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The gig economy, exemplified by ride-service companies like Uber, housing rental companies like Airbnb and freelance brokers like Upwork, is not a harbinger of an empowering new tech-driven economy. These are predatory corporations using age-old practices to exploit workers, dodge government oversight and evade taxes.
Those are the takeaways from the new book Raw Deal: How The Uber Economy and Runaway Capitalism are Screwing American Workers, by Steven Hill, a fellow at New America Foundation. Hill, who splits his time between California and Europe, intriguingly notes that unlike the states, the continent has not embraced the gig economy mainstays in its midst.
AlterNet talked with Hill about how Europe—particularly Germany, where he has lived for most of 2016—has not bought into the sector’s claims that it is somehow futuristic, different and above government regulation and public accountability.
“I first started looking at this myself because I live in San Francisco and I’ve been watching the impact of technology on jobs, and specific companies like Uber, TaskRabbit, and Upwork, which I think in some ways is the most alarming of these companies,” he said, referring to a firm that farms out freelance work to the lowest global bidders. “Having studied that here, and these companies are now operating in other countries as well, I wanted to see how other countries are reacting to the pressures that they’re getting from these companies.”
What follows are 10 of Hill’s observations about the burgeoning gig economy.
1. Not following the laws, anywhere. “The first thing for Americans to realize is that a lot of these companies aren’t following the laws, aren’t paying taxes. Uber comes in and just doesn’t follow local laws for taxis. Not only in terms of background checks, insurance laws, qualifications for drivers, but even in terms of paying livery taxes. Airbnb, same thing. Upwork and TaskRabbit, these companies aren’t following minimum wage laws.”
2. Europeans are not okay with that. “Americans sort of accept some of this. But the first thing you notice when you go to France or Germany, they say, ‘No, this is a taxi service. I don’t care that you are using technology to connect a driver to a passenger.’ In fact, Uber changed its name to Uber Technologies just so they could say they were a technology company, not a taxi company. Across Europe, people say, So what? We don’t care that you’re a technology company. It is the same service you offer, therefore we expect you to follow the same laws that we have for taxis. We expect you to follow the same laws that we have for hotels or any of these other services and platforms.
“So there is this interesting and I would say refreshing perspective: Of course, you’re going to follow the laws. You don’t get out of following laws just because you think you are something new and different.”
3. Anything but a new business model. “Airbnb, for example, will tell you, ‘Look, we want to pay taxes—the hotel and occupancy tax that hotels pay—and we want to follow local laws, but we’re in 34,000 cities and we just haven’t had time to research all of these cities and their laws, and we’re going to get to it.’
The thing that’s rather remarkable is they are asserting this new corporate right that you can set up operations first and figure out the local laws and taxes later on. If Boeing, for example, were to set up an airplane assembly plant here, and said we’ll figure out the taxes and local laws later on, we’d live in a very different world. Corporations don’t get to set up where they want and figure out the laws later on. But that’s what these companies are insisting on being able to do.”
4. Europeans are trying to reel this in. “In Berlin, where I was living for the last five months, they passed a law two years ago saying, ‘There’s going to be the new rules we are going to insist on [for Airbnb rentals]. We are not going to have it take effect for two years so everyone can have a chance to get ready.’
Well, the law just went into effect on May 1, and it basically says that you cannot own multiple properties, you can’t rent out your whole house—you can only rent out a spare room in your house or apartment; they put a percentage on it, and you have to register with the city. They are not looking to shut it down completely. Most people realize that the core idea of Airbnb, that you can allow people to rent out a spare room and make some extra money, is okay. But the problem is a lot of it has been completely taken over by professional real estate operatives, some of whom have dozens of properties. So cities like Berlin and Copenhagen are trying to return it to that earlier core business, where you can still have someone rent out a spare room, but you’re not going to create an opportunity for professionals to circumvent local laws or use Airbnb as a massive loophole.”
5. Pushback in U.S. lags far behind. “San Francisco just passed a law for tougher Airbnb rules. They already have a law that folks have to register, which has been in effect for almost a year and a half. This new law is going to put the burden on Airbnb and says you can’t list folks who haven’t registered. If you do list folks who have not registered, you are going to be fined… Other cities are looking at it.
“The problem, in terms of Airbnb, is that many of these laws have turned out to be unenforceable. Unless you have the data from Airbnb, it’s hard to know how many nights they’re renting out, how much they’re charging, these sorts of things. Airbnb is the only one that has that data, and has refused to give it up, despite requests. So this is a big problem in terms of enforcing any of these laws.”
6. Europe is increasing enforcement. “In Berlin, in contrast, they’re ramping up enforcement. They are actually going to have people go door to door. They are encouraging neighbors to start reporting on neighbors who are illegally operating as Airbnb hotels. That’s interesting, as it taps into a whole history of Germany reporting on neighbors, going back to the Stasi [secret police] and everything else. It’s just a lot of different approaches that are happening. We’ll see if any of them are effective.”
7. Europeans are more concerned. “The public in Europe, in general, expect corporations to be better citizens. There is more of social dimension to the economy there. So when companies like Uber come in and say, Hey, we’re going to give you a new service, people take a second look.
First of all, in Europe, taxi service is pretty good, whereas here in the U.S. taxi service is not. There aren’t enough taxis on the road because of medallions and those sorts of things. But in Europe, there is not as big a need. There’s good public transit. That makes Europeans react by saying, If you want to operate here, that’s fine, but you have to follow the law. You can’t do it on the backs of your drivers, cutting their pay, and those sorts of things.”
8. The gig economy hasn’t exploded there. “It hasn’t hit there like it has here, partly because they insist that you follow the law. So Uber and Lyft and TaskRabbit and these other companies say it is a bigger uphill battle for them. They haven’t tried to push into there as much as in India or China. Europeans are aware of the gig economy. Some call it the digital economy. Some just call it the Internet economy. They’re aware that some of the ways that these companies operate really strike at the core of their social model.
“When you talk to business people in Germany and say, This is what these companies are; this is how they operate; they want a labor force they can turn on and off like a garden hose, they understand what that means for the economy. They have good labor relations and it’s part of their economic successes… So that is a barrier to entry for these kinds of companies.”
9. But European business people are worried. “The companies that are most concerning to them are a company like Upwork. It is based in San Francisco, in Silicon Valley, and has 250 employees who use technology to oversee 10 million freelancers from around the world. If you go on that platform, you see workers from Germany saying, I want 60 euros an hour for this job. And you can see a worker from Thailand or India saying, I’ll take two euros an hour. Some of those workers in Thailand or India are very skilled, have access to technology and can do the job.
“So, if you’re a business person in Germany, you feel torn because you can get someone for a lot less, but understand it undermines something crucial about the German economy, and the relationship between employer and employee, and the basis for their economic success. That’s the dilemma.”
10. American workers are less protected. “A lot of Americans who are working in these jobs just need the work. They know the jobs are not very good. If you look at Uber’s own numbers, it shows that 50 percent of their drivers last a year on their platform and then move on. So it’s a temporary job. It’s something they do because they can’t find anything better.”
The biggest takeaway
Perhaps the biggest takeaway from listening to Hill is that the gig economy flourishes when the public faces a mix of economic anxieties and an absense of government oversight. On both those counts, the U.S. sits between Europe, which has resisted these exploitive firms, and Asia, where they are able to rapidly expand. Indeed, if Americans didn’t have as many economic anxieties at home, there would be less of a need to work longer hours and wrest more income from one’s assets.