Gig Economy Growing in Wisconsin, Despite Early Pushback
Independent contractors, temporary employees, and other so-called “contingent” workers make up a growing share of the American workforce. According to a 2015 report from the Government Accountability Office, contingent workers accounted for 40.4 percent of employed workers in 2010, up from 35.3 percent in 2006.
In Wisconsin—and elsewhere—companies that make up the “sharing” or “gig” economy are forming and expanding. However, some parts of the sharing economy are not being embraced with open arms, and there are lingering questions related to the classification and rights of workers who “gig.”
The sharing economy, while somewhat difficult to define, is likely larger than most people realize. A 2016 study by the Pew Research Center found that 72 percent of American adults had used at least one of 11 shared or on-demand online services. Many of these services, such as ride-hailing apps and grocery delivery, involve a gig worker. However, Pew also considers transactions like buying secondhand items on Craigslist—a website that was popular long before the era of Uber and Airbnb—to be part of the sharing economy.
Most people are familiar with consumer-facing businesses in the gig economy. But the field also has a lesser-known, business-to-business side, says Kevin Kiser. He’s head of brand strategy and communications at Bunker, a San Francisco-based startup that opened an office in Madison, WI, last year. The company’s software helps businesses that hire freelancers verify that they have current and proper insurance policies—covering workers’ compensation, for instance—for the type of work they’re brought on to do.
“Independent contractors are vast,” Kiser says. “We’ve found there’s a lot of pain in managing that continued workforce. We provide software to enterprises or staffing agencies for them to manage insurance for all their independent contractors.”
Bunker, which launched in 2015 and counts Madison-based American Family Ventures among its investors, also helps freelancers purchase new policies if they don’t have the right coverage for a particular job, Kiser says.
Bunker is an example of a company that aims to make life easier for gig economy workers and organizations that use them. Most of the controversy around the sharing economy in the past several years, meanwhile, has centered around consumer-facing services like Uber and Airbnb. Specifically, there’s been a fierce and wide-ranging debate over whether such companies should be welcomed or shunned upon entering new markets.
One local flashpoint occurred in 2014 as a result of Uber and ride-hailing rival Lyft coming to cities in Wisconsin, including Madison. The city’s mayor, Paul Soglin, opposed the companies’ right to operate in the city, in part because they were not subject to the same regulations as taxi companies, which have to do things like provide round-the-clock service. Those objections were rendered moot in 2015, when state lawmakers passed a law that exempted Uber, Lyft, and their competitors from most of the regulations that govern other transportation services.
Still, in Portland, OR, and many other cities across the country, residents continue to express loud opposition over what they see as illegal behavior by gig economy companies. In turn, those companies are becoming more proactive about heading off criticism.
Carrol Chang is a general manager at Uber, where she oversees operations in several Midwestern and Great Plains states, including Wisconsin and Minnesota. She says the perception that Uber’s approach is to enter a new market, build up a loyal base of riders, and then sort out any legal matters afterward, misses all of the work that Uber does before setting up shop somewhere new.
“It is essential for us to work with regulators, to work with our counterparts in legislative bodies, to work with these bodies that exist to protect the public,” Chang says. “We really are moving things forward, in [the] shared interests of expanding technology—expanding safe, affordable, and reliable transportation. But we want to do it in a way that’s working collaboratively.”
She points to two cities in Minnesota—Rochester and Duluth—as places where local leaders wanted to make sure they had all of the necessary information about what might result from Uber coming to town. “The Rochester City Council had said, ‘We’re thinking about this. We want to make sure that we do this right,’” she says. “And so we respected that, and we waited.”
In addition to what some detractors view as a play-by-your-own-rules regulatory structure, Uber and Lyft have also been criticized for the fact that they profit from rides provided by drivers who are classified as independent contractors, meaning they’re not entitled to all the same perks and benefits as corporate employees.
One of Wisconsin’s hottest startups, at least as measured by the amount of venture capital it has raised, would have something to say about that. EatStreet, which develops food-ordering technology, has raised more than $40 million from investors since launching in 2010, and has recently joined the contractor-or-employee debate.
EatStreet’s core business model involves providing software that allows hungry users to place orders through the startup’s website or one of its mobile apps. Most of the restaurants that EatStreet works with either have their own employees deliver orders, or outsource delivery to a service such as Austin, TX-based Mr. Delivery. These services typically classify their drivers as independent contractors, says Matt Howard, co-founder and CEO of EatStreet.
However, some of those contractors saw their employment status change earlier this year following EatStreet’s partial acquisition of Zoomer, a Philadelphia-based food delivery startup that is no longer operating. Under the terms of the deal, EatStreet bought out Zoomer’s contracts with about 1,000 drivers. Howard says EatStreet then hired them as “W-2” employees with benefits.
(W-2 refers to the annual tax form organizations issue to their employees. It is often used to distinguish these workers from independent contractors, who are sometimes labeled “1099 employees,” after a different tax form.)
“We have taken the stance of going W-2 as the right path in our mind,” Howard says.
EatStreet, which Howard says had about 150 employees prior to the Zoomer deal, increased its headcount seven-fold as a result of the decision.
Still, Howard says that most of EatStreet’s direct competitors, as well as other well-known companies associated with the gig economy, continue to use independent contractors. Only time will tell whether many of these businesses feel they, too, can strike the right balance of employee happiness and cost control by doing more for the contractors who have played an integral role in getting them to where they are today.