Six Reasons I Can No Longer Recommend The Gig App Economy

Preface: To preface this post today, I want to state that the gig economy is very region-specific, with the Experiences of others being different based on that state in the United States. My expertise, data, and historical facts form my position. However, I know everyone has a different view on this topic, and I'm not attempting to sway your opinion on gig work. Becoming an independent contractor is much better than being a third party between you and the customer.

#1 - Income Instability

One of the primary reasons I can no longer recommend the gig economy across all states is the inherent income instability. Unlike traditional employment, gig work often lacks a steady paycheck. This instability can be particularly challenging in states with high living costs. For instance, in states like California and New York, the cost of living is significantly higher, making it difficult for gig workers to cover their basic expenses during lean periods (Opportunity Atlas).

Data Point: According to a report by the Economic Policy Institute, nearly 30% of gig workers earn less than the minimum wage after accounting for expenses and unpaid time (Zipperer, McNicholas, Poydock, Schneider, & Harknett, 2022).

Personal Experience: Even with a hybrid vehicle, the cost of performing well in the gig economy was offset by a series of accidents that were out of my control. Granted, some people will never get into an accident, but that doesn't mean you will not have two accidents in one year, which can be harmful if you own or finance those vehicles. Renting a car is ok, but are you making enough income to cover the cost? What happens when your hybrid needs a new battery? Are you putting enough aside for another vehicle? 

#2 - Lack of Benefits

Gig workers are typically classified as independent contractors, which means they do not receive traditional employee benefits such as health insurance, paid leave, or retirement plans. This absence of benefits can have severe consequences, especially in states with limited social safety nets.

Historical Fact: The Fair Labor Standards Act of 1938 established minimum wage, overtime pay, and child labor standards for employees, but independent contractors are exempt from these protections (Grossman, n.d.).

Personal Experience: I remember working to get my car fixed after one of my accidents, and the dealership was working on my car. It turns out the vehicle was not being worked on, and I was set back because I could not do rideshare while it was getting repaired. I had to resort to food deliveries, resulting in a lower income in a rental car while my bills were due. How about some type of pay to help fill the gap by the rideshare companies if you made so many trips before your accident?

#3 - Regulatory Challenges

The gig economy operates in a complex regulatory environment that varies significantly from state to state. Some states have enacted legislation to protect gig workers, while others have not. For instance, California's AB5 law aimed to reclassify many gig workers as employees but faced significant opposition and legal challenges (Board, n.d.).

Data Point: A National Employment Law Project study found that misclassifying workers as independent contractors costs the federal government an estimated $3.7 billion annually in unpaid employment taxes (National Employment Law Project, 2020).

Personal Experience: After dropping off a passenger and leaving an apartment complex, I remember hitting a pothole at night. I was turning right and could not see the pothole, which busted the sensors on the front bottom side of the hybrid I was driving. 

If I kept moving, a passenger could report me as driving unsafely. Just imagine if the state I was driving in would have offered some form of compensation for the accident; the state did not. Here is a news story from today; I'm curious if they do any gig work. 

#4 - Exploitation and Lack of Protection

Gig workers often face exploitation and lack the protections afforded to traditional employees. This issue is particularly pronounced in states with weak labor protections. Without the ability to unionize or collective bargaining rights, gig workers are at the mercy of platform companies' policies.

Historical Fact: The National Labor Relations Act of 1935 guarantees the right of employees to organize and bargain collectively, but this right does not extend to independent contractors (National Labor Relations Act, n.d.).

Data Point: A survey by the Pew Research Center found that many gig workers feel exploited by their companies (Pew Research Center, 2020

). " 57% of Americans think those who drive for ride-hailing companies deserve greater legal protections from being mistreated" (

para, 11).

Personal Experience: I've tried the earn-by-time feature several times, and the app would boot me out of my dash earlier than usual. Sometimes, you are sitting there waiting on an order, and that time should be paid fairly, at least minimum wage for wait time. I've also noted how sometimes you work and earn by time, and you will get several orders without tips. Imagine driving for 20-40 minutes and completing a delivery, receiving no tip, or the order is significant, and it takes you an hour to complete the order with a low hourly rate. The cost to drive needs to be calculated accurately.

#5 - Variable Demand and Market Saturation

The demand for gig services can fluctuate widely, leading to periods of oversupply and reduced earnings for workers. This issue is particularly acute in states with large urban centers, where market saturation can significantly reduce the earning potential for gig workers.

Data Point: According to the Bureau of Labor Statistics, the number of individuals engaged in gig work has grown steadily over the past decade, leading to increased competition and downward pressure on wages【Bureau of Labor Statistics, n.d.】.

Personal Experience: Currently, my smaller market makes it difficult because more drivers are online. The college kids are out of school, so there are fewer orders. Again, if you use the apps for extra money, it might not be a big deal, so carry on if you wish; I still don't recommend driving in all markets. 

#6 - Moving The Goal Post

Data Point: A 2020 National Employment Law Project (NELP) report found that 10 to 30 percent of employers misclassify their employees as independent contractors. This misclassification denies workers essential rights and protections such as minimum wage, overtime pay, and unemployment benefits, effectively moving the goalpost for many gig workers striving for economic stability.

Historical Fact: The gig economy has evolved significantly over the past decade. Historically, gig work was seen as a flexible and supplemental source of income. However, as apps like Uber, Lyft, DoorDash, and Instacart gained prominence, they began to dominate the labor market, presenting gig work as a primary source of income for many. 

Personal Experience: The issue also lies in the faulty points system of many apps; you will find that your statistics will go down over time, or they will take your status away from you. You can go from a top to a lower-tier driver in no time.

Conclusion

While the gig economy can offer flexibility and opportunities for some, there are more than one-size-fits-all solutions for every state in the United States. The variability in income stability, lack of benefits, regulatory challenges, exploitation, and market saturation are significant drawbacks that cannot be overlooked. For those considering gig work, weighing these factors carefully and exploring alternatives that offer greater security and stability is crucial. The risks outweigh the rewards, but many will disagree, which is ok. If I had to do gig work, I would just use gig work as a side hustle to full-time employment if I needed extra money. 

References

Atske, S., & Atske, S. (2024, April 14). The state of gig work in 2021. Pew Research Center.                            https://www.pewresearch.org/internet/2021/12/08/the-state-of-gig-work-in-2021/

Bureau of Labor Statistics. (n.d.). Working in a gig economy.                                                                                      https://www.bls.gov/careeroutlook/2016/article/what-is-the-gig-economy.htm

          Board, F. T. (n.d.). Worker classification and AB 5 frequently asked questions | FTB.ca.gov.                                     https://www.ftb.ca.gov/file/business/industries/worker-classification-and-ab-5-faq.html

          Eye on Tech. (2020, June 22). What is a Gig Economy? Benefits and Challenges of Gig Workers [Video].               YouTube. https://www.youtube.com/watch?v=AcCBqn2bjdc

National Employment Law Project. (2020, October 26). Independent contractor misclassification imposes enormous costs on workers and federal and state treasuries. Policy & Data Brief. Retrieved from National Employment Law Project website. https://www.nelp.org/insights-research/independent-contractor-misclassification-imposes-huge-costs-workers-federal-state-treasuries-update-october-2020/

National Employment Law Project (NELP). (October 2020). Independent Contractor Misclassification Imposes Huge Costs on Workers and Federal and State Treasuries. https://www.nelp.org/app/uploads/2015/03/1099edFactSheet2010.pdf

          National Labor Relations Act (1935). (2021, November 22). National Archives.                                                         https://www.archives.gov/milestone-documents/national-labor-relations-act

Zipperer, B., McNicholas, C., Poydock, M., Schneider, D., & Harknett, K. (2022, June 1). A national survey of gig workers paints a picture of poor working conditions and low pay. Economic Policy Institute. Retrieved from https://www.epi.org/publication/gig-workers-survey-2022/