The focus of this blog is a brief understanding about the business model behind Ubers $41 billion dollar market value through their contract employees with thousands of potential citizen drivers in all 50 states. While reading a recent article discovered on the web it informed me that the employment status of its drivers has become most prominent of the many controversies stabbing at Uber’s 1099 employment methods. Featured in an article written by Steven Hill a public statement was made by CEO Travis Kalanick an interview with the Wall Street Journal and he “Insists that his company is merely a technology platform facilitating rides between passengers and drivers, not an employer of drivers.” (Hill). CEO Kalanick, maintains they are more like Expedia, merely a go-between connecting buyers and sellers.
But what is a “go between” in that market of facilitating arrangements with a person or group strangers and “a ride” to home perhaps, could that turn into collusion if that buyer did not reach that destination? kidnapping perhaps? At lease somebody or form of financial legal responsibility to ensure that the driver will take his passenger to their requested destination. Then, when the government allows this form of communication to happen by cell phone, it is condoning the businesses form of communication as act to be legal. When the government backs an organization or businesses interests, by allowing the facilitating rides, and by expectations as a U.S citizen, we believe that the government is going to enforce financial or physical means to ensure the safety of american consumers. but the practice of independent employee contracts has started the business term called the“1099 economy,” referring to the 1099-MISC tax form for the IRS classification for independent contractor with Miscellaneous Income.
The statement by CEO Kalanick, in my opinion, has created an interesting relationship between the employer (Uber) and employees (the drivers) and the lack of clarity has led to complex situations, some of them tragic, in which the employer shirks responsibility. Uber, a company that doesn’t actually directly employ any drivers has began a labor battle that is just the tip of the iceberg for describing relationships between a businesses and its employees, and the ride-sharing company is not the only employer looking to benefit from the independent contractor loophole.
In the article author Steven Hill mentioned that Corporate America is increasingly relying on these non-regular type of workers as a core part of its new business model to cut costs and maximize profits. Referencing the mathematical benefits of labor costs and a companies advantages for a business such as Uber of using 1099 wage-earners over W-2 workers “An employer can lower its labor costs dramatically — by 30 percent or more — since it is no longer responsible for a 1099 worker’s health benefits; Social Security; unemployment or injured workers compensation; lunch or rest breaks; overtime; disability; or paid sick, holiday or vacation leave.” (Hill). And believed that the accelerated use by employers of the independent contractor loophole is causing a rapid erosion of the safety net for workers and families, one that was forged over many decades.
On a side topic I included a interesting statistic that projects Americas work force with 2014 study commissioned by the Freelancers Union found that more than one in three workers — 53 million Americans — are now freelancing. Other estimates predict that within 10 years nearly a majority of the 145 million employed Americans — 65–70 million workers — will be so-called independent workers.
I personally feel that that this form of employment could really hurt the economy in the future by not having business organizations directly responsible for their employees actions. It leaves them to avoid litigation with the courts when they are an accomplice to the provided service or products.
Do you believe this is good or bad for the economy?
Hill, Steven. “The Future of Work in the Uber Economy” Moyers & Company, © 2015 Public Affairs Television, Inc. Web Access July 29, 2015. http://billmoyers.com/2015/07/27/the-future-of-work-in-the-uber-economy/