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7.65% of your pay. You may have paid holidays and paid
vacation. And if you injure yourself on the job, workers
compensation insurance can make the difference between
being on the street and continuing to get by.
But there are some big issues that no one seems to talk about.
There is a huge gulf between the benefits often provided to full
time employees and part time employees. And that has led to
what I call the 29 hour loophole. Unscrupulous managers can
set the business rules for the automated scheduling software
used by most large low-wage employers to make sure that no
worker gets more than 29 hours in a given week. Because
employment law allows different classes of benefits for part
time and full time workers, this allows core staff at the
company to be given generous benefits, while the low wage
contingent workers get the bare-bones version.
Once you realize this, you understand the potentially damaging
effect of the Department of Labor guidance not just for new
Silicon Valley companies but also for their workers. Turn ondemand workers from 1099 contractors into W2 employees,
and the most likely outcome is that the workers go from having
the opportunity to work as much as they like for a platform like
Uber or TaskRabbit to one in which they are kept from working
more than 29 hours a week! This was in fact exactly what
This isnt to say that there arent serious problems with the
independent contractor model for low wage workers.
Independent contractors are responsible for their own tax
payments, and many, being unsophisticated,think of their
weekly check from Uber, Lyft, or TaskRabbit as being theirs to
spend. They dont make quarterly tax payments, and many of
them find themselves unable to pay their taxes due when April
15 rolls around.
However, there are some offsetting benefits. As independent
contractors (small businesses), they are allowed to deduct 57.5
cents per mile driven in their own vehicle. Intuit even provides
an app, integrated with the Uber app, to help a driver track
personal miles driven versus miles driven on the job. For a
driver putting on hundreds of miles per week, this may shelter
a large part of his or her income from taxes.
Even the notion that being an employee results in benefits such
as paid holiday and vacation isnt quite what it appears. When
an employee accrues vacation, holiday, or sick days this isnt
a gift from the employer. It is fundamentally an escrow of the
employees own wages. This is easiest to see for salaried
workers. Lets imagine, for the sake of convenience, that Im
paying a salary of $26,000/year, $500/week, or $12.50/hour.
Forty hours a week for 52 weeks amounts to 2,040 hours. Take
out two weeks of vacation, two weeks of sick pay, and two
Solutions
There is clearly a Medusas Nest of problems in low wage
employment in America. Lets start, though, by
acknowledging that virtually all low wage workers
in America are on-demand workers. This
acknowledgement lets us enumerate a set of solvable problems:
1. Algorithms used to schedule on-demand workers must be
designed to optimize for the needs of workers as well as
employers. They should honor workers schedule
preferences, and let them opt-out of assigned schedules
without risk of losing their jobs. Companies like Managed
Companies need an option between employee and contractor. Andre Hagiu, HBR