Does the Gig Economy Exploit Independent Contractors?

Research indicates that independent contractors/freelancers may be subject to mistreatment through unethical business practices

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Dr. Mujtaba Ahsan

The economic meltdown of 2008 led to an explosion of workers participating in the gig (or “sharing”) economy who found that they could use their skills or personal resources to create an income source. Unfortunately, low-wages, heavy-handed scrutiny and a legal suppression by companies who contract with these workers have led to their possible exploitation as they find they are often times earning far less than their traditionally employed counterparts.

This is according to research conducted by Dr. Mujtaba Ahsan, management professor from the Fowler College of Business at San Diego State University.  Ahsan’s research examined the challenges faced by private contractors and the ethical issues of the companies who utilize their labor.

Ahsan found that the gig economy is expected to grow from $14B in 2014 to $335B in 2025 and the number of gig workers is expected to total approximately 9.2 million workers in the U.S. by 2021. He also noted that gig workers generally fell into four categories: freelancers who have chosen to work gigs as their primary source of income (32 percent); casual earners who willingly use gigs to supplement their primary incomes (40 percent); reluctants who are unable to find traditional work and are forced to rely on gigs as their primary income (14 percent); and the financially strapped who work gigs out of necessity to supplement other income sources (14 percent).

Companies such TaskRabbit, Fiverr, Postmates and Uber who hire many of these workers call them “partners” or “micro-entrepreneurs” and tout the fact that they can set their own hours and work as much or as little as they choose.

It’s a fact with which Ahsan’s research takes issue, particularly in the case of Uber.  “Drivers might be free to show up for ‘work’ or leave at a time of their choosing, but once they report for duty, their actions are scrutinized, monitored, tabulated and controlled with great precision,” he said. “Decisions are set by an app controlled by Uber, which determines performance metrics, monitors the number of rides accepted or cancelled, and sets their pay. Very little is left up to the driver.” As an example, Ahsan pointed out that drivers are required to maintain a customer rating of 4.6 stars out of a possible rating of 5 stars.

Additionally, Ahsan points out that a survey released in 2018 by the Economic Policy Institute “indicates that 90 percent of all wage and salary workers earn more than Uber drivers. The income Uber drivers earn after deducting Uber fees and vehicle expenses is only $11.77 per hour which is approximately 65 percent less than the hourly compensation of private-sector workers and 20 percent less than the hourly compensation in the lowest-paid major occupations.”

Ahsan says that there is evidence to suggest that the rise of the gig economy will not result in the lowering of income equity. However, it could increase income inequalities as substantially more value is being appropriated by company founders and investors at the expense of independent contractors carrying out the required labor.  “The challenge now for entrepreneurship scholars is to better understand how certain entrepreneurial behaviors further income inequities and to develop programs and shape policies that encourage entrepreneurial behaviors that go beyond self-interest to promote societal benefits.”