The Rise of 'Insourcing' Gives Internet Companies a New Way to Exploit Workers

Jan 30, 2014Lydia Bowers

Services like Uber and Taskrabbit may offer convenience to their customers, but they don't provide essential protections to their workers.

It’s about time we talked about pay. The disparity between the top and bottom wage-earners combined with the inability for most minimum-wage workers to earn a livable income is one of the largest causes of economic stagnation and social justice concern of our time. I couldn’t be more thrilled that it appears we are making moves to raise the national minimum wage to be more in line with a living wage. This raise would have a direct impact on the 3.6 million workers with wages at or below the federal minimum and would have far-reaching positive consequences for our economy and society.

But there is a new, fast-growing class of low-wage workers that would not see the benefit of this decision. These new “insourced” workers are individuals who contract with large Internet-based companies like Uber and Taskrabbit to perform services here in the United States, either at a rate set by the larger company or in a free-for-all bidding war. As contractors, these workers receive very little protection in terms of minimum wage laws or unions, let alone benefits or insurance for the work they do. And their ranks are growing fast.

Taskrabbit, founded in 2008, outsources household errands and skilled tasks so you can find time to do what you love, according to its website.  Members of the site, or “taskrabbits,” place bids to perform services for “task posters.” Need your laundry done or someone to paint your apartment? Post it on Taskrabbit.

While this may at first seem like a modern-day update of the community bulletin board for odd jobs, it is in fact a much more insidious shift in how individuals find work, as many who are unemployed due to the recession turn to the website as a primary form of income. With little in the way of health insurance or other protections in work environments that are frequently dangerous (painting, carpentry, factory packing, and bike delivery) and a stream of work that is impossible to guarantee or even estimate, taskrabbits have it rough. Add that to the “lowest bidder almost always wins” formula for Taskrabbit services and the workers in this emerging industry face a bleak picture for economic stability. I briefly worked as a taskrabbit in 2013 as a way to gain additional income, and while it was a fun side-gig for someone employed full-time, I can’t imagine sporadic $15 delivery tasks becoming a viable way to support myself. But this is the emerging reality for many Americans.

Car service giant Uber is also part of this new group of employers. An article published last week in the New York Times , while focusing on Uber’s legal troubles, also outlined the lack of protection or support for its drivers. Uber maintains its drivers are “partners” – or freelancers – who typically drive their own vehicles. The insurance Uber is required to carry only take effect if an Uber driver is found legally at fault for an accident, and many personal insurance polices do not cover commercial activity. “If another driver is liable, the passenger would have to rely on that other driver’s insurance, assuming there is any.” And while Uber’s supply/demand pricing allows drivers to make significant cash during peak times, one driver estimated that he’s worse off than he was without it. “Peter Ashlock drove a cab in San Francisco for 10 years in the 1970s and early ’80s, bringing home about $500 a week. Two years ago he started driving for Uber. After gas and the company’s commission — usually 20 percent — he makes about $1,000 a week. Factor in inflation, and he has lost ground.” There is no union or wage protection in this line of work, giving Uber drivers no avenue to advocate for themselves.

And perhaps more alarmingly, Uber is making strides, at least in New York City, to replace the cab-driving industry, which has a strong union presence. While many taxi drivers in New York still struggle to earn a living wage, their union power gives them the ability to fight for fare increases, as they did in 2012. If we allow Internet companies with insourcing practices and no accountability to replace long-standing industries with organized worker power, low-wage workers will only suffer.

What can be done? Potential responses to this problem include regulating and mandating fair employment practices for these emerging companies or extending minimum wage protection to abstract “partner” employees. Cities in particular could lead the way in regulating these businesses, which would benefit their citizens by ensuring living wages and compassionate employer practices, and strengthen their economies. Whatever the answer, we must address it now. These companies are growing fast: Uber is believed to be growing at a faster pace than eBay in the '90s, and is now valued at $3.4 billion. We can’t let insourced workers be the modern-day agricultural and domestic workers, who were originally excluded from National Labor Relations Act protections and still fight to this day for many rights guaranteed to other workers. In short, while we debate a living wage on the national stage, we have to consider how to address the emergence of the unprotected, underpaid, exploited insourced workers. 

Lydia Bowers is the Roosevelt Institute | Campus Network's National Operations Strategist.

Photo via ThinkStock.

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