Reclaiming the Gig Economy

Juliet Schor, a professor of sociology at Boston College, isn’t the first to cast a skeptical eye on the so-called sharing economy. But her new book, After the Gig: How the Sharing Economy Got Hijacked and How to Win It Back (University of California Press, 2020), provides a longer and deeper view of these platform-based businesses thanks to research she and her team of graduate students have conducted since 2011. The book traces the evolution of companies brokering services such as local transport and lodging, from their quasi-idealistic origins to purely commercial businesses where revenue growth is often at the expense of the people actually delivering the services. MIT Sloan Management Review recently spoke with Schor — who, in addition to being a sociologist, also earned a Ph.D. in economics and taught the subject at Harvard for 17 years — to find out where the sharing economy has fallen short and how it could be improved.

MIT Sloan Management Review: What exactly do you mean when you say that the sharing economy was hijacked?

Schor: Most of these platforms were launched with an idealistic discourse. Founders typically espoused three benefits: economic, social, and environmental. Economically, they said the platforms would give workers more freedom — they could set their own schedules and not have a boss. And since many of these platforms were founded during the Great Recession, they also offered an opportunity for people to make money at a time when it was hard to find regular employment.

Socially, the platforms were promoted as enabling person-to-person exchanges. These personalized economic relations would lead to stronger social connections. The discourse promised environmental benefits — reduced carbon emissions in particular. The original idea for ride-sharing was that people already driving to a destination would pick up a passenger who wanted to travel in that direction, saving the emissions that passenger’s solo trip would have produced. Airbnb talked about less construction of new hotels; you’d use housing that already existed to lodge people. And TaskRabbit’s origin story is that the founder needed dog food and thought, “Wouldn’t it be nice if I could just find someone who was in the store already, and could pick up the food for me?”

Of course, things didn’t turn out that way. Some of those claims weren’t plausible to begin with. But the hijacking happened when the platforms accepted more capital from investors, which created pressure for growth, which in turn led to their commercialization. Instead of the goal of a more efficient economy by sharing excess capacity, like a spare seat in a car or spare room in a house, the platforms shifted to a goal of growing through increased commercial activity. Drivers bought cars in order to drive for a ride-sharing service. People bought and rented out entire houses rather than just spare rooms.

The pressure for growth, and profits, drove down wages and working conditions. What began as “sharing” became, at times, very rapacious commercial activity.

What are the main problems with these companies today?

Schor: They have not delivered on those promised benefits. On the economic side, platforms are not delivering decent wages and working conditions. Not only are the companies keeping wages low, but the chronic excess supply of workers also drives wages down. This is hard on what we call dependent earners — people who depend on this for a living rather than just supplementing their income. We found that it’s very difficult, if not impossible, to make a living from these platforms. In addition, the platforms shift much of the risk from the companies to the workers, who are classified as independent contractors rather than employees.

On the social side, as these platforms grew, they became more like conventional businesses. When ride-hailing debuted, passengers sat in the front and talked with drivers. By 2019, Uber put a button on its app that allowed users to choose “quiet mode,” basically saying, “Shut up and drive.”

In terms of the environment, instead of reducing carbon emissions, ride-hail has led to more vehicles on the road, more congestion, and people shunning public transportation. Airbnb, by making lodging so much cheaper, has induced more travel.

What impact has the pandemic had on this situation?

Schor: First, the pandemic has drastically altered demand. The two biggest platforms — Uber and Airbnb — have seen demand collapse. Uber has moved into delivery with Uber Eats, and others are moving into delivery as online shopping and grocery delivery has ramped up. At first there was a lot of contention around safety issues, like providing personal protective equipment and sick pay. But all of the companies pretty much have moved to provide these things.

Second, because of the rise in unemployment, more people are starting to work for the platforms. That’s creating excess supply, so it’s gotten much harder for people to get assignments. In ride-hail, they are spending much, much more time in an empty car because the demand isn’t there. Drivers have started using bots to snag shifts.

So workers are getting sophisticated in trying to fight technology with technology?

Schor: Yes. Researchers have been uncovering various ways in which workers are trying to manipulate the algorithm. They use multiple phones, for example. Delivery people enter inaccurate information in order to affect the kinds of tasks they get assigned. If they don’t want to deliver really heavy packages, they say they are on a bike, for example. They can fiddle around and change information to get the kinds of assignments they want.

On the other hand, remember that these algorithms learn fast. So as the workers develop strategies, the algorithms will always be changing. It’s a highly accelerated cat-and-mouse game.

What solutions do you propose to “win back” the sharing economy?

Schor: First is regulation. Governments are already starting to regulate these services, which could make working for the platforms a more viable full-time option. California’s new law, [Assembly Bill] 5, sets new standards for employee classification that mean many gig workers will be classified as employees and therefore be eligible for minimum wage and other benefits. There are a number of similar laws proposed around the country. In July, Massachusetts’s attorney general sued Lyft and Uber, alleging they misclassified drivers as independent contractors. And the New York City Taxi and Limousine Commission has set a minimum wage for ride-hail drivers.

However, the platform companies have been really successful in lobbying, particularly at the state level, making it difficult to regulate them. Many states have passed what are called preemption laws, both in ride-hail and in short-term lodging, which make it illegal for cities to enact the kind of regulation that they want to.

But we see a second, more innovative scenario emerging: platform cooperatives. These cooperatives are owned by their users, by which I mean the workers who are earning on the platforms. My team has produced what we believe is the first academic study of a platform cooperative: Stocksy, a group of more than 1,000 photographers who do stock photography. They own and govern the platform themselves, which takes away most of the problems associated with labor issues. We’re starting to see platform co-ops in house cleaning, driving, health care, translation, food delivery, and bicycle courier. It’s an exciting new development that allows workers to have much more control over work conditions, thereby getting back to that original hope of what the sharing economy could do.

The co-ops use algorithms just like the platform companies, and so they get the same efficiency and transaction savings associated with digital technology. The algorithms wipe out whole levels of management. But in co-ops, the workers have control over those algorithms and how things are done.

Can you give us some examples of how algorithms can eliminate management?

Schor: Think about human resources. There are almost no human resources in these platform companies, at least for those working via the platform. The application process is automated. The platform offers videos to watch for training. And the “performance evaluation” is done by consumers through ratings. In addition, there are no supervisors. American corporations typically have many supervisory levels. But there are no supervisors on the platforms — the algorithm tells you where to go, what to do, and if you don’t do it, the algorithm knows. So the platform company just eliminated huge swaths of the modern corporation.

Stocksy is for selling goods — photos. And the other platforms you discuss in the book typically have a low barrier of entry for workers. What about platforms for freelance workers who offer highly skilled services?

Schor: There is a really interesting platform co-op in Europe, called Smart, for all sorts of freelancers. That’s a relevant model. People set their own prices but share benefits, management, payment collection, etc.

Looking ahead, what’s the likelihood that we will see a real sharing economy with equitable platforms for workers?

Schor: I tend to be an optimist. I think we’ll see growth in the co-op platforms. The real question is whether they get big enough to challenge the larger players.

And it’s worth reiterating that the collapse in demand due to COVID-19 has put the large players in a very precarious position. That may make it easier for alternatives to flower as markets pick up. I think platforms will go in the direction that the country goes. If there are serious moves to regulate big tech, if the country moves toward more equity and fairness and away from extreme inequality in society, that bodes very well for equitable platforms.