‘Tremendous potential being wasted’: How gig work widens the racial wealth gap — and what can be done about it

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The Value Gap is a MarketWatch Q&A series with business leaders, academics, policymakers and activists on how to reduce racial and social inequalities.

As the COVID-19 pandemic underscored economic inequality, the Institute for the Future set out to address deteriorating work conditions in the age of Uber by collecting low-wage workers’ stories and using them to call for change.

“We’ve been thinking of the evolution of this new kind of economy for a long time,” said Marina Gorbis, the executive director of the IFTF, a Palo Alto, Calif.-based think tank that does research on the future of business, technology, health and other areas. “We wanted to look at what’s happening and wanted to create post-pandemic scenarios.”

The IFTF surveyed hundreds of California workers making $15 an hour or less and conducted in-depth interviews with nearly 50 of them, 76% of whom self-identified as Latinx, Black, Native American or Asian American/Pacific Islander.

What it found: many workers relying exclusively on low-paying gig work with little to no benefits. In some cases, they’re cobbling together a bunch of side hustles to make a living. In other cases, they’re turning to entrepreneurship as a last resort. And in most cases, they feel powerless to make structural changes needed to improve their situations.

Marty Martinez, a 20-year-old gig worker in Stockton featured in the California Working Voices report, said, “There is money to be made out there, you just need to look for it and have an open mind.” By day, he scans Craigslist for odd jobs and does deliveries for GrubHub Inc. GRUB, +0.88%, DoorDash Inc. DASH, +0.42% and Instacart. At night, he works part-time at an online retailer’s warehouse. “This is now my way of life!” he said, according to the report, which noted that he doesn’t foresee that changing soon.

‘We see polarization of labor and mostly nonwhite people being greatly affected. It absolutely exacerbates the racial wealth gap.’

“The sad thing is you see tremendous potential being wasted,” Gorbis said in a conversation with MarketWatch for The Value Gap. She explained the report’s findings, as well as the IFTF’s recommendations for solutions. This interview has been edited for length and clarity:

MarketWatch: Will you talk about the impetus for the report?

Gorbis: Partially, the pandemic was the impetus. We’ve been working with the California Future of Work Commission. We’ve been tracking the gig economy since Uber UBER, +1.36% first came into being. I wrote an article talking about how what Uber was doing would impact a lot of companies.

It seems like a new Uber appears every day. They’re not just platforms, they’re becoming labor markets — avenues for people to get work. As such, they have certain responsibilities in terms of design, and we need to think about regulation, ownership, governance.

With the pandemic and the shutdowns, the numbers are impacting people unequally. We see polarization of labor and mostly nonwhite people being greatly affected. It absolutely exacerbates the racial wealth gap.

We talked to people working day and night. This was happening before the pandemic, but it accelerated and deepened. Thirty-five percent of workers in California earn less than $15 an hour, where you need at least $17 to $22 an hour for a livable wage. We talked to people who even if they were working 40 hours, they had to supplement their income because they just couldn’t make a living.

MarketWatch: The report states that “California workers are at the forefront of experiencing profound transformations in the nature of work and jobs.” Why California?

Gorbis: These companies and platforms come out of California. And living here is expensive, so a lot of people have to supplement their incomes in various ways. Housing costs have gone up at a greater pace than wages. There’s so much wealth, yet almost 35% of the population is living on $15 an hour. We’re at the forefront of tech, but at the same time we’re at the forefront of inequality.

MarketWatch: What are the main things workers miss out on as they engage in gig and non-institutional work?

Gorbis: There’s nothing inherently terrible about this particular way of working. Like if you’re an artist or a musician. Or people with disabilities who can’t be in formal work for various reasons.

The reason it’s pretty bad in the U.S. is because we have a social safety net that’s tied to your employment — your medical benefits, sick time, paid vacations. The same platforms are in Germany and elsewhere, and it works differently. It’s just bad in this system. And we really have no regulation of these platforms because they’re new.

There are key challenges regarding these jobs. They’re asset-poor work. And it’s not just that wages may be low; you have no ownership stakes in whatever platforms you work in.

Then there’s the instability: You never know how much money you’re going to earn. It can be reset based on demands, whether it’s surge or non-surge, and it’s very hard to plan if your salary is different every day.

And you’re working in an atomized way, in isolation, with no way of representing your interests in a collective way. That was really evident in our interviews. They always focused on themselves, saying, “I need to learn to save more.” It kind of reminded me of the obesity epidemic, where people were blaming themselves, not questioning the system and saying, “Why do we have bad food and how do we change that?”

You can’t see the larger system in which you operate, and so you can’t advocate for yourself. And how do you think of advancement in an environment where you can’t have a career ladder or progression?

‘There’s hero worship of entrepreneurship in Silicon Valley. But when we talked with the workers, the word most commonly used was not entrepreneur, but hustler.’

MarketWatch: The Proposition 22 ballot measure in California, after being approved by voters, allows Uber, Lyft Inc. LYFT, +2.23% and other gig companies to continue to treat their drivers as independent contractors. Supporters included civil-rights group leaders who said gig work offered opportunities that some marginalized communities may not have; that this allowed Black and brown workers to be “entrepreneurs.” What do you think about this?

Gorbis: There is a kind of pride in this kind of work. There’s hero worship of entrepreneurship in Silicon Valley. But when we talked with the workers, the word most commonly used was not entrepreneur, but hustler.

A hustler is different from being an entrepreneur. A hustler is someone who’s been excluded, someone operating on the margins. You have to be able to hustle, to quickly monetize.

An entrepreneur has a business plan, a long-term vision. You sell it to somebody and you get money. Grabbing work off an app here and there rather than building something — we’re not talking about the same kind of entrepreneurship.

As for unlikely people supporting Prop. 22, in some ways, these on-demand platforms have become an alternative social safety net. So some workers compare the ease of driving for Uber and earning some money quickly to having to apply and wait for benefits. If that’s taken away from them — it’s packaged as being taken away — they think their social safety net is being taken away.

MarketWatch: What does all this mean for the future of work?

Gorbis: For some young people, this is their formative experience of work. You go on one of these platforms and it reshapes your expectations of work. You don’t have an expectation of having a career path.

In one of our interview sessions with low-wage workers, we also had doctors. Doctors are increasingly working in ways that are similar to Uber drivers. They’re emergency-room doctors, or doctors whose practices have been acquired by hedge funds. There are doctors working in four different hospitals in one week. Their salaries are being cut.

This way of working is moving beyond low-wage work into a lot of other areas. The more it enters the middle class, and the more traditionally better-paid occupations, the more you’ll hear people speaking up. It’s kind of like when the draft hit middle-class kids.

MarketWatch: What can be done to address these challenges? Who needs to be involved?

Gorbis: We can make gig work into good work. It’s taking place in Germany, the U.K.

The first area would be reconfiguring the social safety net and disconnecting it from direct employment, such as by providing universal health care or portable benefits.

The second area is the enterprise form itself. In the 1950s, corporations were a means of distributing wealth to companies and workers. The kind of corporations we have today are distributing wealth to shareholders, not to workers.

This is where you look at co-ops. Imagine if Uber were owned by drivers, if companies gave people equity in places where they work. ESOP (employee stock-ownership plan) companies are where workers and the community buy into them, and are equitable enterprises that give economic returns to workers. Taylor Guitars became an ESOP. Or the idea of a public city labor exchange, which is in a New Yorker story this week, is really interesting.

Third, we haven’t established regulations in a lot of these areas. We need minimum-wage regulations. There’s a lot of worker misclassification going on. There are questions about data ownership.

And who is representing them? Unions serve a purpose not just in winning better economic conditions; they also serve to educate workers.

What California’s government can do is, its Future of Work Commission is proposing creating a Job Quality Index, and using procurement practices to give preference to good employers.

If workers are provided basic income, like tax credits or other things, it gives them a little more negotiating room where they don’t have to work for substandard wages. It gives them a little more power, where companies have to do better to attract workers.

See also: Uber to label U.K. drivers as workers

Read more: PRO Act, called ‘most important labor legislation in several generations,’ passes House

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