Inflation is helping gig companies like Uber – and hurting their workers

The Washington Post / Gerrit De Vynck, Faiz Siddiqui, Nitasha Tiku

16:00 JST, August 8, 2022

Debbie Welker quit working as a delivery driver for Shipt and Instacart in Dallas earlier this year because gas prices were cutting too deeply into her earnings.

She would work 12-to-14-hour days, seven days a week, to make about $1,200, but then would have to use some of that to pay for gas and other expenses. People stopped tipping, or tipped between $2 and $5 for an hour of shopping, something she thinks was affected by inflation. “After deductions, I was making less than minimum wage for the hours I was working or sitting in a store parking lot waiting for an order,” added Welker, who started during the pandemic.

Inflation is putting new pressure on the burgeoning workforce of gig workers who deliver food, drive passengers and perform other tasks on the technology platforms that so far are surviving the unsteady economic climate relatively unscathed. That group of people, many of whom do the work part time or even to supplement income with a second job, has grown to a major portion of the workforce over the past decade, built on promises of flexible work with high pay.

But workers now say that, while fees and prices are soaring for consumers, they themselves are struggling to make ends meet, according to a dozen gig workers who spoke with The Washington Post. Meanwhile, the companies say more drivers are joining the apps as a side gig to combat inflation, which gig workers say is increasing competition for the jobs that are out there.

If a serious downturn occurs, as many economists predict, gig workers could be especially vulnerable. An influx of newly unemployed workers turning to gig work platforms could compete with those already there, eroding certain opportunities to steadily earn through the apps.

“With a significant influx of workers, people are going to be getting fewer shifts and fewer gigs,” said Erin Hatton, a professor at the State University of New York at Buffalo who studies labor and the gig economy. “That would in general have pretty significant negative consequences for workers who are already there and the workers that are coming in. There is going to be a finite amount of work.”

Executives at Uber, Lyft and DoorDash all said during recent earnings calls that economic pressures had an upside for their companies, bringing those who are seeking extra income to their platforms. Uber chief executive Dara Khosrowshahi said that more than 70% of new drivers joining the app have said inflation was one of their reasons. New driver sign-ups in the United States are up more than 75% over a year ago.

“No one wishes for a tough economic environment or elevated inflation affecting so many of us, including Uber drivers, but at the same time, from a competitive standpoint, there is no question that this operating environment is stronger for us,” Khosrowshahi said.

Lyft, too, has a strong supply of drivers, executives said on their latest earnings call, as the number of total active drivers stood at the company’s highest figure in two years. A recession could also bring an influx of new drivers, Lyft chief executive Logan Green said on the call.

The “gig economy” is a loose term for the ecosystem of technology platforms and informal networks that connect independent workers with piecemeal jobs.

Millions of Americans have found piecemeal work as independent contractors for decades, but the rise of companies such as Uber, Lyft and DoorDash has made it even easier for people to find gig work easily. Many use the platforms to make extra cash in between full-time or part-time work, while others have made driving for Uber or delivering for DoorDash their full-time job.

For the companies, the dynamics result in a flexible, on-demand workforce consisting of workers who are not typically subject to employee wage requirements, job protections or benefits such as health insurance. It means the workers are cheaper and the companies are not bound to provide them with work. Even retail giants such as Amazon and Target have their own gig workforces, with Flex and Shipt, respectively.

Workers and activists have fought for years for better protections for gig workers, who have to provide their own cars and equipment for the work, and do not receive health insurance or other benefits from the gig companies.

Uber spokeswoman Alix Anfang and Lyft spokeswoman Katie Kim said the influx of drivers speaks to the attractiveness of the companies. Both also pointed to earnings rates that are up significantly year-over-year, with double-digit percentage increases, both to the same rate of $37 per hour of giving rides.

DoorDash said in a recent letter to shareholders that in the current environment, its flexibility makes it an attractive option. Both Instacart senior director of shopper engagement, Natalia Montalvo, and Shipt spokeswoman Danielle Schumann said the companies have worked to help shoppers offset gas prices. Instacart has also updated the app to encourage higher tips.

Some sectors, like food delivery and the taxi industry, have been upended by the gig platforms. Restaurants used to employ their own delivery drivers as part-time or full-time workers, but now apps such as DoorDash, Seamless and Uber Eats handle much of the food delivery business in major cities. The taxi industry in most cities across the country has also been decimated by the rise of Uber and Lyft.

According to a 2021 survey from the Pew Research Center, 16% of Americans had used an online platform to earn money doing gig work. Hispanic people and those with lower incomes, as well as people under 30, were more likely to do gig work, according to Pew. Moreover, 7% of all American adults with lower incomes said gig work had been their main job over the previous year.

It is unclear if or when a recession is coming. Unemployment is low, but the government stimulus that helped many weather the pandemic has dried up. Rising prices have made many Americans, especially those with lower incomes, focus their spending on gas, food and other necessities. That is causing some big companies, including Walmart and Best Buy, to warn investors that sales are starting to falter.

Technology companies are still pulling down billions of dollars in revenue but have begun freezing hiring and warning of a recession, telling their employees they will need to work harder and be more productive. Cracks are forming in an otherwise strong economy.

On Friday, the Bureau of Labor Statistics said the economy added 528,000 new jobs in July, blowing away predictions of a much lower number. The unemployment rate is now 3.5%, the same as it was before the pandemic began in February 2020. The robust job numbers contrast with slowing consumer spending in some areas and the fact that the economy has shrunk slightly overall so far this year.

While companies say they are increasing wages, some workers say otherwise. “It does not take a calculator to see the rising expenses are outpacing the alleged increase in pay,” said Jerome Gage, a Lyft driver in California who is now down to driving just five hours a week and has found a separate full-time job.

He said the higher wages on Lyft, which executives referenced on the conference call, may be at least a partial reflection of incentives to get drivers who had stopped because of high gas prices back onto the app. “That is all temporary,” he said. “They will pull the rug from under us as soon as they get enough drivers back on the road.”

Current economic conditions work in favor of the gig companies, experts said. “Gig work looks more attractive on the surface than retail jobs, but there are hidden things that eat away your wages,” said Lindsey Cameron, a professor at the Wharton School of the University of Pennsylvania, who studied the impact of the pandemic on gig workers. The price of rides may have increased but not at the same rate as worker expenses, Cameron said. “They are not as good jobs as they used to be in 2014 and 2015, but they are still better than so many other options,” she added.

Raya Denny, 23, of Springfield, Mass., said her earnings on Lyft have remained stable and enough to cover her expenses. There are factors outside her control, however. A few weeks ago, she said in an interview arranged by Lyft, she ended up with a screw in her tire, a costly hiccup. “I have been earning more with Lyft, but the problem is that the pandemic is getting more and more expensive,” she said, adding that her earnings have been good.

Gig companies rely on trip-count bonuses and demand-based price surges to quickly reward newly acquired drivers after luring them onto their digital platforms. That environment, flush with incentives, can give drivers and couriers the impression of easily attained earnings where a bonus is always around the corner.

But drivers describe a dynamic where suddenly, once they have spent enough time on a platform, those rewards quickly erode. The long-haulers are left relying on apps that force them to work harder, for longer, to earn the same amount as before. And they find themselves burned out by the time they have grown to fully appreciate the realities of the gig economy.

LaDonna Hamilton has driven for Uber in the Los Angeles area for five years. She stuck it out through the pandemic when her rides dropped to nearly nothing. But recent inflation has dealt the final blow, as high gas prices, maintenance costs and the rising cost of insurance have all cut into her take-home pay. “It takes twice as long to make the same amount of money,” compared with when she started driving, she said, adding that she plans to quit soon.

Faced with the increased cost of living and high gas prices, drivers have to work harder than before just to rack up diminishing returns. More drivers means fewer opportunities, they say, as they struggle to find lucrative trips because so many peers are battling to scoop up the best fares.

Ben Valdez, an Uber driver based in Los Angeles who also organizes for the labor group Rideshare Drivers United, said gig workers who turn to the apps for extra income can find themselves trapped in a “vicious cycle.” “You get accustomed to the money and when they drop rates and they tell you that you have flexibility, it just means that you have to work more to make the same amount of money,” he said.

If the United States does go into a severe recession, gig workers could suffer further, said Enrique Lopezlira, director of the low-wage work program at the University of California at Berkeley’s Labor Center. “Consumer spending is also going to drop severely, so I’m not sure how many real opportunities for gig type of work there will be, or whether people will be able to live on those kinds of jobs,” he said.

Gig work takes many formats beyond driving and delivery work. Freelance platforms such as Fiverr and Upwork have created spaces for graphic designers, software developers and digital marketers to find clients without having to have a full-time job.

Lindsey Chastain, a former English professor and journalist who lives in Skiatook, Okla., started working as a freelancer full-time in March, after the small newspaper where she worked closed, increasing her reliance on Fiverr and Upwork. So far, it has worked, but inflation has bitten into her earnings. She needs to pay subscription fees for a collection of software programs to be compatible with her diverse range of clients, and costs are going up. “All of these programs have gotten more expensive. If work goes down, my operating costs do not decrease, they have actually increased,” Chastain said.

Abby Forman, director of communications at Fiverr, said “people are using it as a way to bring in additional income, as costs continue to rise,” and that data shows they generally can raise rates without consequence. The flexibility of gig work is still attractive to many. But many fear an economic downturn. “I do have a fear of a recession, I do have a fear of work drying up,” Chastain added. “Am I going to have to get a job at Walmart?”