Silicon Valley’s Contract-Worker Problem

From NYMag  —

I first heard the term “1099 economy” at this year’s TechCrunch Disrupt conference, where it was uttered not as a pejorative, but as a way to praise the innovative labor practices of Silicon Valley start-ups. When you order a service from one of these companies, the people who get paid to perform it don’t file W-2 tax forms because they’re not officially employed. Instead, they file the independent contractor form, the 1099-MISC. The most famous examples of 1099 companies are on-demand car providers like Uber and Lyft, but there are dozens of others: Homejoy, Handy, Postmates, Spoonrocket, TaskRabbit, DoorDash, Washio. All of these companies employ similar jargon to describe their labor model — if you hear the words platform, provider network, or Uber for ____, you’re likely talking to one.

Homejoy, one of the more successful start-ups to adopt the 1099 model, insists that its method is better for workers. “Our partners are free to create their own availability and scope of work,” CEO Adora Cheung said in an email interview. “That flexibility is one of the main appeals of the platform.” (As for the homeless cleaners, Homejoy says its Bay Area contractors earn, on average, between $17 and $20 an hour, well above minimum wage. “While we sympathize with anyone who is in an economically difficult situation, we don’t think that relating that to Homejoy’s website or its practices makes sense,” Cheung says.)

For start-ups trying to make it in a competitive tech industry, the benefit of opting for 1099 contractors over W-2 wage-earners is obvious. Doing so lowers your costs dramatically, since you only have to pay contract workers for the time they spend providing services, and not for their lunch breaks, commutes, and vacation time. Contract workers aren’t eligible for health benefits, unemployment insurance, worker’s compensation, or retirement plans. And contractors don’t have to be fired if they mess up, since they were never employed in the first place. Instead, they’re simply removed from the network, and life goes on.

In other words, the 1099 economy is almost perfectly calibrated to serve the needs of fast-moving start-ups — lower costs, less liability, the ability to grow and shrink the labor pool quickly — but is it good for the people doing the work?

That depends on whom you ask. Start-up workers generally “fit into three buckets,” explains Josh Felser, a venture investor at Freestyle Capital. “There’s the control-your-hours contractor. That group seems to be very happy with where things are. There’s the full-time employee. And then there’s the middle group — where they’re acting like full-time employees and being paid like contractors. That group is disenfranchised.”….

Read the full story at Silicon Valley’s Contract-Worker Problem

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