Reich testifying on income inequality before the Joint Economic Committee in 2014.
Win Mcnamee / Getty Images
Former United States Labor Secretary Robert Reich always suspected Uber driver pay was low — but he didn't know how low until recently, when he read a BuzzFeed News report that found that Uber drivers in three cities made less than $14 an hour on average.
“It was about where I thought they'd be,” he told BuzzFeed News on a recent sunny afternoon in Berkeley, California. “But I was surprised the payment was so low after costs.” He also called Uber’s price cuts, which tend to infuriate drivers despite Uber’s claim that they increase demand for rides, a “blunder.”
“Tech is affecting the entire workforce very dramatically.”
Reich has spent about half of the nineteen years since he left the Clinton administration and the Department of Labor working at the University of California, Berkeley, where he’s a professor of public policy. Between writing bestsellers, stumping for Bernie and maintaining an active Facebook presence, he has also been observing the impact of the tech industry on the American workforce.
“Tech is affecting the entire workforce very dramatically,” Reich said. “A lot of people don't know how much they're being affected. It's not just Uber and Airbnb, it's really the whole employment relationship.”
Here’s what he told BuzzFeed News about why the gig economy — a group he said makes up 30% of the American workforce — is bad for workers, how it’s making labor worse, and what we can do to fix it.
Gig workers are the new blue collar workers.
Not only are wages for gig workers low, but the work is also unpredictable, according to Reich — ”not just in how much you earn, but when you will be needed.” For example, it used to be that it was an employer’s job to predict demand; if customers didn’t come into a store, the people staffing the cash registers still had to get paid. Nowadays, it’s the Uber drivers of the world who take a hit if demand is slow. Said Reich: “If you have a lot of fixed costs that you have to bear as a person with a family and a home and utilities and auto costs and so on, that unpredictability can really cause havoc.” The result of this instability and frustration, he continued, is that gig workers are becoming part of the “angry working class.”
“The new blue collar workers are gig economy workers. If you define gig economy broadly to include part-timers, the self-employed, independent contractors, freelancers and temps, they’re on a downward escalator.”
The gig economy is both a product and a cause of income inequality.
“We are actually reducing the quality of life for millions of people.”
Airbnb and Uber say they’re helping middle-class Americans get by, and Uber justifies paying drivers at a rate, that is in Reich’s words, “not all that far removed from minimum wage” by saying it’s only supposed to be additional income on top of another job. But 35 years ago, Reich said, employed Americans didn’t need supplemental income just to pay the bills. If people still had good wages and labor protections, they wouldn’t need to turn to these platforms for extra cash. And ironically, Reich said, it’s companies like Uber, which popularized the idea of a digital on-demand labor marketplace, that are driving down the value of work, causing people to need extra jobs.
“I think the digital platforms are making it easier for companies to move in this direction,” he said. “And it's happening in all sorts of ways. I'm not blaming tech companies. They are doing what the economy wants them to do. There's all sorts of money to be made in making it easier for everyone else to move from fixed costs to variable costs. The problem is, if you believe, as I do, that the heart of the economy is a good job, with predictable wages and benefits, we are actually reducing the quality of life for millions of people.”
The solution is more and better benefits.
Thanks to Obamacare, many gig workers now have health insurance. But Reich thinks we need income insurance, too. Here’s how it would work: “If you, next month, are earning half as much as you earned this month, the wage insurance or income insurance would give you, say, half the difference between the two,” he said. “It smooths out your income stream over time.”
Reich also think we need portable benefits — in which tax advantages normally given to employers are instead attached to individuals. (On Thursday, the Department of Labor announced $100,000 to fund portable benefits research. Many tech companies already support the idea.)
But the easiest way to make sure workers get the benefits they need is to help them retain employee status. To that end, Reich wants to make it harder for companies to classify workers as contractors — even Uber. Said Reich: “I think Uber made a terrible strategic blunder. A few years ago, a lot of drivers really liked the company. They felt they were getting a fair deal. These price changes coming at them with little or no warning has made them far less generous with regards to the company. They feel that they are being treated badly, and the fiction that they are not employees becomes even more obvious.”