The fake innovation of gig companies

Over the last several months, Americans have heard hundreds of stories about the horrible working conditions of jobs in the so-called "gig economy." Amazon contract drivers have such brutal delivery schedules that they are sometimes forced to pee in bottles or defecate in bags. Uber drivers are often forced to work ludicrous overtime to make ends meet, much of it waiting for the algorithm to deliver a fare. Doordash paid $2.5 million to settle a lawsuit over allegedly stealing its drivers' tips (though it denied doing so).

These stories illustrate an important truth about these gig companies: They are not actually innovative, in the traditional economic meaning of the word. Instead they rely on the most ancient employer technique of all: plain old labor exploitation.

Innovation is of course a vague concept, but in economic history the idea typically refers to technology that allows for more production with less labor. The spinning mule and the power loom, for instance, allow the production of huge amounts of cloth with only a few workers, as compared to hand spinners and looms that require a worker for each one. The Bessemer process greatly increased steel production because it required many fewer workers. Manufacturing has become vastly more labor-efficient through the use of techniques like interchangeable parts and the assembly line. Every major industry has a history of this kind of thing.

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With that in mind, let's consider Amazon warehouses. Jobs there are notorious for how management mercilessly regulates the work process with panopticon surveillance. Workers' every movement is tracked, bathroom breaks are strictly limited, and they are required to maintain a frenzied rate of packing and shipping. Dip below the demanded production metrics, and you will be automatically fired. Documents obtained by The Verge in 2019 found that Amazon was firing about 10 percent of its entire workforce every year at one Baltimore facility.

Now, a lot of technology goes into this system. But it is not using labor efficiently, it is efficiently exploiting labor — more production with more work. Indeed, these warehouse jobs are so brutal that many people end up disabled as a result, with chronic knee, back, or foot problems. That's whole future lifetimes of potential work burned up because Amazon wants to wring as many possible shipments out of their workers in the short term.

The story is the same with Amazon's delivery drivers. These work basically just like UPS — a bunch of people driving around dropping off packages. Amazon's logistics are world-class, but their signature strategy in terms of delivery is profligate use of labor. Whereas UPS is unionized, and so drivers generally get good pay, benefits, and decent hours, Amazon uses (heavily surveilled) disposable contract labor that can be forced to work as hard and as long as possible.

The story with taxi companies like Uber is even more wasteful. The entire value proposition of Uber is based on exploitation — paying drivers as little as possible, especially by shifting the costs of car ownership and maintenance to them. Worse, as Hubert Horan writes for American Affairs, Uber's ride system is far less efficient than traditional taxi companies. A normal taxi company will own a fleet of cars that are all the same (or just a few models), thus creating efficiencies of scale in terms of purchasing and maintenance. They also must carefully analyze their city to avoid trips that won't be able to return with another fare, thus keeping rides per miles driven high. But Uber has no such efficiencies of scale, and allows rides to almost anywhere because it subsidizes its fares far below the cost of production, thanks to deep-pocketed investors who are hoping for monopoly profits. (Though these are likely a mirage, as Uber has lost something like $29 billion over its existence, and any attempt to reach profitability will immediately put it at a disadvantage relative to normal taxis.)

Food delivery companies like Grubhub or Doordash are perhaps worst of all. These basically get in between a restaurant and its customers with an app that is convenient for the customer (sometimes putting restaurants on the service without even asking first), and then squeeze the restaurant with high commissions, all while paying their delivery workers as little as possible. One study found San Francisco food deliverers made just $26,000 per year, and that was before expenses. Many app orders for restaurants are straight-up unprofitable — New York City is considering new regulations to limit delivery app commissions for this reason.

Moreover, food delivery is a difficult business — Domino's, for instance, has its own delivery service, which requires elaborate systems to maximize deliveries per trip and make sure the pizza arrives hot. With gig companies, by contrast, delivery workers can service dozens of different restaurants, leaving little room for coordination or for workers to learn efficient routes for a particular store. That means haphazard delivery paths where food often arrives cold, and workers regularly competing with each other to get their deliveries first, creating big pile-ups and confusion at the restaurant. That's probably a big reason why even despite all the predatory business practices, not a single one of these companies has ever turned a consistent profit, not even during the pandemic as online food orders soared.

All this demonstrates an important side function of pro-worker policies like the PRO Act to make union organizing easier (which is before the Senate right now), a high minimum wage, and running the economy hot so that unemployment is low. Those of course benefit workers directly by increasing pay and helping labor organizing. But they also change the balance of power between workers and bosses.

All these horrible gig companies rely on a large population of people desperate for work. But if jobs are plentiful and labor scarce, then suddenly they will find it a lot harder to fill ruthlessly exploitative positions. They will have to start offering better pay and conditions, forcing them to economize on labor with real innovation or go out of business. Amazon could probably handle it, but many of these other gig companies likely can't. And if so, that is all to the good. As Saoirse Gowan and Mio Tastas Viktorsson write about Sweden's postwar economic model, one prime objective was to ensure that "unproductive firms would not be able to stay afloat by underpaying their workers." If a company can't survive without paying its workers decently under good conditions, it doesn't deserve to exist.