1099, Being Freelancer, Companies, Finding Jobs, Freelancers, Future of Work, Income, Industry Research, Insurance, News, On Your Own, People, Self-Employed, Uber, Your rights: Presidential Election, Laws, etc.

Portable Benefits for the On-Demand Worker

The emergence of the gig economy has opened an important debate about having portable health and other benefits for the On-Demand Worker. There has been a number of calls for a new category for those who occupy the gray area between employees and independent contractors. Freelancers often work through a middle man or a marketplace (think Upwork.com or 99Designs) or an intermediary, typically an “app,” that customers use to identify themselves as needing a service—for example, a car ride, landscaping service, etc. This enables the employer to maintain some sort of arms-length distance from the worker. (We all know this is often broken, however). How can you work for someone without them giving you some sort of direction?

It’s increasing, but today it appears that at least about 600,000 or .4% of the US Workforce work with an online intermediator. The Hamilton Project at Brookings (I once interned there while I was a student across the street at Johns Hopkin’s University’s SAIS program across the street), recently hosted a gig economy event where Brookings made a proposal for  Modernizing Labor Laws in the Online Gig Economy. The talk focused on health and other benefits, and how to ‘force these new forms of work (from Uber, etc.) into a traditional employment relationship could be an existential threat to the emergence of online-intermediated work, with adverse consequences for workers, consumers, businesses, and the economy. “One of their One of the key benefits they proposed was portable benefits, which is a fascinating idea because (Independent contractors tend to have multiple gigs at one time). Their definition:

As we are defining it, the online gig economy involves the use of an Internet-based app to match customers to workers who perform discrete personal tasks, such as driving a passenger from point A to point B, or delivering a meal to a customer’s house. Note that this definition excludes intermediaries that facilitate the sale of goods and impersonal services to customers, such as TeacherPayTeachers.com, a Web site where teachers sell lesson plans and other non-personal services to other teachers, and Etsy.com, a Web site where individuals sell handmade or vintage goods. It also excludes Airbnb, a Web site where people can rent apartments, houses, and other accommodations.

The authors of the Hamilton Report highlight that ‘because it is conceptually impossible to attribute their (workers’s) work hours to any single intermediary.” Today, these independent workers do not qualify for hours-based benefits, including overtime or minimum wage requirements. These independent contractors rarely, if ever, qualify for unemployment insurance benefits. If intermediaries could pool independent workers, however, for purposes of purchasing and providing insurance and other benefits at lower cost and higher quality without the risk that their relationship will be transformed into an employment relationship, then they might be open to pooling their resources and having portable benefits for the contingent workforce.

The Ubers of the worls could then save on the costs if they have to eventually hire these workers full-time and on legal fees (although Uber has changed their driver terms of service agreement that bars drivers from participating in class action lawsuits against the company and instead requires them to enter into arbitration in the case of disputes).

As Steve King points out in his short analysis of this proposal, this new portable benefits law probably should include gig economy workers who work in the B2B sector, or sell goods, or rent real estate, but they do. But even though they are excluded from their analysis, they would likely be included in any portable benefit laws. Portable benefits seems to be a hot topic. Next week the Aspen Institute is holding a workshop on portable benefits.

Protection of the 1099 is important. I have heard of companies (the employer and the intermediary) using algorithmic scheduling to ensure their works never go beyond 29 hours of work a week, which ensures they don’t have to pay them health benefits or provide the other goodies full-time employees receive. It’s important to figure out how to address this barrier to benefits.  Ouch! Talk about Big Data hurting the worker!

Another reason to address this is that Brad Smith, the CEO of Intuit and one of the best leaders I have ever worked for, has indicated that his company’s data data shows that 40% of their self-employed customers also have income from a W2 job. (I know several people who wear these two hats). So this problem of multiple employers with different tax and benefit regimes started way before the Ubers, Lyfts, Instacarts came on the scene.

Portable Benefits basically means a person should be able to use the same benefits when they work for different on-demand companies. The Hamilton proposal is a start – it has accelerated the discussion about a new class of employees or at least the call for examining how workers are currently classified. Their proposal really doesn’t focus on online or offline, but instead stresses that workers should be protected and receive benefits. As the chart below indicates, this will continue to become an increasingly important issue to address in our On-Demand Society.

You can read The Hamilton Report here

Community, Future of Work, Gadgets and Apps, Industry Research, News, The American Dream

Mobile Moms and the Sharing Economy

Recently BabyCenter.com announced it’s latest findings from its U.S. Mobile Mom 2015: The Sharing Economy report. It outlined how moms are participating in our On-Demand Society. Some facts about and results from the survey.

  • For the survey Baby Center contacted Mom’s in the top 10 U.S. DMAs – Atlanta, Boston, Chicago, Dallas-Ft.Worth, Houston, Los Angeles, New York, Philadelphia, San Francisco Bay Area, and Washington, D.C.
  • 42% of moms in those urban markets say they have tried a “sharing economy” or concierge-type app in at least one of these categories: beauty on-demand, clothing rental, grocery delivery, home cleaning, household chores, private car/taxi, vacation/temporary home rental, and valet/parking assistance.
  • San Francisco, where many early adopters of new technologies live,  claims the most moms on the “on-demand” bandwagon, with 56% saying they have tried one. Outside of those major markets, the percentage of moms who have used one of these apps drops to just 21%.
  • The study also shows that moms’ lack of familiarity with these services is a critical stumbling block in greater penetration across the board.
  • When talking to mothers about household chore services like TaskRabbit and Airtasker, nearly 2 out of 5 in each of the top 10 DMAs said they were not acquainted with these types of “sharing economy” apps.
  • Three out of 5 moms who live outside those urban centers said the same. However, when asked, moms showed strong interest in using a household chore service app – 60-70% in top markets and 57% outside – pointing to a disconnect and missed opportunity between a target audience and utilities they want and need.
  • There are two categories of “sharing economy” apps that are the exception to the rule, with a larger number of moms being familiar or actively using private car/taxi apps, such as Uber and Lyft, and vacation/temporary home rental services, like Airbnb and HomeAway.
  • Private car/taxi mobile services were far and away the most familiar to moms, with those in San Francisco, New York City, and Chicago being most likely to have used those services or be considering giving them a try. Still, numbers take a tumble when talking to moms who live outside of the top urban areas.

 

 

Handy’s Corner of the Gig Economy Is a Mess. Doesn’t Bother Startup Investors!
Companies, Health Care, Industry Research, Ondemand Platform, Services, The American Dream, Uber

Home Services need to be Cleaned Up

Originally Published in Slate

The startup world is full of ironies and poetic justices. The bubbly race to wash your clothes. The club of billion-dollar “unicorns” that boasts more than 100 members. And the undeniably messy market for on-demand cleanings and home services.

In recent months, the home-services market has repeatedly proven one of the riskiest and most muddled in the burgeoning “gig” economy. The clearest evidence of this came in mid-July, when Uber-but-for-cleaning platform Homejoy announced it was shutting down. At the time, the company attributed its exit to problems with raising money and to a lawsuit over its employment practices;other reports since have traced the collapse to substantial losses, poor customer retention, costly expansion, and Homejoy’s inability to keep its best workers on the platform.

Similar problems have plagued Handy, another Uber-but-for of the home-services sector, and Homejoy’s main competitor before it went under. Like Homejoy, Handy poured money into scaling up its operation, spending tens of thousands of dollars a week—if not more—to onboard cleaners. Like Homejoy, Handy struggled to retain those cleaners, with 20 to 40 percent becoming inactive after two to three months. Like Homejoy, Handy is in litigation over its independent contractor-based business model. On top of that, Handy has faced tough criticism about its customer service—in particular, a signup system that automatically enrolled users in repeat bookings and made it extremely difficult to cancel them.

And yet the gig economy keeps chugging. Handy said Monday that it had raised $50 million in a Series C funding round led by Fidelity Management and several of its current investors. That brings the company’s total funding to $110 million, for an unofficial valuation of around $500 million.

In its press release, Handy points to its 1 million-plus bookings (a milestone it celebrated over the summer), and that 80 percent of them come from “loyal, repeat customers.” Presumably a good deal of the company’s valuation and new funding is tied up in this claim—repeat customers are much more likely to actually pay off than one-time users—though the fact starts to sound less compelling when you wonder how many of the 80 percent were repeatedly using Handy of their own volition, and not because they couldn’t cancel those automatic recurring bookings.

“Handy has demonstrated to consumers that it is the company to trust when it comes to finding professionals to take care of their homes,” Handy co-founder Umang Dua says in the release. “Professionals love the flexibility, high-paying jobs and high demand for their services, while consumers enjoy the convenience and high quality.” It’s nice PR boilerplate that becomes less convincing once you consider the cleaners who have filed lawsuits against Handy, the customers stuck with followup bookings they didn’t want, and the customer-experience employees at Handy’s headquarters who had their jobs outsourced and were fired en masse between late 2014 and early 2015. For more on most of that, see my Slate story from this summer.

On the other hand, it’s possible that Handy, in the spirit of its sector, has started cleaning up its act. In late August, a former Handy employee notified me that the company had finally reviewed its compensation and payroll practices and issued back-pay to some customer-experience employees for their rest periods. As part of that, back-wage recipients were asked to “stipulate and agree that my accepting this payment does not constitute, for any purpose whatsoever, either directly or indirectly, an admission of any violation of law or contract or any other legal obligation whatsoever by Handy,” according to a copy of one agreement provided to Slate. They also released Handy from “any and all individual and/or class claims under the New York Labor Law and, to the extent allowable, any other federal, state or local law, related to the payment of wages, benefits or other compensation related to my employment with Handy,” so you have to assume that’s something the company was nervous about.

Could such changes, plus the Homejoy exit, be enough to pave Handy’s way toward establishing a profitable, sustainable business?Or is the market for home-cleaning and other household services fundamentally too tough? Those are questions that as of yet don’t seem to have clear answers. For now, though, Handy doesn’t need to convince the world one way or another. It just needs metrics that are aspirational enough to attract a few investors—to keep the cash flowing in from one end to be burnt up on the other. Fifty million dollars might not feel like much compared to the $1 billion rounds that Uber raises with casual regularity. But for a company in a space as murky and fraught as Handy’s, it’s an equally big vote of confidence.

 

Community, Industry Research, Technology Platforms

Amazon new store: The Laboratory

As one of the guys who helped launch Border.com, I have been watching the opening of Amazon’s first brick and mortar store closely. I have been waiting years for the ironic moment to happen. I once ran into Jeff Bezos in an elevator and told him ‘I just joined Borders and we have been waiting to take you on.’ Jeff replied ‘And we have been waiting for you and who knows, we might just open a store.’

To be honest, I have learned a great deal about merchandising and business from Amazon. Probably the single most valuable lesson was ‘don’t be afraid to cannibalize your own business.. otherwise someone else will’, as Bezos described in the great book Everything Store.

Early reviews of the new store indicates that it has a nice atmosphere, has a good offering of Best Sellers, and that the store personal (some of whom are part-time self-employed holiday workers) often say ‘you can order it online.’ But what is really behind this new store. I am surprised that more journalists are not say ‘what’s the catch.’

And there is one. This new Amazon store is a laborary. It is another way for Bezos to get close to the customer. Just think the types of information they can capture:

  • They can test out their price matching app to see if it can keep up with store information real time
  • They can test out the GPS capability of their app (when it arrives) to test out On-Demand Curb Site Pick Up (like Curbside which lets customers buy products on a smartphone app then pick them up outside of Target stores.
  • They can see how well their online ratings system translates to the store because they don’t rotate books or use the New York Times Best Seller List to determine what to feature like other Bookstores do. Instead, the shop’s selection hinges on Amazon’s
    curation—books selected due to their own rating algorithms. Think about Amazon sharing this valuable info with other stores)
  • They can test out their ability to sell Hardware such as Amazon Echo.
  • They can stick their young associates in front of customers to get face-to-face training

So this might be one case where generating a profit will not matter. (Sounds like Amazon : ).

The company also plans a few other Bricks and Mortar experiments. It plans to be a true Miracle on 34th Street; and open store in New York City. Since Amazon hires tens of thousands of workers during the last quarter of each calendar year, I am sure some of the people behind the counter in Seattle and New York, will be seasonal temps and freelancers. Considering the company has received some negative press recently about how it treats it’s temporary workers, I wonder if how these experts will be treated. Unfortunately, they could be the perfect hire in such a grand experiment as the testing of a book retail store.

As always, I have my eye on Amazon and hope to learn from their experience.

 

Background Check, Immigrants, Industry Research, Self-Employed

Immigrants are a sizable segment of self employed U.S. workforce

are now a sizable segment of the U.S. workforce. In 2014, the nation’s 146 million workers included 24 million immigrants, accounting for 16.6% of total employment.26 Immigrants occupied an even more significant presence within the self-employed workforce last year. Some 2.8 million, or 19%, of the nation’s 14.6 million self-employed workers were immigrants. Thus, immigrants are also responsible for a good share of the jobs created by self-employed workers, hiring workers at virtually the same rate as the U.S. born.

The Self-Employment Rate Is Slightly Higher Among ImmigrantsOverall, 11% of immigrant workers were self-employed in 2014, compared with 10% of U.S.-born workers. The incorporation rates are also similar. Some 4% of each group of workers had incorporated businesses. But there were proportionally more unincorporated self-employed immigrants than U.S.-born workers, 8% compared with 6%.

The overall similarity in self-employment masks the fact that immigrants outpace the U.S. born in the likelihood of being self-employed within each racial and ethnic group. The largest gaps appear among whites and Hispanics. Almost one-in-five (17%) white immigrants were self-employed in 2014, compared with 11% of whites who were U.S. born. Among Hispanics, immigrants were about twice as likely as those born in the U.S. to be self-employed, by 11% to 6%.

Among Asian workers, 11% of immigrants and 7% of the U.S. born were self-employed last year. The rates of self-employment among black immigrant workers (7%) and U.S.-born blacks (5%) were about the same. Notably, Hispanic and Asian immigrants were just as likely as U.S.-born whites to be self-employed.

Self-Employment Among the U.S. Born and Immigrants, by Race and EthnicityThus, when considered by racial and ethnic groups, the evidence shows that immigrants are engaged in running businesses far more than U.S.-born workers. The magnitude of the difference is muted in the aggregate, however, because of the vastly different racial and ethnic composition of the two groups. The immigrant workforce is almost all —some 82% were Hispanic, Asian, black or some other race in 2014. This drags down the self-employment rate for immigrants in the aggregate. On the other hand, the U.S.-born workforce was mostly white, while only 25% were Hispanic, Asian, black or some other race.

Self-employed immigrants also outdo self-employed U.S.-born workers in running incorporated businesses. Among white immigrant workers overall, the 17% who were self-employed in 2014 included 8% who owned incorporated businesses and 9% who were unincorporated. Thus, within the universe of self-employed workers, almost half (46%) of white immigrants had incorporated their businesses. Among self-employed whites who are U.S. born, 39% had incorporated businesses (the 4% who had incorporated as a share of the 11% who are self-employed).27

Self-Employment Rate Among the U.S. Born and Immigrants, by IndustrySimilarly, 46% of self-employed Asian immigrants owned incorporated businesses, compared with 37% of U.S.-born Asians. Among self-employed blacks, 40% of immigrants had incorporated businesses, compared with 30% of the U.S. born. However, among self-employed Hispanics, immigrants are less likely to incorporate their businesses, at a rate of 20% for immigrants compared with 30% for the U.S. born.

With a few exceptions, the self-employment rates for immigrants and U.S.-born workers tend to vary in tandem across industries. The major exception is agriculture, forestry and fishing, a sector in which 51% of U.S.-born workers were self-employed, compared with only 6% of immigrants. By contrast, immigrants have a notable edge over U.S.-born workers in self-employment in wholesale and retail trade—12% versus 7%—and in transportation and utilities, 14% versus 6%.28

More broadly, immigrants and U.S.-born workers share higher-than-average rates of self-employment in the same industries, such as construction, professional and business services, and other services, and lower-than-average rates of self-employment in several other industries, such as manufacturing, educational and health services, and leisure and hospitality.

Job Creation by Immigrant and U.S.-Born Self-Employed Workers

There is little difference in the shares of U.S.-born and immigrant self-employed workers that have paid employees. In 2014, 24% of self-employed workers born in the U.S. had paid employees, compared with 22% of self-employed immigrants. But notable differences in hiring practices emerge when immigrants and U.S.-born workers are classified by racial and ethnic groups.

Self-Employed Immigrant Asians Most Likely to Hire WorkersAmong the self-employed, immigrant Asians are by far the most likely to have paid employees. One-in-three (32%) self-employed Asian immigrants had at least one paid employee in 2014. Trailing them were self-employed white immigrants, 25% of whom had paid employees in 2014. Hispanics and blacks lagged further behind among immigrants, with 17% and 13% doing some hiring, respectively.29

Whites lead in hiring among U.S.-born self-employed workers. In 2014, 25% of self-employed whites who are U.S. born had at least one paid employee. This outpaces the rate among U.S.-born Hispanics (19%) and blacks (15%). Some 27% of U.S.-born Asians are estimated to have paid employees in 2014, though this is subject to the caveat that the sample size is less than 500.

U.S.-Born Self-Employed Workers Have More Paid Employees on AverageIn number, U.S.-born workers comprise the clear majority of the self-employed with paid employees. Of the 3.4 million self-employed workers who had paid employees in 2014, 2.8 million are U.S. born and 617,000 are immigrants. The U.S. born had 25.1 million paid employees and immigrants had 4.3 million employees. Thus, the U.S. born accounted for 85% of total hiring by the self-employed and immigrants accounted for 15%.

The average employment size of businesses run by U.S.-born and immigrant self-employed workers is similar. The U.S. born had 8.9 paid employees and immigrants had 7 employees in 2014, on average. At the median, both groups of workers had only three employees.

  1. Bureau of Labor Statistics (2015)
  2. All computations are done before the rounding of reported percentages and shares.
  3. These two sectors include “mom-and-pop” stores, taxi and limousine services, and related operations often thought of as gateway opportunities for immigrants, at least anecdotally. Due to the limitations of sample size it is not possible to break down self-employment rates for the various groups of workers to this level of industry detail.
  4. The sample size for self-employed black immigrants is less than 500.

From the Pew Research Website