The Current Wows and Woes of Silicon Valley – Big Tech, the Gig Economy and its Workers
By Natalie Rauscher
Last year, I published the article Welcome to Uber Land on the gig economy giant Uber. Uber had just started trading publicly and had delivered disappointing initial numbers for investors. The company had been struggling for years to prove that it was becoming profitable any time soon.
This year, gig economy companies like Uber and other big tech giants are facing a crisis of a different nature altogether. The Corona pandemic has hit the US more intensely than any other Western nation so far. Millions of Americans have contracted the virus, and by the end of June 2020, over 120,000 Americans have died of or with COVID-19. In many regions, lockdowns and social distancing rules, as well as distant working in the home office became the norm for several months starting in March 2020. The American economy witnessed a sharp downturn when these measures were put in place. Many Americans immediately lost their jobs and thus their social protections, which was a much more intense shock to the labor market than in other Western economies. Many states and cities moved ahead in May and June to reopen their economies, but this has proven to be fatal in many places with the virus roaring back to life. Many states had witnessed low numbers of COVID-19 patients or thought they had the virus under control and thus moved ahead to open shops, restaurants, cafés and bars without robust testing and tracing mechanisms in place and without requiring physical distancing or wearing masks in public spaces. In California, which introduced the first strict lockdown in the country, but also in Florida, Arizona, Texas and many more states, the numbers of COVID-19 patients have been growing dramatically in recent weeks.
Reopening measures were understandable to a certain extent. States wanted to move towards reopening the economy because of the dramatic economic downturn witnessed through the novel Corona virus pandemic. The American economy is seeing the highest unemployment numbers since the Great Depression in the 1930s, and GDP growth downturn is expected to be huge, widespread and long-lasting. Nevertheless, the move towards reopening seems to have come too soon in many places, and initial success in containing the virus could turn out to have been in vain.
Several sectors in the American economy have been hit particularly hard by the Corona virus pandemic. Especially face-to-face services have seen the steepest decline due to the lockdown, social distancing and closing rules. Large parts of the gig economy have also seen a dramatic decline as a result of these measures. The business models of many of the gig economy giants of the Silicon Valley like Uber, Lyft or Airbnb have suffered a serious blow, while other big tech companies are thriving.
Amazon, Google, Facebook, Microsoft, Apple or Netflix have all profited immensely from the crisis because of the products they offer. Amazon has been the number one online shopping destination in the US for years, but this intensified further during the crisis when people were afraid to leave the house and turned online even to shop for daily necessities. Amazon’s strong presence and delivery network in the US proved vital for many people who wanted to stock up on groceries, sanitizer or home office supplies. With its wide range of products, Amazon could satisfy all of these consumer needs. Additionally, Amazon has become hugely successful with its cloud computing service that offers digital storing space in the cloud, especially for companies. Alongside Amazon, Google and Microsoft have become the largest providers of online cloud space, which has become one of the most important components of the digital infrastructure for companies. These three cloud-computing giants are “swimming in cash” and are offering discounts for companies also using their software. Microsoft has seen a surge for their project-management application Teams that lets groups of employees work on projects together remotely and offers communication tools like video conferencing or chat functions. Microsoft reported that the number of users on Teams has grown by 37 % in recent months. Additionally, new players were added to the big tech mix. Zoom, the video conferencing application, has seen the number of calls and users soar during the lockdown period when so many people were suddenly asked to work from home. It seems to have also emerged as the number one application for schools and universities conducting online classes and lectures in the US. Although people were quick to develop a love-hate-relationship with the communication tool (Why Zoom is terrible) and some profound security mishaps came to light(Zoom’s security woes were no secret to business partners like Dropbox), it has become essential for home office workers and students alike.
Companies like Apple or Netflix have profited from the pandemic in other ways. As people have stayed at home much more than before, entertainment has also moved to the home front. Streaming services have thus skyrocketed in recent months. Apple, who was expected to struggle due to lockdowns in the Foxconn factories in China that assemble Apple products like the iPhone, could alleviate these struggles through increased revenue from app sales, Apple music or the new Apple TV streaming service offering original content. And although Netflix is notoriously cagey about the numbers of subscribers or the success of individual productions they offer, it is very likely that they were able to add many viewers on a worldwide scale.
Yet, for gig economy businesses, the picture is a lot more mixed. Although there are some gig platform services that became more popular during the pandemic, most of the big gig economy businesses have seen the basis of their business disappear. Delivery options through Grubhub, Postmates, UberEats or DoorDash have been in high demand during the lockdown when people could no longer go out to eat but did not want to miss out on their favorite meals. This was an option for restaurants to reach their customers despite having to close down actual dining. Yet, more and more restaurants have become fed up with delivery platforms that charge the restaurants up to 40 % on an order. Thus, despite platforms claiming to help the survival of restaurants and small shops during the pandemic lockdowns, many places feel they are squeezed out financially by the platforms without having any say in their business practices.
With regard to workers in the industry, delivery drivers for these platforms still have the possibility to earn some extra money during the current economic crisis, which many welcome despite the higher risk to contract COVID-19 or spread it to family and friends. As unemployment numbers have soared, many people have been waiting a long time for benefits to arrive, if they are even eligible for them at all. Although the federal government introduced a program, the Pandemic Unemployment Assistance, to alleviate the strain on independents, freelancers and gig workers during the pandemic who would normally not qualify for unemployment assistance, the sheer number of applications seems to have overwhelmed the program and thus money only arrives very slowly. But for many gig workers, this assistance is crucial as the basis for their income has vanished almost altogether. This is especially true for ride-hailing drivers on Uber, Lyft or any other such platform. When lockdowns were introduced in March and many people stayed at home to work, not venturing any further than the next grocery store, hailing a ride on Uber became obsolete for many. Additionally, travel bans from and to most countries meant that the steady stream of tourists requesting rides to the airport or around town in places like New York City or San Francisco came to a halt.
In the past, gig work on platforms like Uber was an economic life-line for many people, making it possible and easy to earn extra income in times of financial squeezes or an economic downturn. Yet, this economic crisis is different from anything witnessed in the recent past. Gig workers such as Uber drivers are extremely vulnerable during this crisis, not only because the basis of their economic activity has vanished, but also because they are much more exposed to the risk of contracting and spreading COVID-19 themselves. These workers come into contact with many people on a daily basis, and social distancing is only partly possible. Additionally, many people who work on platforms fulltime do not have health insurance, and if they have one through their spouse or a ‘day job,’ this might also be on the line with so many workers in the US currently being laid off. Because of the status as an independent worker on the platforms, paid sick leave or minimum pay are also not provided. All these issues are not new and the status of workers or their possible misclassification as independents instead of employees has been one of the most hotly debated issues around this type of work.
Even before the outbreak of COVID-19, public scrutiny of the practices of many gig economy platforms seemed to have intensified. Places like California, home of the Silicon Valley tech philosophy that ‘acts first and asks forgiveness later,’ has been discussing ways to limit the consequences of the platforms’ unchecked business practices. In 2019, a state law was introduced that limits the use of independents by narrowly defining who is an employee and who is an independent contractor. Uber drivers and many more gig workers would not qualify as independents under this law as the platforms leverage control over workers who are engaged in regular business of these platforms. In May 2020, Californian authorities moved to sue gig economy platforms over their (deliberate) ignorance of this new law. On the company side, many gig platforms have moved to sue as well and try to challenge the law in court. But especially now that so many independent workers engaged on these platforms face economic hardship due to the coronavirus pandemic and the economic downturn, past arguments of economic opportunity and autonomy for workers ring shallow. Many workers are not even making minimum wage on these platforms, do not qualify for basic worker protections like unemployment benefits, sick leave or health care benefits and are exposed to the threat of a spreading virus without much support from the platforms when it comes to hygienic minimum standards and the right equipment (such as face masks, sanitizer and other protective equipment). Although many of these issues were discussed before the current pandemic, they remain unsolved, and their consequences have come into focus even more intensely now. Time will tell whether this crisis will eventually have the momentum to solve some of the most controversial issues of the gig economy in the future.
Check out more on this matter in my episode of the Corona in den USA podcast by the HCA (in German).
About the author:
Natalie Rauscher is currently pursuing her PhD at the Heidelberg Center for American Studies where she is also working as research associate in Political Science. Her dissertation looks at political and public discourse around the topics of the future of work and automation in the U.S. She is also interested in social media platforms and social movements. She is a founding member of the HCA Graduate Blog.
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Check out her chapter Future Unknown: How Digital Technologies and the ‘Future of Work’ Are Unsettling America in Mobilization, Representation, and Responsiveness in the American Democracy, edited by Michael T. Oswald, Palgrave MacMillan.
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