, I bet in the Ivory Tower in Folsom, most of those “employees” are not affiliated with Intel at all, just vendors or contractors.  The guy who delivered my FedEx package?  He works for Package Delivery LLC, not FedEx. Want to take odds he is a contractor as well?

Now there are benefits to having a mostly contracted workforce do not get me wrong. Corporate labor costs become just another fixed expense because the details are somebody else’s problem. This makes product prices lower and outsources compliance to government’s myriad of labor regulations.

Such a workforce could/should be more motivated. Labor suppliers are motivated to perform because they know that their contract could end and they all may be terminated after a set date based on performance. Such an arrangement gives the parent company limited liability exposure if the labor force does poor workmanship.

But now the downside. In such an arrangement, you have no bargaining power, and no rights. If your “contracted employer” wants you gone…adios.  You get no healthcare and pay no taxes so you’re on your own to settle up with Uncle Sam at Tax time.  You are 100% at the mercy of your contracted company. If the contract goes out for bid and your company doesn’t bid the lowest, you’re out of a job.  You are essentially a Labor Ready employee, knowing full well you are 100% disposable and completely at the mercy of your employer.

In our economy, there exists a tier below even this level. This is the “gig economy”.

In a gig economy, temporary, flexible jobs are commonplace and companies tend toward hiring independent contractors and freelancers instead of full-time employees. A gig economy undermines the traditional economy of full-time workers…

Definition: Gig Economy

Examples of the gig economy are companies like Airbnb, Uber and Lyft.  Again you are an independent contractor but you are able to work in your spare time, as much or as little as you want.

Here is the problem with this system….government regulation.  Well that fear is coming true in California, as the State Supreme Court ruled those workers need to be classified as employees not contractors. Yes folks that Uber ride you take to the airport, used to be $15, likely will be $25 soon.

This is the way it works folks, if you’re no longer a contracted worker then your employer is not going to allow you to wait around in your house for your Uber app to ding saying someone requested a ride.  So you will be burning more gasoline driving around aimlessly. Oh what’s that, you want to work the late shift?  Sorry we need you to work the morning shift! What’s that you don’t like it?  You’re fired.  Really the end game here is the State of California wants to allow these folks to unionize and pay more dues into the system to elect more socialists to give them “handouts.”  This ruling actually hurts the people who depend on it the most, I’m talking in terms of Uber, Lyft etc.  The gig economy allows younger people to work whenever they feel like it and earn a little extra money on the side, like to buy and smoke weed for example, or pay off your student loans, or something.

The gig economy has its place. It’s a nice supplemental income to support your minimum wage paycheck. Also it can be fun to have flexible hours.  Lost in all this is the idea that the minimum wage was intended as a training and entry level wage, not something to continue earning for the rest of your adult life. It is not the minimum income to support a family and be a productive member of society.

This court ruling is being aimed at cracking down on big businesses trying to skate employment law, but it’s going to hurt the ones who depend on it most.  I learned a lot about how millennial and Gen-X live these past few days.  As much as I faulted them for being “live in your parent’s basement types”, boy was I wrong.  How does one live on a paycheck of $1,750 gross a month?  Especially when an apartment costs $1,100, and you have a car payment, insurance, cell phone, cable bill etc.?  Along with $100k in student loan debt?  Yeah I would drive for Lyft or Uber too.  It’s too bad because the futures of these kids just got set back a decade, or forced them to become government slaves for life.

However if I may address the other side of this coin, the older workers on contract for a big company.  This is a horrible way to live life, no benefits, being lied to, and living on a 90-day contract cycle.  Some workers exist in a sort of limbo because the company they went to work for doesn’t want to pay medical or other benefits.  Even worse, if the company doesn’t meet earnings expectations for its shareholders, your job could well be outsourced. This was the case for Conagra Brands (Chef Boyardee, Reddi-Whip, and Hunts) as they outsourced their entire sales team (over 1,000 jobs) to a Florida outsourcing company.  The bottom line is, in today’s regulatory and Wall Street driven world economy, there are two sides to the coin.  Heads I win, Tails you lose.

Until next time,