The Motherboard Guide to the Gig Economy

On its face, the "gig economy" seems like a simple catch-all phrase. It’s often used by a flurry of commentators, regulators, politicians, businesspeople, entrepreneurs, and academics, and it has become a vast and expansive phrase describing anything that vaguely resembles independent contract work―but through an app. 

But here’s the thing: the gig economy doesn’t actually exist. 

By skirting US labor laws, a host of companies can misclassify their workers as independent contractors, exempt them from basic rights or social welfare programs, and then pay them less than minimum wage in many cases. None of this is really new and it’s certainly not an “economy.” Rather, Silicon Valley has managed to reinvent piecework, albeit in a digital form, whereby workers are forced to work longer hours unpaid as they wait for assignments that'll pay paltry sums. 

All of that is a mouthful to get out, so it’s been branded as the “gig economy.” An earlier iteration of the term―the “sharing economy”―failed to take hold after it became obvious that there was not much sharing going on, so much as merely renting what you own. 

“Language is important,” Sam Lipsyte pointed out in New York magazine in 2016 in an article that tracked major events during Barack Obama’s presidency, including the rise of the gig economy as a new splash of paint on old, exploitative practices. Gig companies have spent billions of dollars over the past decade not only fighting how they are regulated, but how they are talked about. At different points that has meant different things, but the goal has always been to narrow the range of acceptable debate. In doing so, gig companies have undertaken exploitative and illegal behavior over the years while distracting from how bad they are for workers, consumers, various communities, and the economy at large.

Motherboard has reported on numerous aspects of the gig economy over the years; from bathroom access, to companies’ fight to continue misclassifying workers, to driver strategies to make a living wage. And now that gig companies are looking to replicate regulatory victories such as Proposition 22 nationwide and abroad, having a grasp on the industry is more important than ever. This is Motherboard’s guide to a core group of buzzwords, phrases, talking points, and strategies deployed over the years by gig companies to advance their cause. 

Gig work: Loosely refers to labor arrangements where tasks are performed for money, usually via app-based interfaces that assign contracts to workers. Typically misclassified as independent contractors to avoid the labor expense of employment, even though gig companies fix the price of their labor, assign them customers, deploy algorithms or customers to surveil and evaluate workers, but also roll out policies that limit when and where work can be done.

Venture capitalist: In the gig economy world, venture capital is a form of private equity whereby investors raise funds and wield them as a weapon to enter large markets, undercut competitors through predatory or anti-competitive behavior, then profit later by raising prices or extracting monopoly rents. It’s helpful to think of VCs as a group of capitalist central planners: their entry into various markets will reorganize the operations and regulations at play, but also determine what direction technological development and resource allocation goes.

Platform: A nebulous term that is interchangeably used to refer to an app, an app-based marketplace, or an app’s parent company. It is typically deployed to add a technological gleam to gig companies’ activities and obscures that most of these firms are simply modern versions of a pre-existing business (e.g. ride-hail gig companies are taxi companies). The idea that Uber, for example, is a “rideshare platform” and not a taxi company allows them to rationalize certain arguments about the need to regulate these companies only in ways that just so happen to benefit their business.

Technology company: A buzzword at the crux of one of the oldest arguments by the gig economy, typically rolled out in Europe where labor laws are strict enough that exploits similar to those pursued in the United States are impractical. The lynchpin of this argument rests on the “platform” that matches buyers and sellers obscuring the real business model. 

Flexibility: Gig companies use this word to insist that misclassifying gig workers as independent contractors provides them with more autonomy than employment. Gig workers, however, enjoy little to no control over income, pricing, scheduling, or wages, which are unilaterally changed regularly by companies as part of regular pricing experiments. Algorithms give companies significant leeway in structuring when and how workers can perform labor on their platforms.

Algorithm: An ostensibly automated system powered by machine learning software and deployed by gig companies to streamline or optimize management decisions. Many “algorithms” actually obscure underpaid human labor that pretends to be robotic. 

Information asymmetry: Platforms, particularly gig company platforms, sit on a glut of insights about various cities, their traffic systems, working conditions, and more that are not shared with any actors outside of the company. At the same time, gig companies regularly make authoritative claims based on this unverifiable, proprietary data and algorithms when it comes to employment decisions or public policies that affect their services, communities made reliant on them, and urban transit systems that end up being forced to compete with them. 

Independent contractor: A legal classification for workers that has allowed gig companies to reduce labor costs and improve the firm’s financial health, at the expense of depriving workers of benefits, protections, and qualification for social insurance programs. At the same time, it has allowed companies to avoid scrutiny for the antitrust law by deploying it against workers who collectively bargain, accusing them of price-fixing as workers classified as contractors are technically corporations.

Independent workers: A hypothetical category of worker proposed by gig economy advocates that seeks to preserve and legally codify many of the loopholes in labor or antitrust law that companies currently exploit, while providing workers with minimal rights (e.g. right to collectively bargain without a minimum wage).

Time spent logged on: Gig workers are not paid for all the time they spend logged onto an app, because gig companies keep wait times low for customers by inflating the supply of workers via overhiring. This leads to a lot of waiting around. Instead, gig workers are paid for time spent doing a task (making a delivery or driving a passenger), ignoring the costs incurred traveling between tasks or waiting for a new assignment. Many gig company-supported estimates for average incomes ignore total time spent logged on. 

Deadhead: The industry term for the unpaid portion of gig work that comes after dropping off a person or item, but before arriving at the next pick-up. This cost typically presents as fuel and vehicle depreciation and maintenance costs for driving around without a customer, as well as unpaid time on to the app but without an assigned task―gig companies often fight to avoid wage regulations which would adequately pay drivers for this time and instead externalize the cost whenever possible.

Deactivation: An innuendo applied when workers are fired or terminated to prevent any association with the concept of employment. Decisions are unappealable in most cities, leaving drivers with no recourse if―as is often the case―a false report is filed by a rider or an algorithm monitoring driver behavior makes a mistake.  

Security systems: As working conditions continue to erode because of increasing demand and workload, surveillance systems are being introduced to maintain previous levels of production while putting the onus on drivers to remain safe as opposed to simply reducing the company’s growth. Some notable examples include Uber and Ola in Europe, as well as Amazon in the United States.

Forced arbitration: Most gig companies force consumers and workers to sign Terms of Service agreements that surrender the right to sue the company as part of a class action lawsuit. Instead, disputes are settled privately with arbitrators chosen by the companies.

Excess driver incentives: In markets where gig companies are scrambling to acquire market share, they will often pay workers more than what a customer pays for a meal or trip as part of its bid to attract or retain workers, but to also reduce wait times. In theory, these incentives go down over time but in reality they have actually grown as companies have struggled to convince workers to put in long hours for what can amount to starvation wages.

Astroturfing: A strategy adopted by gig companies to create the appearance of grass-roots support for an agenda that happens to line up with their own. Usually involves quiet, obscured, or secret funding for local groups, as well as partnerships with trusted community figures. In California, this meant payments to a firm run by the head of the state’s NAACP who then went on to support Prop 22, but in other states it usually entails much more quiet work such as deceptive mailers, grassroots groups that repeat corporate talking points, and even reportedly fabricating endorsements.

Convenience: Often, when gig companies and their advocates speak of the benefits conferred to consumers, they’ll invoke the ease with which you can have something on-demand as a cost saved by their services. What is left out of this is how much more expensive the services are when you account for where the costs actually are. Ride-hail gig platforms are seeing prices surge due to a driver surge sparked by poor safety conditions and subminimum wages during the coronavirus pandemic. Those price hikes, however, may be normal if you’re not white as ride-hail companies regularly hike prices in non-white communities. The food delivery variants are even worse as they offer delivery at a significant markup for the consumer (as high as 91 percent) and at great cost to restaurants.

Research: The gig economy’s information asymmetries affect not only consumers and workers, but regulators and independent researchers as well. Instead of transparent access to data, companies like Uber tightly control information and will selectively offer segments to teams that coincidentally affirm gig economy PR. Uber created an "academic research" program in 2014 and over the past seven years, the shop has produced claims and findings that reaffirm Uber talking points but which cannot be easily replicated or critically evaluated thanks to relevant data being deemed proprietary. 

Regulatory arbitrage: A basic strategy in which firms exploit favorable legal environments in one area to prevent less favorable ones in others, gambling that they won’t be forced to follow the law in the meantime. One recent example: when a coalition of gig companies successfully passed Proposition 22 in California, the ballot measure was repackaged and pushed in other states (Massachusetts, New York, Connecticut, Illinois, etc.) as well as other countries (e.g. Canada), in the hopes of formalizing the legislation elsewhere. Over the next few months, not only were app changes that gig companies made in California to sell the public on Proposition 22 rolled back, but new pay cuts and fare hikes that were painted as inevitable if Proposition 22 failed were introduced anyways.

Churn: Labor conditions at most gig companies are so tough that the vast majority of their workforces leave each year. At Uber, the last year we have data for (2017) suggests well over 95 percent of drivers left before the end of the year.

Competition: Gig companies are fundamentally anticompetitive and seek monopoly status, relying on billions in subsidies to operate below cost so that whoever has the deepest pockets is left standing. As a result, the real costs of operation are borne by the public (pollution, traffic congestion, degraded urban transit service), consumers (higher prices), and workers (poverty, lack of adequate physical or mental healthcare).

Driverless: Ride-hail gig companies such as Uber and Lyft once pitched the sci-fi pipe dream of autonomous taxi fleets to investors and the public as a way to please investors with zero labor costs and consumers with even cheaper services. The endeavor was abandoned by both companies after burning billions of investor capital to make little progress, but not before securing near-peak valuations in public markets. Other firms like Tesla and Instacart have followed suit, burning billions to make relatively little progress to justify higher valuations or more funding in pursuit of this moonshot project.

Amazon of transportation: A narrative once adopted by Uber to explain away persistent losses. The story went that, much like Amazon, Uber was generating historic losses because it was investing in lines of business such as driverless that would yield stupendous growth and profits in the future. Unlike Amazon, however, Uber was not a cash-positive company reinvesting its profits to fuel ravenous growth but a cash-negative firm burning cash to stay afloat. 

EBIDTA: In the words of Charlie Munger, Warren Buffett's longtime business partner, “every time you see the word EBITDA, you should substitute the word ‘bullshit’ earnings.’" EBITDA―an acronym for earnings before interest, taxes, depreciation, and amortization―is rarely an accurate picture of a company's actual earnings. Even so, it’s commonly used in earnings reports by gig companies such as Uber, Lyft, and DoorDash. Uber has excluded stock-based compensation, IT expenses, lobbying, accounting, and more recently expenses that emerged specifically because of the ongoing COVID-19 pandemic, from its earnings calculations to massage its earnings into a story of improving financial health.

Economies of scale: In theory, the more gig workers and consumers that are on a platform, the more useful it becomes. Perhaps wait times get lower, or more information is shed on how to optimize routes and prices based on ride-hail data, or maybe it costs less to attract or retain workers and users. The larger a gig company’s platform gets, the cheaper and more profitable it would become to operate, or so the idea goes. This theory has not panned out―in fact, operations have only gotten more expensive in the midst of price wars, litigation, marketing campaigns, lobbying efforts, and a dearth of drivers during the pandemic unwilling to work for subminimum wages.

Perpetual ride: An early dream in the gig economy of a ride-hail trip "that never ends." Drivers would pick up a passenger, pick up another, drop off one, pick up another, drop off another and so on. Also known as a privatized bus, but this vision was more inefficient, expensive, and, most importantly, unrealistic. 

Profitability: A state where a gig company consistently earns more money than it spends. None of the major players have attained this basic milestone. Only once has Uber claimed to turn any profit at all, and that was essentially a one-time accounting entry due to the sale of its Southeast Asian and Russian units. The companies’ abysmal unit economics demand they burn billions of dollars in vicious price wars to attract and retain customers who can then be pinched with price hikes once competitors vanish. In fact, just about every S-1 filing that gig companies have made before going public warns investors that they may never, ever be profitable. 

There are countless other buzzwords and rhetorical flourishes, and this list could stretch on for pages. For nearly a decade, “gig companies” enjoyed largely little to no critical coverage outside of labor reporting and were thus able to convince the public, regulators, politicians, investors, and commentators that their PR was in fact an objective accounting of reality. Things have begun to shift over the last few years, but only as the companies are on the precipice of permanently altering the regulations that sit between them and their first profits.