In 2015, author Steven Hill’s “Raw Deal” hit book stores.
Reviewing the book for the San Francisco Chronicle, I wrote: “For just as (Hill) perfectly captures the anxiety of the American worker in today’s increasingly digital economy, he directs the same populist rage toward on-demand companies…effectively drowning out much of anything worthwhile he has to say.”
I obviously didn’t like the book. But nearly 3 years later, Hill’s scathing critique of the growing wealth and income gap in the United States, as evidenced in the growing gig economy dominated by Uber and Airbnb, rings true.
Hill warned America was becoming a nation of contract workers, driving cars and renting out homes to make ends meet because they lacked regular pay and benefits. Left to fend for themselves, Hill argues, these workers will no longer be able to afford the goods and services the U.S. economy produces.
“In a sense, employers and employees used to be married to one another, and there was a sense of commitment and a joined destiny,” Hill writes. “Now employers want a bunch of one-night stands with their employees, a promiscuousness that promises to be not only fleeting but destabilizing to the broader macroeconomy.”
Airbnb appears to have reached a similar conclusion. Not the part about paying contractors wages and benefits. But rather the need for a more substantive relationship between Airbnb and the people crucial to its business.
Last month, Airbnb wrote to the U.S. Securities and Exchange Commission, requesting the agency allow the company to issue stock to hosts.
“Airbnb believes that twenty-first century companies are most successful when the interests of all stakeholders are aligned,” the letter said. “For sharing economy companies like Airbnb, this includes…our hosts who use our marketplace to list unique accommodations and experiences.”
“As a sharing economy marketplace, Airbnb succeeds when these hosts succeed,” it continued. “We believe that enabling private companies to grant hosts and other sharing economy participants equity in the company from an earlier stage would further align incentives between such companies and their sharing economy participants to the benefit to both.”
For years, Airbnb and other on demand giants like Uber have vehemently fought efforts to classify gig workers as employees. Offering pay and benefits to freelancers would undermine their cost structure. But Airbnb’s letter suggests that the company realizes that flexible hours and extra cash is no longer sufficient compensation to gig workers.
The U.S. economy has never fully recovered from the 2007-2009 Great Recession, the country’s worst economic downturn in nearly 80 years.
Real wage growth, which considers inflation, has barely budged, despite a tight labor market and strong GDP growth. From August 2017 to August 2018, real average hourly earnings increased just 0.2 percent, according to the federal Bureau of Labor Statistics.
Unemployment stands at 3.9 percent but the percentage of the adult U.S. workers who are underemployed (those who work part time or earning wages significantly below their education and professional qualifications) could be as high as 14 percent.
The stock market is performing well but fewer Americans are owning shares. In fact, stock ownership has grown increasingly concentrated among the richest Americans, according to study on household wealth published last November by the National Bureau of Economic Research (NBER).
In 2016, people who made $250,000 or more a year (5.2 percent of U.S. households) owned 60.5 percent of all stocks; in 2001, the same income group (2.7 percent of U.S. households) owned 40.6 percent of all stocks.
Or put another way, the top 10 percent of U.S. households by wealth own 84 percent of all stocks in 2016.
In lieu of this reality, SEC Chairman Jay Clayton recently said that he wants to make it easier for Main Street investors to access the private markets, including the stock of unicorn firms like Uber and Airbnb. The private markets, Clayton noted, is awash in capital and ordinary investors, not just rich ones, should be able to participate.
With its request to the SEC, Airbnb also seems to be saying it want to share the wealth to a broader group of people.
Of course, equity is not really a substitute for income and benefits. In his book, Hill said companies should create something called a multiemployer plan in which they pay into a fund to help pay for the health care costs of gig workers.
Companies could also contribute to Individual Security Accounts, he said, in which employers would pay into each worker’s account a pro-rated amount to subsidize benefits like paid sick days, vacation and holidays, based on the number of hours people worked or a percentage of gross wages.
Three years ago, when I reviewed Hill’s book, I would have said that’s unlikely to happen. Today, given Airbnb’s stock plan, we’ve made a small, but potentially significant, step towards this vision.
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