Could A Minimum Wage Work In The Gig Economy? 

Favor Customer


From Fast Company, Sarah Kessler discusses how some gig economy companies are offering a minimum guarantee, similar to a minimum wage and discusses the possibility of a minimum wage for gigs.  Sarah writes:

Favor, an Austin-based instant-delivery company that operates in 22 markets, follows the same model, but with one exceptional difference: Favor has taken an unusual step of guaranteeing all of its 10,000 drivers a minimum hourly wage.

If Favor drivers, who the company calls “runners,” don’t meet their pay guarantee, between $9 and $12 an hour depending on the city, then Favor makes up the difference.

As some gig economy startups like Uber grab attention for their eye-popping valuations, the way they pay workers has become a topic of debate (and litigation). Some argue workers should be classified and paid as employees. Others argue that they warrant a new category of employment. But as independent contractors, these workers currently don’t fall under most of the government’s safety net programs, including minimum wage.

So why is Favor paying them a minimum wage?

“It allows us to set expectations,” says Favor CEO Jag Bath. “What ends up happening [without the guarantee] is that you’re hiring people, and they are going to leave because you’ve set an expectation that is far from reality.” This is especially important when Favor starts in a new city, Bath says, because runners typically sign up for Favor faster than new customers, who create work for them by placing orders. A month or two after launching in a new city, Favor’s drivers usually take enough trips to make more than guaranteed. “It’s a safety net, and it works when it’s needed,” Bath says. “Most of the time it’s not needed.”

Read the full story at  Could A Minimum Wage Work In The Gig Economy?

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