By Lina Moe, James A. Parrott, and Jason Rochford
Apps and algorithms have had a profound impact on the way we live and work. In recent years, the rise of on-demand labor platforms (e.g. Uber and TaskRabbit) has dominated headlines and offered one vision of what the future of work might hold. While contract jobs mediated through labor platforms promise flexibility and the opportunity to earn supplemental income for some workers, such “gig work” is often unstable, low paid, and lacks the basic labor protections and benefits afforded to traditional employees.
In the wake of California’s groundbreaking AB5 legislation, which subjects employers to an “ABC test” that narrows the guidelines for which companies can classify their workers as independent contractors, New York State lawmakers have begun exploring similar measures to better protect workers against misclassification and exploitation. However, much of the focus in Albany has been limited to the employment status of on-demand platform workers for companies like Uber and Postmates. But there is in fact no good reason why the debate about gig workers should be limited to platform workers. This report will argue that the misclassification of workers as independent contractors is much broader than just the platform sector, and that many of the largest low-paying industries utilize significant numbers of independent contractors who likely are misclassified.
This report estimates that there are about 150,000 app-based independent contractors in New York that represent only 1.6 percent of the state’s overall workforce and constitute about 17.5 percent of over 850,000 low-paid independent contractors in the state. This much broader category of independent contractors labor under similar low-paid and precarious conditions.
These independent contractors work in low-paying industries with median annual earnings reported as $20,000 on a largely full-time basis. The largest of these industries (personal services, construction, transportation, retail, and building services) are those identified by the State’s Joint Task Force on Worker Exploitation and Employee Misclassification as “industries with the highest rates of employer noncompliance and where workers are least likely to come forward, for fear of retaliation.” There is ample reason to suggest that such workers who are not on a company’s books as payroll employees are, in fact, misclassified independent contractors.
The demographic profile for independent contractors working in low-paying industries is similar to that of standard payroll employees who work in the same low-paying industries, but with slightly higher shares of male, older, and foreign-born workers. Other than construction and transportation, a fairly high proportion of independent contractors in these industries are female. In New York City, two-thirds of low-paid independent contractors are persons of color, with particularly high concentrations in the personal services and transportation industries.
Independent contractors have missed out on the benefits of New York’s historic recent minimum wage increases that raised the inflation-adjusted annual earnings of standard payroll workers by 20 percent or more from 2013 to 2018. Earnings are so low for self-employed unincorporated independent contractors that over a quarter (27 percent) are covered by Medicaid while 20 percent do not have any health insurance coverage. The occupational fatality rate for self-employed workers is over three times as great as it is for private payroll employees.
Thus, app-based independent contractors are part of a much broader group of low-paid independent contractors in New York State whose work status warrants examination and clarification. In addition to enduring low pay, these workers receive little to no benefits and are not covered by labor protections such as the minimum wage, unemployment insurance, or workers’ compensation (with the exception of FHV drivers).
James Parrott is Director of Economic and Fiscal Policies at the Center for New York City Affairs. The report was co-authored with two New School graduate students, Lina Moe (NSSR Economics MA program) and Jason Rochford (Milano Public and Urban Policy PhD program).
This post originally appeared on The Center for New York City Affairs website.