 Hi, I'm Pedro D'Costa, Director of Communications at the Economic Policy Institute. This is the State of Working America podcast where we seek to elevate workers' voices to make sure that they're heard in the economic policy debate here in Washington and beyond. First, tell me your name and a little bit about yourself. Okay, my name is Sergio Avidian, born actually in Istanbul, Turkey, and then I came here to go to college when I was 17, finished college, got an economics degree from a major Southern California University, went to work on Wall Street. Immediately after that, I was on Wall Street. I was probably the head trader at Prudential Securities for about 18-19 years and then quit, retired, whatever you want to call it, then became a PGA certified golf instructor, do that at my spare time as a hobby, still actively trade stocks for myself and a few friends of mine derivatives in stock. Three, four years ago, I decided we were having dinner and I decided to, you know, I wanted to actually write a book about how algorithms are pretty much going to be running human life as we know it. But then started driving, immediately got myself a couple of mentors who practically taught me everything I know from the get-go, so I had a leg up on most of the drivers. Did well, I was averaging close to $40, $50 an hour driving on a relaxed fashion basically, and then started looking into the, practically deciding what the driver does, where they do, where they drive, when they drive, and then it became like an obsession of mine to really dig deep and eventually became a driver's advocate, actually, because I think what these companies are doing are horrible, to be honest with you, but look, I use Uber and Lyft as a passenger myself, it's a great service, it's all good, but at some point, things have to change, and I think with AB5 passing now. So, is this the case where you kind of got in on the ground floor, so to speak, and you had, you were able to make money while the going was good before they started implementing the kind of algorithms that cut down on people's interest? No, the algorithms always give you a point of reference when UberX, in the Uber app, as far as the passenger is concerned, obviously, started in Los Angeles, July 4th of 2012, and at that time, it paid the driver $3.25 a mile. Today, we're nine years later, it pays the driver $0.60 a mile. So, a lot of people don't know this, don't know the history of where things have gone, and the flexibility and the freedom argument, it becomes moot when you just cut the prices from $0.325 a mile to $0.60 a mile gradually over the last seven years. So, when I got in was, I would say was about 2016, early 2016, the price cuts were already, were done pretty much, but then when I started driving in 2016, we used to get paid $0.25 a mile. Well, now it's three years later, and it's, yeah, I mean, initially, obviously, the marketplace wasn't oversaturated as it is today, and it's going through the roof. If I wanted to, basically, I could have 100% utilization rate as far as my driving is concerned. But obviously, driving is physically taxing, so you just kind of take breaks, whatever. But I got in it when the things were good. You know, I call it like, I call it, there's three phases of Uber, it's the good, the bad, and the ugly. So, the good was when it first started, the bad was when I started, and now it's ugly. So, that's where we're at. That's fascinating. So, how did you veer into advocacy, and how did you become, I mean, I guess you became aware of the price squeeze through your own experience, and could you tell me about the differences between Uber and Lyft if you work with both platforms? I work with both platforms. I started with Uber first, and then probably about six months later, I added Lyft because I figured quickly that if you're on both platforms, your chances of increasing your earnings are a lot higher. Plus, you have this, right? I mean, if a passenger complains about anything, Uber will deactivate you, or at least suspend you for 48 hours until they do their own investigation. And in fact, it happened to me last year. I had a, obviously as you know, marijuana is legal in California. I had a passenger who I gave a ride to, was reeked. I mean, he was reeking of pot up this lady who immediately, once she got him, I mean, I opened my windows, but well, if you know me and look at me, I don't think I'm that irresponsible. I am aware that there may be some other driver doing it. So she reported me and before I, you know, I ended the ride earlier, I said, please get out of my car, but he reported me and sure enough, before reporting to Uber, by PD, they should first ask questions later. 72 hours later, supposedly they did their investigation and then they put me stronger. And could you talk a little bit, because the research that my colleagues have done is basically focused on the notion of whether or not Uber drivers and Lyft drivers are independent contractors or actual employees of those companies. And some of the arguments that the firms have made is that basically that these are new tech platforms that provide a way for individuals to create their own small business. Could you talk about whether or not you feel like you're running your own small business when you're driving Uber and Lyft? Well, absolutely not. I mean, look, we have all called a lot of independent contractors for services that are, you know, plumbing may need or if I were to call a plumber and say, well, why don't you just, I'll tell you what the job is and I'm also not going to tell you how much I'm going to pay you. How many plumbers will drop at your house? Right? I mean, I would say you would get hung up pretty fast and Uber and Lyft drivers are in the same situation. We show up in front of people's homes close to 10 million times a day. That's how many rides Uber and Lyft do between the two platforms in the U.S. alone and those homes, restaurants, bars, whatever there is without knowing what the job is and without knowing what we're going to get paid. When the companies I read about Tony West's claims the other day on Twitter, apply to us, ABC test doesn't apply to us, well, teams which I have the transcript for and Uber attorney made the same argument in front of a judge and I have the transcript, I read it, I was laughing about it the other day. You can't make the, you can't just say that the driver is not the core part of our business or obviously say whatever you want. If you're going to just, that's your claim that the driver is not an essential part of your business, so we're going to look at that. As far as independent contractors, I mean, look, if you tell me where the destination of the passenger is because we don't know where the passenger is going until you get in the car, they get in the car and we start the ride. That's a really important point. Yeah, I mean, I could be going to Timbuktu and there are certain days, you know, if I live in Santa Monica there are certain days I don't want to go more than 10 miles of my base because I may have something else going on or pick up the kids from school or whatever. Well, once you send me to Timbuktu, the question is how am I going to get back, right? So we don't know where you're going. I mean, a lot of passengers, I don't think are even aware of the situation. So once I'm out of that core or where rides are really not that plentiful, well, most likely dead hit, obviously you're putting miles on your car and you quoted in your, in the article that I read today a lot from Alex Rosenblatt about her book, Uberland. I read the book, I think it's a fantastic book and she has a quote in there when she's where she says, you know, which 14 of the 24 hours you're going to decide to work, you know, makes Uber's argument of flexibility. Last month, Lyft instituted a policy in New York after the TLC Commission passed minimum wage rules and capping the driver headcount. Just joined them today actually a 90% acceptance rate and had done 100 rides in the last 30 days. They won't even allow you to turn your app on. Yeah. That started the month ago with Lyft and now with this now, and that's without an AB5 in New York. Now, what are they going to do here? I have no idea, right? So they're retaliating. I mean, I think they're just circling the wagons and they're doing everything that they can. And that's on top of the last two weeks. Lyft have cut rates in 12 major cities to 33 to 40 cents a mile. I mean, look, I understand not everybody has the 58 cent deduction going for themselves. Maybe your car is a beater, which it should be if you're going to do Uber and Lyft these days, that your costs are maybe 20, 25 cents a mile. Still, I mean, how many pennies can you put together to make some complaint? I'm a driver's advocate. I even now with 60 cents a mile rates in Los Angeles, when I drive, I may average over $30 an hour gross. But I know exactly what I'm doing. I'm autopilot basically. So but how many of drivers like me are out there? I mean, I don't think there are too many. And I've actually interviewed 40 Uber and Lyft drivers last month and wrote an article about it. On average, Lyft drivers are making 14 to 16 hour gross and Uber drivers are making 14 to 15 to $17 per hour gross. That's gross. Yeah. Well, so much for independence, so much for freedom, so much for flexibility. When you say gross, I mean, it's actually fairly important to be specific about it because drivers might have expenses that people might not think about it, right? In term not not only just maintenance, but healthcare, etc. I mean, I would think that the costs, you know, the unspoken costs pile on over time without a question. I mean, 90% of the drivers, one of the I had 10 questions. I'll send you to link to the article, but I had 10 questions to ask drivers. And one of the questions was, do you treat driving your driving as a small business? Because I do. I do spreadsheets every day. I know exactly what my costs are. That's besides what you mentioned as far as healthcare and all the other issues. But when you're driving a car, obviously look, you have four or five major expenses, starting with gasoline, which most people only factor that in, but you have depreciation, you have wear and tear, you have maintenance, you have insurance, you have car payment, you have all these things that you have to factor in. And then you'll come up with a number that you know what it costs for you to operate your car per hour. So if you're making $15 an hour, in my case, with my car, it's about between $5.80 and $6 an hour. And assuming my car is an average car about four or five years old, which I do Uber and Lyft with, the one that I use for, well, most people's averages are going to be pretty similar to mine, or probably higher if you're driving a newer car. So to me, well, let's take that $5 or $6. Let's take $6 on average. If you're grossing $14 to $16 an hour as a Lyft driver, and you take that $5 or $6 out of it, you're left with what? With nothing. We're like $8 or $9 net, right? Which is well below the minimum wage in Los Angeles, right? Well below, yeah. But not only that, but to my surprise, 90% of the drivers said, no, we just get out and drive. So they don't run it like a small business. And Uber and Lyft knows this. Look, Uber and Lyft know exactly what they're doing. I mean, they didn't become multi-billion-dollar companies because they're stupid, right? Now, how they're going at it, and then I'm a capitalist, I was on Wall Street. So all power to them. I'm not against that. But fairness has to come into play at some point. And there is no driver education out there. There is nothing out there that unless few blogs or websites or YouTube channels that you can watch, and most people don't care about those things. Yes, there are some groups, Facebook groups or whatever. The ignorance of the driver is pretty much what Uber and Lyft want. I mean, initially, initially with an economics degree, right? I thought, okay, if I had a business and I had a turnover, and Uber and Lyft have 80 to 90% turnover in less than eight months, these are their numbers. I'm not telling this just out of my head, right? So if 80 to 90% quit, well, that practically 100% of your workforce that you have to replay. And retrain and the cost of like, well, there's no, there's no, there's no training, zero, right? But, but basically the training is you pass that water down background check, if you're breathing, you'll find, you know, you download the app and you go put your gas in your car and go. So to me, okay, if a business has a turnover of 80, 90%, that business is not going to have success. Initially, that was my idea that, okay, well, these people are just not going to have success because of this. But you know what, they were the smartest people in the room, not me, because they like 80, 90% turnover. Because because the new drivers that they're getting don't have a point of reference. See, as a veteran, I have a lot of scars because of the rate cuts, right? Yeah, but for the new driver in Los Angeles, they cut the rates in this March 2019 to 60 cents a mile from 80 cents a mile. That's another, that was another 30 or 25% cut. And they didn't call it a cut. They call it a rebalancing. And I'm going like, okay, you know, they have all these fancy words that they use, you don't understand. But then to me it's like, it's a cut because I ran a spreadsheet of all my rides for the day, I made 20% less. So I was like, okay, well, there's nothing in my knowledge bank that I can apply to make up for this 20% cut. There's nothing I can do. And at the same time, gas prices were going through the roof. I mean, gas prices at that time were like three, now we're paying four. So to me, there is no way to get around it. But the new drivers that they're getting don't have a point of reference to them 60 cents a mile is gold. They don't even know, they don't understand. So, you know, Uber and Lyft knows this very well. And then they just take advantage of it. I mean, there's constantly replenishing drivers is something that I think worked for them really, really well by just selling the flexibility and the freedom argument. And so as an advocate, what are some of the stories that you've come across that kind of built, they've built on your own experience, but kind of maybe are even more harrowing about people trying to survive, you know, and not being able to, you know, the kind of obstacles that drivers face that people might not think about. Well, I mean, we read all the stories in the mainstream media about people, you know, drivers sleeping in their cars. And, you know, look, these cuts are cuts. They can, they can say whatever they want. They may be able to sell it to certain drivers. But then, if I'm making, I mean, I have screenshots going back to the first day that I drove. My income has gone down from with everything I know, and I consider myself an elite driver, and it's gone from 45 to $50 an hour to if I can crack $30 an hour now, I'm a hero, right? Well, that's valid for everybody with obviously, depending on what city you drive in, you cost the living expenses have gone through the roof over the last, I don't know, six, seven, eight years of Uber's existence. So there are a lot of stories out there that people just cannot survive, cannot buy food and sleep in their cars. And in fact, they move cities because in one city, the demand is not there. I know a lot of stories that a lot of Sacramento drivers moved down to San Francisco and sleep there. A lot of, you know, drivers in Texas moved from their small towns to Houston and Dallas area because the demand is there. They just sleep in their cars. But these things, this is not Uber and Lyft's fault directly, but then the fare cuts, the price cuts, make sure that these kinds of things are happening. And then I speak to a lot of drivers when I drive. I mean, my passion is just pulling over. And when I say an Uber and Lyft driver, I'll speak to them and then I'll ask them what their complaints are. A number one complaint is making money. And as long as this continues, right, you're going to hear the stories of people sleeping in their cars and not being able to pay or lose their cars. And because, look, the number one issue for me is Uber and Lyft have a place to such a point now in especially major cities to understand this, but I don't fault them. Look, people got to make money. It is what it is. The gig economy is massive now. I mean, I'm pretty sure it's skewing a lot of the unemployment numbers that the federal government is throwing out there. But there was a Forbes article that I read that 57 million people. I mean, the workforce with the US is about 135, 40 million people. 57 million people are involved in the gig economy. All these companies start with a great promise just like Uber and Lyft did. They pay well. You are making good money, definitely double, if not more than minimum wage. You are working flexible hours, but then what happens when they get to a certain scale, they start cutting. Well, this is valid with every economy company. I mean, you can go from DoorDash to Instacart to whatever you want to call it. And people are having a difficult time making money, making ends meet, doing the gig work, right? I think the narrative is changing though. I mean, stories out there of disasters. And to be honest with you, I do read a lot of social media and I do visit a bunch of forums. I don't know if there has been two companies more hated than Uber and Lyft, right? But then on the other hand, people are still out there driving. So what does it tell you? What does it tell you about the underlying strength of the American job market that there is this kind of, you know, this endless pull of people who are willing to put in some fairly deep sacrifices to earn a fairly small wage? Well, I mean, what does it tell you? It tells you that the American economy is not as strong as everybody says it is. And around the corner, we're going to go into a recession and the bubble they created in 2008 is just bigger now because they keep pumping money every day on us every single day. I mean, my opinion is my opinion, obviously, but I have an econ background. It's anymore a freedom and the flexibility part of the gig economy. You know, they're getting that, but what are you giving up? Are they sitting down and having a talk with themselves? What am I giving up here by not being an employee? Is my freedom and flexibility worth sacrificing this much? And I don't think that's been answered. But not only that, it's not, you know, one of the things that I've come to learn from my colleagues who study the issue is that the flexibility argument is not only weak from that standpoint that you've just pointed out, but also because making people employees doesn't actually curtail the company's ability to allow for flexibility, right? There's nothing in there that says your flexibility and freedom will be lost, right? But Uber and Lyft have to do what they have to do. You know, they created this nine while including DoorDash. Now they, I'm pretty sure they're going to lose that one as well, but they're just buying time, right? And then they came up with that offer of $21 minimum, which is a lot of, you know, what? And just for the fact that within three seconds, I figured, well, it's a $21 book time. Well, book time means while you have a passenger in the car, but then you oversaturated the market so much that my utilization rate, that was 80%, could have been 100% three years ago. Now if I'm lucky, it's down to 50% in a city like Los Angeles, right? In most other cities, it's probably worse. So why did Uber and Lyft oversaturate the marketplace? Because their utilization rate is completely different than my utilization rate. My utilization rate is how many minutes of the hour I have a passenger in my car. And your utilization rate is how fast can this passenger get picked up, right? Pick up ETAs, have to go down. That's one of the things that they wanted to do. And they oversaturated the market to a point that ETAs have gone down to like three to five minutes max now in Los Angeles for the passenger. But then utilization rate for the driver has gone down from 80%, 90% to 50% if they're lucky, right? So not only the price cuts have happened, but you know, there also one other, you know, talking points was, well, we're cutting fares, we're cutting rates so that you'll be busier and you'll make more money. Well, yeah, that would be perfectly good if you capped the driver count at the same level. Now, if you oversaturated the market 100% and my utilization rate went from 80% to 50%, and you cut the rates on top of that, how am I going to make more money? So basically what happens is I drive twice the amount of hours to make the same amount of money. Well, that doesn't fly in my econ book, but then I guess it flies in their book. And so this this flexibility and freedom argument is a lot of nothing but crap. But then here, look, AB five is here. They have to deal with it. How do you think it's going to affect the landscape both for even for drivers, but even for for sectors beyond? Well, I think it's going to, I mean, it's going to, well, once it becomes law January 1st of 2020. Well, as you know, a lot of professions got an exemption through AB five, right? So, but to me, it's almost seems like this was directly for the gig economy companies. Obviously, truckers lost a little bit in this from what I read last few days, independent truckers did. But most professions got exemptions. You know, I mean, look, states know this, I understand they're looking out for the driver, they're selling it this way, but also they're losing a lot of revenue. I mean, 57 million people in the economy is a lot of people. So they're losing revenue. So it's California that this things will change how they will change. If Uber and Lyft are going to react the way they're reacting in New York now, because when I drive, I'm very selective driver. So in my case, I'm definitely going to get hurt, but I'm taking one for the team. So my thing is, I have other sources of revenue. So it's not my livelihood. But then for people who it is their livelihood, it's not just completely a side gig. Because 20% of the drivers are full time, do 80% of the rides and 80% of the drivers who are part time do 20% of the rides. Well, there is 20, 20% of the drivers are going to benefit from this just because okay, they may have a minimum wage restored 80% some of the 80% part timers will probably be let go by what Uber and Lyft is doing in New York now by not allowing them to go online and make some money, you know, but if you're driving for 10 hours out there to make an extra hundred bucks a week, you know, I don't even think you should be out there, to be honest with you. So yeah, things will change and it's basically not dance, not the legal dance. And let's see how it's going to go. Will it change for the better? Look, with my experience over the last seven years with Uber and Lyft, nothing has been done that's been beneficial to the driver. And I can unequivocally say that nothing has been done. It's been price cuts, it's been it's been cuts all over the place. And at some point they needed a break check, right? So this is their break check. So let's see what happens. Fascinating. Well, thank you so much, Sergio. This is great. I really appreciate it. Is there anything I didn't ask about that you wanted to flag? No, not really. I mean, my thing is, as far as the driver is concerned, if the driver can get together like, you know, as you know, we had a couple of protests and so-called strikes or whatever, right? And in Chicago now, the city attorney is trying to get to Uber and Lyft names from Uber and Lyft as a list. And Uber and Lyft took them to the court and said, no, they said, drivers are trade secrets. And I'm like, I was like, I'm honored, I'm a trade secret. I'm surprised they didn't say driver's privacy concerns somehow. Yeah, they didn't say that. They're always in for their own. So they said they're trade secrets. And then what they said is we're afraid that the competitor, they never named Lyft, by the way, they said the competitor may be able to poach our drivers. Now, I don't know about poaching, because Mr. Uber and Lyft, if you know, 80% quit in less than eight months. So there is not much to poach. Right, exactly. And plus, if the two platforms are allowed to coexist, it's not like they're exclusive. So, Yeah, exactly. So most drivers that I know of are our coach. You know, the first thing I tell them, look, you have to be on both platforms. You can't just be a Uber. You can just be on Lyft, right? And so most drivers are on both platforms anyway, but it's going to be a fight. I mean, look, I think $90 million that they put out there for this referendum is like a hedge to protect maybe like a $80, $90 billion market cap that they're supporting right now. So it's a pretty good hedge, right? I would have done the same thing. But I see over the last six to eight months, a lot has changed, right? There's so much, I mean, they're getting bombarded from every angle now. And there's so much negativity out there that they have to relent, I'm saying, but then knowing Uber and Lyft, you know, they play hardball. They're trying to protect their existence for God's sakes, right? I mean, they have to do what they have to do. Well, this has been wonderful. Thank you so much for taking the time. And if you don't mind my asking, what did you use to trade on Wall Street? I actually, I used to be a Wall Street reporter. So I used to work for Reuters covering the markets. Oh, after school, I went to New York for six months. I was trained, to be honest with you, initially I started with Commodity, and I used to trade gold, and now, you know, gone the old World Trade Center, the Twin Towers, the Twin Towers, and we used to go to Windows of the World up top there. Sure, yeah, I've been up there. Oh, yeah, I mean, that probably was the worst ever time of my life, to be honest with you. When those things went down, I was like, I probably cried for like 10 days straight. And so I started there. Then, as you know, that's a pretty intense kind of environment. And then I switched to equities about a year and a half after that. And I was, you know, the old days, as you know, we had the courts and quarters and eighths, right, before decimalization started, but that's how far back I go. They still do it. Well, I actually was a bond market reporter, so we still work with fractions in that market. Yeah, yeah, you still do it with the 64th and 30 seconds, right. So I switched to equities, and then I moved my way up, and I was the provincial head of NASDAQ trading for about eight years, for the last eight years. And I didn't start a prudential. I started with a small boutique firm called Bech, Halsey Storage Shields, and then prudential ended up buying them, and we became a subsidiary of Prudential Insurance of America. And so it was pretty much NASDAQ equities, where we were obviously market makers, and we were a profit center, so we would do what we need to do. It was fun. I learned a lot. It was fun. And nowadays, you know, the way I trade is not much smaller. We use high frequency trading, all computerized algorithmic trading. Really, I have a couple of my own algorithms that are just throwing there and trying to make some money here and there. So yeah, I mean, I'm still involved. I still follow. And then I'm short Lyft. I'm not short Uber yet, but I'm short Lyft. I've been short Lyft since 72. So I'm going to stay short until that thing goes to $2.62. That's what they pay their drivers for a minimum fare. So I will cover it to 62. I love it. I like that as a price market. That's a good one. And that's not to go long. That's just to cover my short. Oh, great. This is great, man. Thank you so much for your time. And I'm sure I'd like to stay in touch because we'll have a lot to talk about. So because I also pay to, even though I'm here at EPI, I've been at this think tank for nine months now. But my whole life, I've been basically a financial reporter covering the Fed and covering markets. So I still pay. I still watch Palace Press Conference and watch the markets pretty closely. So yeah, I mean, look, you know, it's a fascinating thing, right? One of the reasons I got attracted to that was because it's not static, right? I'm not a nine to five kind of guy. He changes every second. And you know, it's a lot of fun. And then it fit my personalities. You know, when I went through my psychological exams before I got hired, you know, they put us through two psychological exams to see if I'm cut for this kind of a job. And I know, I mean, I remember like yesterday, you know, I got a call from the day I got hired. I wasn't even all I was with my girlfriend. Tells the guy that hired me, call me up. He goes, I have good news and bad news. He goes, which one do you want? I go, I don't know, whatever you want. And then he says, he goes, you're insane. And I go, Oh, really? I go, that's horrible. He goes, no, no, that's exactly what we're looking for. Yeah. That's classic. That was classic. I never forget that. That's classic Wall Street, right? Like we want that. Oh, yeah. Oh, yeah, I was type quadruple A point up a late, forget the triple A. And, you know, I know I have literally sat on people's throats for like a quarter of a point. So it was me, but now I'm like father or two and trying to raise a couple of good cases about it. And I'm down to like a single A, I think, from quadruple A. Hey, man, it's all, it's all the better for your heart, if not for your wallet. Yeah, I mean, it's all good. You know, it's all good. But yeah, let's keep in touch. And then, I mean, I know enough about it that I don't care about it. But then when I say I don't care, I know more than I need to know. But then in my life, I've never done anything was the way. And now I write quite a bit. And I do these interviews and I do podcasts and, you know, my voice is getting a home now. So which is good. And it's fun. It's been fun. And it's going to saga continues. Absolutely. That's great. Well, thank you so much. It's my pleasure today to be joined by Larry Michelle. Larry is a distinguished fellow at EPI and one of its founding fathers, as I like to call him. And we're here to talk about a really important and timely issue today, which is the so called gig economy. And I say so called because I want to start, you know, really honing in on that terminology. There's a lot of a lot of euphemisms that seem to get thrown around in the tech world, like sharing economy, gig economy. Could you break down the terminology? Since you've studied the issue in depth, what do you consider gig work and what is something else? That's a great place to start, Pedro. And thanks for having me on. You know, people basically the media when they put in headlines use gig for a wide variety of types of employment. So let's start at the broadest category, which I would call contingent work. This is made up of a number of types of work. It includes people who work temporarily, either directly for a firm or through a staffing service. It could involve people who are self employed. It could be on call workers. It could be workers who work in firms that contract with other firms, but they are actually working for a firm that has a number of employees. So they're, you know, they work as a for a contractor who runs a warehouse for Amazon or such like that. So that broader category of contingent is an important one. And like other categories, it has it expanded in some places and not in others. So, you know, we haven't seen that much of a rise over the last 40 years in, let's say, franchising or or temporary help. It's going up about a percent or two of the workforce self employment. We'll talk about later, but that's really been pretty stable. The part of contingent work that I think is of concern and should be the topic of another episode is the Fissured Workplace. And that is where firms are contracting out to other firms, to shift costs, to shift liabilities, to try to lower wages. So when you walk into a Marriott, the people behind the desk may be working for a contractor. They don't actually work for Marriott. The people who clean work for a different contractor, et cetera. So it's a it's a legal maneuver to put workers at a disadvantage. But the category that frequently gets talked about is the overall one of self employment or freelancers. And we've seen a lot of contention that we're all going to become freelancers that, you know, pretty soon in 10 years, 20 percent of the workforce, 30 percent of the workforce is going to be people working for themselves. Temp nation, I believe the phenomenon. Temp nation, freelance nation. Right. Back in the late 1990s, a book on that. And it's total baloney and has been for a long time. The fact is that people who say that, then claim the fundamental nature of work is changing. In fact, the number of people that are freelancers has risen a little bit. The number of people who are freelancers that do it as their main job has been stable for since the mid 1990s. So one of the things that many recent research papers have concluded is that 1099s are not replacing W2 work. Right. There may be a lot more people doing some freelancing, but they tend to do it for supplementary income on top of their W2 work and not as their main job. So the fundamental nature of work in that regard has not changed. There has been, and this is the topic that brings us here today, that the growth of freelancing in the last few years has really only been by what I think you could reasonably call gig work, or it's better to be called online platform work. That is work that is mediated through an app or a platform where you get paid through the app. And that has grown in terms of the number of people quite a lot. In terms of a share of the workforce, it may be one, one and a half, two percent, but that's a lot compared to zero percent back in 2012. Right. And we're talking about Uber drivers, Lyft drivers, DoorDash, all these kinds of services. Well, it's interesting to note that the increase in the on-demand platform work is primarily in transportation. It is really Lyft and Uber. More recently, the DoorDash is, et cetera. So what do we know about those workers? Well, we know that Uber workers and Lyft workers, the vast majority of them are working to supplement income. The average Uber driver, his or her career with Uber lasts three months. Around 65 percent of Uber drivers quit within six months. They drive on average 17 hours a week. So there's a very high churn. There's a lot of people who are working very part-time and to supplement their income. At the same time, we need to be cognizant, but there are a lot of full-time Uber drivers who are doing this as their main thing, and they play an important role for Uber. So it's been estimated that around half the rides provided are provided by full-time workers, and the other half are provided by this churn of part-time supplementary workers. Now that's also true of all the other kinds of on-demand work as well. It turns out that it's mostly people who are doing it for supplemental income, even more so than Uber and Lyft. Let me ask you a quick follow-up before we get to Uber, because you mentioned contingent work as opposed to gig work. Contingent, to me, it just sounds like something that's not certain. It sounds contingent. It sounds temp. It sounds contract. How big is contingent work versus gig economy work? And what do you think the impression comes from that we are becoming a temptation if the data suggests otherwise? Yeah, that's a good question. Well, I can't say that we have a really good handle on the biggest piece of the contingent work, which is the fissured workplace, the layering of contract and independent contractors reporting to firms, and that research is ongoing. But that could be, I don't know, 10, 20 percent, I think at most. The parts that have been fairly stable are people who are working in actual temp jobs for a staffing supply firm or temporarily directly for a firm. So that's been a phenomena that we've been studying at EPI and in labor economics for almost 30 years now, and the fissured part is a problem. The reason why there's, that's a good question I should ask you as a former journalist, why has there been so much of a focused on the gig economy? And I think there's a number of reasons that I would just speculate. It's not economics, but this is observer. One is because there's a lot of people just want to pay attention to the tech economy. There's a big megaphone in front of them. There's a lot of media. There's a lot of clicks. Anytime you put something out about the gig economy, the tech barons view themselves as the center of the universe. So when they see things going on, they think they are creating the world. It's not just that. So I think there's a liberal elite, coastal elite bias in the media in that very narrow sense. So reporters are most likely to be in cities where they take Uber and Lyft all day long. And so they think of it as some revolution, something that's really changed their lives. And yet, if you go to other parts of the country, it's much less prevalent. Of course, it's sort of the same phenomenon that we've discovered within EPI that reporters tend to write about themselves. People think about themselves. If reporters are predominantly white and male, they will write white and male stories. We found out that when we released reports on the job prospects for high school graduates, nobody covers it. And we realized even though they are a bigger part of the economy than college graduates. So that's how I see the bias. I can even tell you even more as someone been talking about these things since the mid 1980s. So when in the mid 1980s, when blue collar workers are experiencing plain closures and manufacturing was not doing so well, then it was hard to get a hearing about these issues. But in the mid 90s, when downsizing was happening and journalism was starting to have problems, then reporters really got got what was going on. And they really do get it now because with private equity and everything invading and abusing them. But yeah, so there's been a lot of contention about the gig economy being everything. I think that the bubble was burst last year when the Bureau of Labor Statistics came out with the gold standard of the data, which showed that independent contractors, which includes all the on platform gig workers, was just about 7%, 7.5% of employment. And it was the same as in 2005 and the same as in 1995. I remember that report because there was so much hype in newsrooms at the time, like, oh, or this is going to be a big spike. This is going to be. And they thought it was wrong. BLS had to be wrong. So then the narrative became, you know, why is BLS wrong? And because BLS is only looking at people on their main job. Well, the point is, if you want to make a statement about the future of work, the future work has to be about how people are earning a living, right? People don't have a lot of bonds they're living, you know, and stock they're living off of, right? People can make a living from what they earn on the job. And so if you're earning on the job is not increasingly coming from self employment, then that's not the future work. So I don't think the future work is about freelancing or self employment. Now that doesn't mean that there aren't issues being raised appropriately about helping people who are freelancers in New York. There's a bill to make sure that freelancers get paid. There's other work making sure that they get access to portable benefits, meaning that they find some way to get unemployment insurance or vacation or sick leave or health and pension. But one of the problems with helping the self employed and providing these things like portable benefits is that to do so also helps all those firms like Uber that misclassifies their workers and makes them into independent contractors when they are really employees. So it's really important that if we as we do things to provide a safety net for the freelancers, that we couple it with a very aggressive policy set that will keep people from being misclassified. Now, why does that matter? Can you explain that concept a little bit to people? What is worker misclassification and how does it affect the economy negatively? And how does it cost workers? That's a great point. So when you're most people who are employees, well, people who are employees get a W2 at the end of the year. That's how you know you're really an employee. And if you don't, then you may think you're an employee, but you're not. Firms increasingly like to consider people independent contractors, give them 1099s rather than W2s, because they don't have to provide them benefits that they might provide to their other employees. They don't have to pay the employer side of the Social Security Medicare tax. They don't have to provide unemployment insurance payroll taxes. They don't have to provide worker comp. And something like worker comp is a very important thing for people who are basically taxi drivers. It's equivalent of around $2 an hour to Uber if they were to pay worker comp for their drivers. And that's because driving is a very dangerous business. If you look at how much people who are W2 workers for taxis, that's how much the taxi companies end up paying. And then the governments, both the state and the federal government, local governments, usually end up not getting as much taxes when people are independent contractors because people's wages aren't withheld and paid and people tend to escape. And the last thing is also that independent contractors are not covered by our laws regarding collective bargaining or sex, race, age, disability, discrimination. So you have no recourse if you're discriminated against. You have no recourse to form a union if you're an independent contractor. And in this case, we're not talking about just what we think. We're talking across industries here, right? It's not just drivers and so on. It's a huge problem in places like construction where again, employers would very much like not to have to pay benefits or worker comp. It's a huge issue in trucking. There's been very famous articles about the poor drivers in LA and them being forced to be independent contractors. And it's true of, in my view, lift drivers and Uber drivers. And that's roughly 2 million people or more in a year. So it's actually, in my view, an amazing feat that all these companies, like Federal Express, Uber, Lyft, can go on misclassifying their workers. And you have to ask yourself, well, why is it that all the government agencies that are involved aren't able to clamp down on them? Because the worker comp system is not getting money. The unemployment insurance is not getting money. The state tax system, the federal tax system, the National Labor Relations Act, the wage and hour people who enforce overtime and minimum wage are not really active. And they do that by, in a sense, lobbying. And this is not just the Trumpian start of the beast phenomenon. This is a longstanding issue. So take Federal Express. UPS has its people. They're all W-2 employees. FedEx gets away with all sorts of variations of claiming their people are independent contractors. And they end up losing suits, paying hundreds of millions of dollars. But then, instead of making their people employees, they make them self-employed independent contractors in a new way. So the suits have to start all over again and indict them, you know, go to a court and get that changed. But let's just talk about Uber a little bit because I think that's what's on people's mind. Uber and Lyft. And, you know, without getting into the legalities, I mean, one of the problems is, and we'll talk about the new legislation in California, is that a lot of the ways of judging who's a W-2 worker and who's an independent contractor can be kind of fuzzy, or too fuzzy. But let's just, let me appeal to people's common sense. Is, don't ask whether Uber driver is a W-2 worker. Ask, are they really running their own business? You know, can you, so let's just say as a business person, what- Can set their own hours, that would be the Uber argument, right? Yeah. Well, the Uber argument is that they can decide when and where to work, and they can also decide to work for Uber or work for Lyft or start something else, so they must be self-employed. But the bottom line is that the only way for an Uber driver to increase his or her earnings is to drive more hours. They have no control over their business. So, for instance, the prices are all determined by Uber. Uber, in fact, over the years just lowers the prices. They even changed the whole way the pricing works, if they feel like it. They moved from a system where they paid people based on the time of the ride and the length and miles of the ride to they just tell the, you know, the rider an upfront price, and then the driver gets paid in a totally different way. So, they have total control over the prices. They can't build a base. The Uber driver, if you like your Uber driver, you cannot identify his or her name and request the Uber driver. So, even to do a good job, it's not like they can build up a customer base. They are not allowed to keep the contact information of the people that they, you know, give rides to. Because you can't order a particular Uber driver. They can't advertise. They can't go on the street and give out leaflets saying, I want to be your Uber driver. They are not allowed to subcontract. So, if they had more business that they wanted, that they could handle, it's not like they can give it to their friend and say, you know, Susie will give you the ride. You know, that's not allowed. So, they really can't, you know, improve their business whatsoever. How much can they improve their business by being better at their job? There's a very good academic paper that looked at the return to experience of an Uber driver. And if you discount the first 150 rides where they're basically learning about how to do it, after that, over the next two years, their earnings per hour rise around 9%. Well, that's not inflation adjusted. And if you look at what happens to other workers in the economy, they all saw their earnings rise by around 8%. So, for an entrepreneur, they really can't build their business. And then after the first two years, their earnings really don't rise. They flatten out. So, these are people who are controlled by Uber. They are told how to drive the route by Uber. If they vary from that, Uber can dock them. They really can improve their earnings except deciding to drive at a different time, which doesn't really help so much because you can only make money if there's people on the road asking for rides. You know, it's not, you have the freedom to earn hardly anything by choosing to drive, you know, in the middle of the day or in the middle of the night. So, what we also know, based on research that I've done for the Economic Policy Institute, that Uber drivers earn a minimum wage or below $9 or $10 an hour in terms of wages. And for people who live and drive in major cities, the minimum wage is much higher than that in most of the major cities. So, that's a pretty strange kind of entrepreneur who earns a minimum wage and Uber itself in its filing to sell stock for the first time, called its IPO, likened its drivers to people who work in retail and restaurants, which are some of the lowest-paying industries. So, that's a very strange thing to say. These people are entrepreneurs, small business people. You know, we consider them low-wage workers and we basically control them. And that gets us to AB 5. Indeed. So, let's talk about California, recent passage of legislation that, if I understand it correctly, pushes to recognize, you know, gig economy workers as actual employees of these firms. So, what are the implications, both for California, for Uber and for this kind of work nationally? Yeah, absolutely. It's a really exciting development. The California Supreme Court last year in a decision called Dynamics established a new criteria for deciding who was going to be considered an employee versus an independent contractor. It's a three-part test. I won't go into all the details, but the point is it really clarifies it. And if you are doing the main business of the firm, you're going to be considered an employee. And what happened is that the state legislature decided that they were going to codify, put the Dynamics decision into legislation. And that was a big legislative battle. Uber, Lyft, Handy, other firms really opposed it. They tried to mobilize their drivers and their workers against it. They didn't succeed. It passed overwhelmingly. And it's expected that the governor will sign it soon. And it'll take effect in January. And what that does is it'll make most people in their on-demand platform economy into regular workers. And importantly, they gave the right of the attorney generals or district attorneys or whatever in the big cities to enforce it along with the California attorney general. So this is important because Uber and Lyft are big bullies. We know that over the years they've gone into cities where they acted illegally and their modus operandus was, don't abide by the law. We'll apologize later if we have to. And what Uber said if- Pay the fine. Pay the fine or whatever or threaten the leave like they did in Austin, Texas, and they did. But what Uber said after this legislation passed as he said, well, okay, go ahead. We'll see you in court. So they're really being bullies. They're claiming that they're just a technology platform, not really a transportation business, which many a judge has giggled at when they made that claim. So what's really important is that this is the first time that we're really seeing a successful pushback against misclassification. And it's not just, you know, Uber and Lyft are, so that's important. It's going to be people in construction. It's going to be janitors. It's going to be others as well. And we expect that to be followed up in other places that New York was jealous. They said, you know, we don't want California to get the reputation of the progressive state. We're going to do it. And there's national legislation being introduced. And many of the presidential candidates among the Democrats have already announced that they favor a basically a national AB five legislation. And that's, that's, that's very exciting. And you know, one of the first, one of the biggest things in employment law in decades, I want to ask you the Silicon Valley questions, which is, you know, they, you know, they do claim that they're tech firms and there is a technology component to it. What about innovation? What about making things better? I have to say as a, as a, as somebody who takes DC cabs, the quality of DC cabs has improved because they've had to compete with the albeit utterly unregulated competitors like Lyft and Uber. So aren't you stifling innovation by, by preventing these companies from coming about or from doing business in this way? Well, I guess we'll see. I do think that, that what Uber and Lyft provide is a really good service that, that people want need in the taxi industry is not one that we should shelter and they should have to compete or, or, or die. But at the same time, you know, they have to, they have to show that they can provide a living wage and provide good services. And if they can't do both, then they won't prevail and live. And we don't really know a path by which Uber and Lyft are going to attain profitability. And they, they, they worry about having to pay a living wage, but I don't see why we should allow workers to be exploited to earn subpar earnings, not have worker comp, not have unemployment insurance as a way of subsidizing innovation, innovation, if it's good, it's going to exist if while paying decent living wages. Oh, that makes sense. My last question is basically about the future of this debate and where it heads both nationally and internationally. I know Uber's had a ton of problems in this area. And really, what we've seen is after a long decline of labor and worker power that we've chronicled at EPI and researched and kind of written about its, its negative consequences for inequality and wages, we're actually seeing not just mobilization at the, at the union level, you know, there's a strike going on at, with UAW and General Motors. We've seen teacher strikes across the country. We're also seeing non-union entities mobilized such as Uber and Lyft drivers, you know, Google workers, Wayfair workers. Indeed. So can you talk about the kind of positive momentum that labor has and how it plays into an election year and really the future of, of economic debate in this country? Well, the big picture is that over the last 40 years, very conscious policy decisions and political things, political actions by corporations and the wealthy have lowered the leverage of workers in dealing with their employers, keeping unemployment too high, making it hard to have a union, doing things like misclassification, stealing their money through, through wage theft, and all of these different things. And there's now a concerted effort to reversal this. We see it in the, in the large policy proposals floating in the Senate and the House by presidential candidates. We see it in the actions of the teachers and supermarket workers in California, GM workers. People are sticking up from themselves. And, you know, the situation is like a tenor box. I think if, if people see ways that they can succeed collectively or, or politically to make their lives better, then they're going to, they're going to get it. You know, so there's going to light a fire and with the tender, I expect to see a lot of activity just like we did with the teachers. It was just remarkable how teachers really went out on strike in many ways that were illegal, but with the support of the parents, with support of the school districts in deep red states. Because both the schools had been sabotaged in terms of their spending, the teachers have been sabotaged in terms of what they could earn, and people were rallying around them. And I think we see the largest share of workers now indicate in polls that they would like to seek collective bargaining in their workplace tomorrow. Roughly half of the non-union workforce wants a union on their job if they could have one. If we did, if they all could have a union, we would have collective bargaining rates higher than in Germany. So it's not because people don't want collective action. They don't want unions. They don't want to work together. It's that they have been blocked from being able to pursue that. Thank you so much. That was Larry Michelle, Distinguished Fellow at the Economic Policy Institute. I'm your host, Pedro DeCosta. Thank you so much for joining us. I hope you like the podcast. Please subscribe to EPI's YouTube channel and like us on YouTube and you can download us wherever you get your podcasts.