The emerging 1099 economy: the new sweatshop

If your total income in 2013 put you in the top 40 percent of Americans, you’ve likely gotten richer over the past 20 years, according to the Federal Reserve. If you are anybody else, your income, after adjusting for inflation, has probably gone down.

This trend will likely continue if the independent contractor business model enabled by technology multiplies. The winners will be the educated, specialized elite with full-time jobs and benefits who file W-2 tax forms; the losers will be independent contractors who file 1099-MISC tax forms.

On-demand worker company TaskRabbit CEO Leah Busque told TechCrunch, a technology news website, that the company’s goal is to “revolutionize the world’s labor force.” It and similar companies relying on independent contractors are accomplishing that if you consider the revolution to be back to the future of sweatshops.

Automatons

Consider that under current law, independent contractors aren’t entitled to:

  • A minimum wage
  • Health benefits
  • Unemployment insurance
  • Retirement plans.
  • Workers’ compensation
  • Job protections

Uber and Lyft, both of which use independent contractors, are two of the best known 1099 companies, but others are sprouting like weeds. They include Homejoy (house cleaners), Handy (home cleaners and handymen), Postmates (couriers deliver goods locally), Spoonrocket (restaurant food delivery), Washio (laundry and dry-cleaning), DogVacay (pet sitting), Zirtual (personal assistants for entrepreneurs and professionals), Kitchensurfing (personal chefs) and TaskRabbit (personal tasks).

Washio allows customers to place laundry and dry-cleaning orders online and sends “ninjas” to pick up and deliver items. Washio doesn’t actually do any cleaning; it sends clothes to third party facilities. Independent contractors use their own vehicles, and cover their own costs, to go hither and yon picking up and dropping off clothes.

Online job source TaskRabbit asks people, “What can we take off your plate?” It offers “fully vetted Taskers to get the job done”, allowing the customer to “kick back and relax” and pay the bill online when the job is done. TaskRabbit makes its money by taking a 20% service fee off the payment.

TaskRabbit makes it clear that Taskers are independent contractors and that Taskrabbit is no more than “ a communications platform which enables the connection between Clients and Taskers.”

The company reinforces that message by saying it “…has no liability regarding the Service” and “…is not responsible for the performance of Users, nor does it have control over the quality, timing, legality, failure to provide, or any other aspect whatsoever of Tasks Clients, nor of the integrity, responsibility or any of the actions or omissions whatsoever of any Users.”

SherpaVentures, a venture capital firm, predicts that so-called “freelance marketplace” or “managed-service” labor models used by these companies are poised to transform industries like law, health care, and investment banking, and that fewer people will have traditional full-time or part-time jobs as a result.

According to Sherpa, “perpetual, hourly employment is often deeply inefficient for all parties involved, with the employer having to employ long-term workers for short-term needs and the worker missing the independence and productivity that come with freelancing and make workers happier.”

Futurist Thomas Frey, predicting 1099 nirvana, asserts that on-demand work will mean freedom. “…those who master the fine art of controlling their own destiny will rise to the inspiring new lifestyle category of “rogue commanders of the known universe,” he says.

A shift to independent contracting is more likely, however, to create a permanent underclass with meager, unreliable income, no benefits and few protections.

TaskRabbit CEO Busque says future work will be more flexible and “much more in the hands of what I like to call micro-entrepreneurs—people setting their own schedules, setting their own rates, saying what skills they have and what they’re good at.”

Valleywag, a Gawker Media tech blog, puts it a little differently: “If TaskRabbit Is the Future of Employment, the Employed Are Fucked”

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