In a pandemic, ‘gig’ workers can fall through the social safety net
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Michael Thorne used to make most of his living as a stand-up comedian, but after his daughters were born, picking up fares for companies like Uber and Lyft slowly became his main job.
“If I was out driving during the school day and got a call from school that one of them was sick, you don’t have to call anybody, you don’t have to request permission,” Thorne said. “You just log out and go take care of your kids.”
But the spread of COVID-19 has changed how Thorne feels about a job that puts him in contact with strangers.
“I’ve been very nervous about it,” Thorne said. “I’ve gone back and forth about whether to continue, but I have to try not to lose my apartment, so I have continued.”
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Even though he’s going to be sharing his Toyota Prius with strangers, he tries to take as many precautions as possible. He offers masks to riders, airs out the car and attempts to sanitize surfaces after every ride.
“It’s a one-day-at-a-time thing,” Thorne said. “If I start to project, I start to panic. I can’t do that. I’m going to take care of what I can today to stay above water.”
Many workers who have made their living in recent years in the so-called “gig economy,” including driving for companies like Uber, are facing difficult choices during the COVID-19 pandemic. It’s not yet clear how states, including Minnesota, are going to make sure these workers receive the unemployment benefits they were promised by Congress.
Pandemic exposes lack of safety net for ‘gig workers’
The gig economy has exploded in the last decade “from zero to millions,” said Paul Oyer, a professor of economics at the Stanford Graduate School of Business. At times, “it’s questionable whether there is a social safety net in this country for almost anybody,” Oyer said. “You can think of the gig economy as kind of its own little social safety net, but right now maybe it’s not working that way. Because of the global pandemic, not everyone can be or wants to be an Uber driver.”
Andy Hayden has been driving for Uber since the very early days of the company. But he’s made the choice to stay off the app for the last couple of months.
“I’ve got elderly parents and I’ve got family to worry about, and I’ve got people in my life who don’t necessarily have the best autoimmune systems,” he said. “I wouldn’t even think of doing it now because you’re just asking for problems.”
Hayden has his own small business and drove for ride-share companies to supplement his income. And even though he’s not driving for Uber now, he’s kept his earnings up by piecing together other gig economy jobs, like delivering packages.
Even when the economy was doing well and there was no pandemic, Oyer said, not much was being done by policymakers to provide support for gig or low-wage workers.
”People are making very difficult and unpleasant choices from a set of really lousy options right now,” Oyer said. “That’s literally true throughout the world, but especially difficult and true for people who have fewer resources to begin with.”
The number of workers primarily making their living in the gig economy isn’t easy to pin down. But the most recent data from the U.S. Bureau of Economic Analysis found that self-employed workers, which includes the gig economy, make up about a quarter of all jobs in the United States, covering more than 46 million workers. In Minnesota, about 20 percent of all jobs are classified as self-employed, according to the Federal Reserve Bank of Minneapolis.
Since concerns about COVID-19 have brought stay-at-home orders, gig workers like Thorne have noticed they’ve been giving fewer overall rides, although some of them are longer distances than usual. A couple of days, Thorne has had to drive additional hours to earn his usual paycheck.
In a recent analyst call, Uber’s CEO acknowledged that the number of rides in areas hard hit by the coronavirus, like Seattle, has declined 60 to 70 percent. A spokesperson for Uber pointed to programs the company has created to help drivers find other “gig economy” work as cities shut down.
This is the first big economic downturn to take place since companies like Uber became such an important part of the economy. But even when the stay-at-home orders are lifted, the job market will not simply return to normal. It’s not yet clear, Oyer said, how much money people in the gig economy will be able to make.
“There’s going to be this huge potential supply of gig workers because so many people are going to be unemployed,” he said. ”You worry that’s going to drive the hourly wage of the Uber drivers and Instacart workers down pretty substantially from a pretty low number to begin with.”
Gig workers struggle to collect unemployment benefits
Even though recent federal legislation makes self-employed workers eligible for unemployment benefits, it’s not yet clear how states are going to cover them, said Pauline Kim, a professor of workplace law at Washington University in St. Louis.
Kim said state unemployment systems have not traditionally been set up to provide benefits to independent contractors or gig workers.
”It’s sort of this collision between a totally different way of organizing work and then the emergency of the pandemic,” Kim said. “That’s inevitably going to cause some kind of confusion and chaos.”
The federal legislation put the burden of proving their incomes onto the gig workers, and it’s possible that many gig workers don’t qualify for official statements showing their earnings, Kim said.
In a typical layoff situation, a company decides whether an employee should be laid off. But in the gig economy, Kim said, the companies don’t lay anyone off; instead, the worker is put in the position of trying to decide whether to keep driving, even if demand for rides is drying up. That means states will need to find a way to determine how and when gig workers are eligible for unemployment benefits.
A spokesperson for the Minnesota Department of Employment and Economic Development said it’s still waiting for federal guidance on how to get unemployment benefits to gig economy workers. Commissioner Steve Grove said in a media briefing last week that independent contractors should apply for unemployment benefits, even if they’re initially denied.
“Getting yourself in the system means you’ll be ready to go as soon as that federal guidance comes,” Grove said. “If you’ve already applied and you’ve been denied, you don’t need to do anything new, we will proactively reach out to you once that federal guidance lands.”
The state agency expects money to start going out to independent contractors and self-employed workers in Minnesota by the end of April.
Kim said the pandemic has exposed gaps in the social safety net for gig workers, which will likely be used by companies and advocates to push for change. Companies like Uber are arguing that drivers should be treated differently from either employees or independent contractors, and have made that case in a letter to the president. Labor groups have opposed creating a new classification for gig workers.
“So, many of our benefits are provided through the employment relationship, I think we’re really seeing the impact of that on gig workers right now,” Kim said.
In the past month, almost 17 million Americans have filed claims for unemployment benefits, including more than 400,000 applications in Minnesota.