(TMU) — The unemployment rate in the United States has fallen consistently over the last ten years to levels not seen since the 1960s, according to the U.S. Bureau of Labor Statistics. On the surface this may appear to be better news than it actually is.
According to a November 2019 Brookings Institute report, “Low-wage workers comprise a substantial share of the workforce.”
In fact, a whopping 44% of workers age 18 to 64 earn low hourly wages. That’s more than 53 million people.
And 53% of those earning low wages are in their prime working years (age 25 to 50) with 43% of that age group raising children. Not only that but more than half of those earning low wages are the sole earners in their families or are responsible for major income contributions to the family. And sadly, about one-third of low wage workers are living below the federal poverty line—$36,000 for a family of four.
While unemployment rates may be at record low levels, it is clear that simply being employed just isn’t good enough for roughly 44% of the population.
The employment opportunities for those stuck in this bracket are bleak. A small number of occupations offer their employees these unlivable wages. It is here that we find most jobs popping up in what is being called the “gig economy.” Freelancing certainly isn’t new, but the U.S. has never had enough people employed as freelancers to even pretend that a “freelancing economy” were a thing. The “gig economy” term has come into use largely because of newer app-based services like Instacart, DoorDash, Uber, and Grub Hub and their independent workforce.
While freelancers can be employed full time doing freelance work—meaning you work for yourself and aren’t an employee of whoever it is you’re doing work for, gig work has traditional been more of a one-time or temporary nature. And while some who work in today’s gig economy only do so here or there or for a short amount of time, others are being forced into working gig jobs full time—or more.
The latest data from the Pay Up campaign is bleak and doesn’t bode well for the gig economy or anyone working in it.
Because independent contractors are just that and not actual employees they are not entitled to benefits or federal oversight. This means they’re not actually entitled to the federal minimum wage. As a result, the average DoorDash employee makes an average of $1.45 an hour. That’s less than the 1968 minimum wage of $1.60.
The average hourly wage was calculated using “more than two hundred samples of pay data provided by DoorDash workers across the country.” Included in the calculation was the cost of mileage and the additional taxes that independent contractors are responsible for. According to Pay Up, “Nearly a third of jobs actually pay less than $0 after accounting for these basic expenses.”
Numerous people employed in the gig economy have provided feedback to Pay Up and hardly any of it is positive. From single mothers of multiple kids who make $5 in an hour just to put that $5 in their gas tank to do two more orders to make $5 to put in their gas tank to drivers who only do it in hopes of the few trips that result in decent tips, Door Dash and gig generating apps seem to be doing more harm than good.
The company was recent caught up in a scandal after it was discovered that tips paid by customers were actually counting as part of the payment from the company. In effect, if a customer tipped a driver $2, DoorDash would then pay the driver $2 less. Thankfully that policy changed but the current model hardly seems better.
And DoorDash isn’t the only gig app give their drivers the short end of the stick. Grocery delivery app Instacart pays its workers $7.66/hour on average but Pay Up has documented cases of Instacart paying a measly $0.96/hour. According to Pay Up, Instacart has been embroiled in multiple controversies in the past over “cutting pay, mishandling tips, and treating workers poorly.”
While unemployment rates may be dropping, it isn’t a good sign that 44% of workers aged 18 to 64 are earning low hourly wages as the gig economy continues to grow.
In addition to having a better understanding of employment rates, there are multiple things to take away from knowing just how bad the gig economy can be for those doing the work.
There is nothing wrong with wanting—or needing—someone else to pick up your lunch, your dinner, or a cart full of groceries. But when choosing to do so, being prepared to tip the driver or the shopper with cash when they show up at your door is likely the best way to ensure they receive some semblance of a living wage.
But more than that, because these gig apps are responding to a significant demand, perhaps the apps that are profiting off your need without reimbursing drivers even remotely close to what they should be should ultimately be abandoned for a more decentralized option that directly connects someone with a need to someone with the ability and time to fill it, leaving the details of time and cost up to the two parties involved.
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