One conundrum in economics is why fims exist. Why don't people with money just contract individually with anyone they want work from? The answer people like Ronald Coase and Oliver Williamson highlighted were the problem of transaction costs, in particular the problem of monitoring employees to ensure that they deliver on the work promises (ie. the need to manage employees). These monitoring and transaction costs meant we ended up with massive workplaces like Henry Ford's River Rouge plants and similar industrial firms across the country. Nasty as management could be, workers could collectively at such places organize unions to demand standards of treatment that improved their lives and the lives of workers across the country. Laws such as the minimum wage and workplace safety were passed as well oriented to raising work standards in the traditional workplace.
Enter new data tools and companies like Uber. When every action of a contractor can be monitored by computer, the need for traditional onsite management is eliminated so workers can be treated as "independent contractors" and thereby lose most protections traditional workers have. As Rebecca Smith at the National Employment Law Institute outlines in a Fortune article, by calling workers at Uber "non-employees", workers lose out:
Non-employees are not entitled to minimum wage, overtime pay, compensation for workplace injuries, or protection against discrimination. They have no federally-protected right to join a union and collectively bargain with the companies for which they work. Few have job-based health care or pensions.
Second, many on-demand companies break down and outsource what once were jobs into tasks, and those tasks into micro-tasks that are paid at piece rates, sometimes in pennies, to their independent contractor workers.
A recent survey of on-demand workers found that half have college degrees. Indeed, one in six landed these gigs through advertisements at their universities. Half said that finding enough work to pay the bills was their biggest problem. To make ends meet, two out of five work for more than one on-demand company at once, and just like workers in previous generations, what they most want from work is paid leave, pensions and health care.
The CEOs and venture capital firms behind these companies may be getting rich and a few high-end workers may benefit from a bit more flexibility in their work setups, but the overwhelming number of workers in this new "gig" economy are left with few tools to work together to improve their working conditions.