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David Rolf currently serves as president of the Seattle-based Local 775 of the Service Employees International Union.
Tim: What’s your background in dealing with workers? I know it’s quite extensive.
David: I have been an organized labor leader for 24 years.
Tim: How have things changed in those 24 years?
David: I talk frequently about how a lot of us were organizing essentially contingent workers, like janitors and home care workers, people who were, either through subcontract or through misclassification, or through creative legal categorization, not full scope employees of their true upstream payer. People who organized with Justice for Janitors or in Comcare viewed those efforts as part of a long-term effort to make those jobs into “real jobs.” What happened in those couple of decades is that real jobs became more like Comcare jobs and more like contracted janitor jobs. Through a variety of mechanisms, many of them having nothing to do with technology, work became less predictable, less secure, more poorly compensated, less benefited, etc. Those are long-term trends that date more to the origin of the transistor than to the origin of the smartphone.
Tim: Is it difficult to organize contingent workers? These are not traditional full-time factory jobs where labor has typically been organized.
David: For one thing, most of them are not covered by the National Labor Relations Act, which means that state and local laws can innovate and not be preempted. It was kind of the trifecta of federal labor law exclusion. They were publicly reimbursed independent contractors working in a domestic environment. So three out of the five exclusions from the Act apply to a lot of the people in that workforce. But we were able to design state and local laws to facilitate something very much like old school collective bargaining. All the Teamsters are now trying it here in Seattle with ride share drivers, which because they are independent contractors are excluded from the National Labor Relations Act. In retrospect, I worry we didn’t get creative enough when we had our moment, and we could’ve actually built a better labor law. Instead we copied all the elements of the ones we didn’t like that much to begin with because it’s what we knew.
Tim: There’s a big debate right now about whether jobs are being destroyed or jobs are being created. What’s your take on this?
David: We don’t know yet. The Labor Department’s finally getting funded to do a comprehensive survey of the space. The last time they did one might as well have been the Stone Age considering changes in technology and the maturity of the workforce. I think there’s essentially three credible hypotheses here.
One is that nothing’s actually happening. This is much ado about nothing and the majority of the growth in contingent work is people adding small income streams to their otherwise full-time or significant part-time employment. When I get into an UberX and I ask the woman driving me across town for an appointment what she does. She says, “I just got off shift at the hospital where I’m a medical social worker, and that’s my job. But my boyfriend is spending a year on sabbatical abroad and I’m saving up for a big international trip to go visit him. So I’m trying to get as much extra pocket money as possible.” That’s one hypothesis. It’s funny listening to the rhetoric of the platform themselves. Before they hit the challenges of misclassification in labor law coverage, they were insisting that they were changing the fundamental nature of work. And now they’re all pulling statistics showing that the supermajority of the people working on their platforms are doing it for a small number of hours a week primarily as extra income. That’s one hypothesis.
Another hypothesis is that the technology and the ability to profit from that technology for both providers and platforms is the next evolution of something that used to live on bulletin boards, subsequently lived on the Craigslist and Angie’s List, and now lives on these on-demand apps. That it’s not really replacing traditional jobs. It’s the stuff people always have done but in a more efficient way of matching the consumer need with the provider availability. I’ve always been able to hire a dog walker, but what used to be true is that if it was the middle of the day and I realized I wasn’t going to be able to get home to walk my dog, unless I have a regular dog walker I was SOL. Now I go to an app and a dog walker shows up, walks my dog, and the app sends me a report on how long they walked, how many minutes, how many miles, what happened, and verify that they locked up my place, and it’s all done through some magical thing on my phone. Arguably that’s not new work, it’s just a different way of distributing work in a way that is more efficient and that companies can charge a premium for.
And then the third hypothesis is this is a new way of working that is not suddenly being imposed on everybody but over time has grown significantly and is starting to replace traditional jobs both as a strategy for companies to get the work done and for workers to earn their income. I looked at this in my book and there’s surveys, there’s interpretations or extrapolations from data, but there just hasn’t been a really unbiased, comprehensive study of the contingent worker economy and its employment effects to date that can answer these questions definitively.
Tim: What parts of this discussion around contingent work, on-demand work gig work, etc. do you think is surprising and overlooked? What are we not recognizing?
David: If we look at the era in which we were assigning responsibility for what in many countries is called the the social contract to the employment relationship, the signal moment was 1950. This is when the Big Three automakers settled the contracts with the United Auto Workers that assigned health care, pension, and cost of living adjustment responsibility to the employer. Later they would even add more in terms of retiree health and legal service benefits. But what we did in America that was somewhat unusual was we privatized the social contract through the employment relationship. And that of course makes it much more expensive to be an employer and creates equally powerful incentives for people to not be an employer.
So four years after the Treaty of Detroit, when the transistor was only seven years old and there were no smartphones, a really smart entrepreneur, a blender salesman name Ray Kroc bought the marketing rights from his largest customer and essentially imported a relatively obscure business model from the sewing machine industry called franchising. This model allowed him to centralize all the profits and decentralize all the risk. So you had workers making poverty wages without benefits. Their “employers” were small business people who would sink their nest egg into a McDonald’s franchise. If these employers did well they were able to maintain an upper middle class lifestyle, but without the ability to compensate their employees well and with the obligation to ship about 20% of the proceeds out the door to the corporate center. And the corporate center simply had to control the marketing rights and a bunch of other things like worker’s compensation, insurance, and ownership of the supply chains, and most significantly the real estate in order to create a multi-sourced profit center where they never actually had to serve any food to anybody. All they had to do is control a bunch of legal rights over property, marketing, and supply chains and then they would collect all the money. It was brilliant from a business strategy perspective, but it depended in large measure on not having to pay the social contract costs that had been assigned to heavy industry and government in that point in our history.
That’s one thing I think people are overlooking. That the reaction to the Treaty of Detroit only took a few years. And by the 60s we had Kelly Girl which advertised that she will never slip a disk, never have a toothache, never have a migraine, at least not on your dime. This flexible, on-demand worker thing really has been with us for awhile. It was partly a way of luring people into the workforce for supplemental income, not career income, just like today’s on-demand economy. And then we saw the beginning of outsourcing and offshoring in the 70s and the use of subcontracting in the 80s. It was not the smartphone that gave us this desire by capital to escape the costs of being an employer. In everything from the way state governments design their home care programs to the way that the airline industry has moved into a subcontracted ecosystem after the Airline Deregulation Act, to Kelly Girl, to McDonald’s, you can see these examples of the workplace fissuring going back decades. I think people do forget about that. Uber is like more a signal that people are reacting to than it is necessarily the beginning of this.
The other thing I would just add, it’s corollary of all this, is people are now in this debate about do we need a third classification.
Tim: Yes, that’s a question I have. That seems like a bad idea.
David: It’s a terrible idea. Some very smart people are advancing this idea, and I think some of them quite naively, because it really looks like a full time employment act for employment lawyers. Because it’s already confusing enough for a lot of people to understand the difference between independent contractor and full scope employee, how much more confusing would it be if you had introduced a third classification with its own 20-item checklist of what makes that up. It seems to me that a more elegant solution might be to move away from multiple classifications altogether and to simply assign to every employer five responsibilities. Wages over $15 an hour, prorated down to the second if need be, workplace non-discrimination, safe workplaces, fair and humane scheduling, and a payment into a benefit fund that the worker owes. How silly is the health care mandate in ObamaCare that is not calculated as a percentage of payroll? It was done as a binary “yes” or “no,” depending on the number of hours you work a week. This predictably encouraged every retail and fast-food chain to do a hard cap of 29.7 hours a week for their employees to guarantee there would never be a need to pay the several hundred dollars extra in employer premiums.
It seems like you could design a much more elegant system that begins to decouple the social contract with the employment contract. Maintain the money in the system, but instead of having every employer responsible for a health plan, a retirement plan, and all kinds of compliance with state and federal insurance funds, just outsource that. Let a worker organization handle that and start to disincentivize misclassification, which is really what the current system incentivizes.
Tim: How would you advise businesses to think about this? What positive role can businesses play?
David: First of all, if your business depends on substantial misclassification in order to be profitable then you don’t need to be in business. We have a set of laws. If you can’t figure out how to conduct yourself according to the law and still succeed then you’re in the same category as a butcher who can’t afford to refrigerate. No one wants to buy the meat from that butcher and the public health regulators will shut them down. It may cost us a couple jobs along the line, but in the grand scheme of things we shouldn’t be shy about enforcing the law. And if the laws need to change then we can figure that out. But it’s interesting to me that Instacart reclassified a significant number of their people as W2 employees because they figured out that no one will use Instacart a second time if they get crappy avocados. The problem is if an employer wants to dictate quality, it involves a level of control of the workplace that only comes from employee status. So Instacart re-classed all of their previous 1099s as W2s so they could actually train them and fire them if they failed to meet quality standards.
This same process has already happened with all of the major homecare apps. The majority of them started out as 1099s. But homecare is an industry where quality matters. Because if you’re a thousand miles away from mom and dad and someone’s supposed to be toileting them, bathing them, transferring them, and helping them keep their checkbook, you actually care about whether that person is trustworthy. And so all of the homecare apps went to a W2 model employment so they could guarantee quality.
In my book, when largely channeling and quoting the work of Zeynep Ton at MIT, I talk a lot about how some businesses adopt high wage models in low wage industries and still win. Costco vs. Walmart, QuikTrip vs. 7-Eleven, In-N-Out Burger vs. McDonald’s, Cooperative Home Care Associates vs. the rest of the industry in New York. Southwest vs. other airlines. You can find plenty of examples of businesses that succeed on a high wage model even in a low wage industry. And so the other thing out there, if you are Uber or you’re Lyft, in addition to your misclassification challenges, why not just build a business model from Day 1 doing the right thing?
I was talking to woman who owns a farm in California Central Valley. She said, “We pay $15 an hour already. It’s just always been our philosophy that we pay our people decently. And if we can’t pay them $15 we shouldn’t be in business.” This becomes interesting when reflecting on the on-demand economy. It may turn out that a high wage model doesn’t actually work for all of the on-demand economy. Let’s say venture capital expects double digit returns and the consumer base is only willing to pay $50 for two hours of housecleaning. By the time you do the math of a $15 minimum wage plus a few bucks for benefits, times a couple of hours, plus overhead for technology and operations staff, you may find it impossible to deliver on the double digit rate of return. It may be that that house cleaning sector doesn’t belong on our smartphones. Maybe it belongs back on Craigslist or back on the bulletin board. And if higher labor costs dictate a lower return on investment, that’s actually not a problem for anybody in the world except venture capitalists. Houses have been cleaned for hundreds of years before they showed up and tried to figure out a way to monetize it on an app.
Tim: Do you know anyone who’s doing cooperatively or worker-owned apps?
David: There are a few examples of this, but there’s an antitrust law problem. You can do it with taxi cabs. In Seattle the taxicab companies have an app. The reason they can do it is because the prices in that sector are already publicly regulated. But let’s say you had a group of house cleaners and they said, “Let’s cut out the middleman. Let’s cut out Handy or TaskRabbit and let’s collaboratively set our prices. We’ll pay just a couple of percent off the top to maintain the technology, but instead of 15% going out the door to our investors, we are going to actually harvest that as savings for the customer and as more money in the workers’ pocket. It’s a rational proposition, but because independent contractors are considered business people, under the 1912 Sherman Antitrust Act, their collaboration around prices is considered an illegal conspiracy and restraint of trade.
Tim: It’s a monopoly.
David: Yes, or cartel is probably more accurate. So the house cleaners in Seattle can have a venture capitalist hire a technologist to run an app, and that person can set the price because they’re just distributing work on the platform, but when the workers themselves collaborate on price they’re breaking the law if they’re in the 1099 sector. And that’s the problem of with why you can’t cut out the middle man. It’s actually not a technological problem. The technology was developed by Microsoft Research, it already exists. It’s not a tech problem, it’s a legal problem.
Tim: How should workers be thinking differently about the world of work today?
David: Let me speak to a group of workers that I think matters the most in all of this which is low wage workers. I think high wage workers will be fine. Internet software engineers will be fine, lawyers and doctors will be fine. They will figure it out even if a bunch of things are going to have to change. I think low wage workers have got to stop trusting that their employers and their elected officials are going to have their backs because clearly they are not. What we’ve seen is 40 years of wages in decline for the bottom 50% of income earners. Half of Americans now make less than $17 an hour, 43% less than $15 an hour, 25% less than $10 an hour. We’ve seen a cost shift away from employers and governments towards consumers on both health and retirement costs. The most important thing workers can do is resist these forces and do things like the fast food workers have done and start going on strike, start forming new organizations, and demand what may seem to be impossible. When the first group of workers walked off the job for $15 in Brooklyn in 2012, that seemed like a laughable demand, but now it’s the new normal with 18 million American workers getting a substantial pay increase off of the dominoes that began to fall in SeaTac and Seattle in 2013 and 2014. I think the most important thing that workers can do is be demanding and to form organizations.
Tim: And not necessarily unions?
David: Unions are so inaccessible. Imagine if in order to practice the right of free speech or freedom of worship you had to first get a majority of your neighbors to sign a petition calling for it to happen. And then you have to have the government come in and conduct an election. And let’s imagine that the people of the next neighborhood over disagree with you. They could run a campaign to stop your neighbors from voting to give you free speech and they could go to court to file all kinds of motions to delay the election. Free speech would be a meaningless right. That doesn’t make any sense. If something is right it can’t be optional. But we’ve built collective bargaining as this optional right, and that’s a pretty useless system in the 21st Century. There are a handful of industries and geographies that are still relatively accessible for union organizing. But in general I think people should be demanding both local and state-level legal innovations around different models, or just building organizations independent of state actors and making demands on capital and business.
Tim: What skills right now do you think are really critically important for workers to have? There’s a lot of emphasis on STEM such as science, technology, and…
David: That’s nonsense. Look at what jobs the economy is producing: drivers, home care aides, child care aides, retail clerks, heavy laborers, movers. Even in Higher Ed faculty, the majority of jobs are now low wage jobs. People get their PhD’s then become adjuncts for years and years and years and have to teach nine courses to put together a salary of $32,000 a year. It’s certainly true that if you got aptitude in math and science that becoming an engineer or a research scientist is going to be more remunerative than say becoming a math teacher in a high school. But the problem in the economy writ large is not that we’re under producing college graduates. We’re actually over producing college graduates for the number of jobs that require a college education. There may be some labor market inefficiencies and skills mismatches in as much as we overproduce lawyers, but under produce engineers. But the purported skills gap is largely another money grab by the tech sector to convince a government, to whom it does not pay any taxes, to train its future employees so they don’t have to pay money to do it. That’s some silliness. The jobs the economy is actually producing are low wage jobs. The only way to change that is to make them into high wage jobs. God didn’t make an automobile worker a high wage job, humans did that. And we could do the same thing with baristas today if we wanted to. It’s just a choice.
Tim: What should we really be focusing on as a society? The fight for 15 is obviously one of your focal points. But in our conversation you’ve made it clear it is not about Uber…
David: The on-demand economy stuff is important because it’s new and it becomes a way of talking about this stuff. I’d rather get the on-demand economy organized now when it’s small and young than to wait until it becomes the next Wal-Mart and it’s unorganizable. I don’t think the on-demand economy is irrelevant by any means. There’s a lot we don’t know yet. We can’t really predict whether in 10 years this is going to be how everybody works or this going to be a fad the same way we now remember floppy disks.
Tim: So that’s one thing to focus on: organizing the on-demand space. But in the contingent worker space as a whole, what do you feel are the core issues that we should be looking at?
David: Here’s my overall hypothesis. We need to rewire all of our public policies in order to solve for the creation of a large, stable, accessible, and growing middle class. I don’t think this is that mysterious. Workers need organizations that are powerful, scalable, and sustainable. Our trade policy needs to align towards the creation of good jobs here. Our monetary policy needs to actually aim for full employment as much as it aims for low inflation. Our criminal justice policy has to focus on re-entry and re-employment. Our immigration policy has to focus on allowing people to actually bargain for better jobs with new employers, which means having full legal rights. We need to rewrite the rules of power so they work for everyday Americans. This is not that mysterious. How to get the power to do it is hard. There’s no reason we have to be transferring the costs of higher education, healthcare, and retirement onto individual consumers who increasingly can’t pay. There’s no reason that any of this has to happen. It’s just a reflection of who has power.
Tim: To summarize that, you’re talking about a systems-wide rethinking of the social infrastructure that solves for a strong middle class.
David: Yes, that’s exactly right. We used to have the largest middle class in the world, now we have the 27th largest middle class. Germany pays its automobile workers two times what ours can make and they make twice as many cars. It’s simply not true that globalization and technology require low wages and instability, and it’s not true that we bankrupted ourselves through overspending on social programs. This is misinformation that is designed to intimidate workers into being happy with what they have. It’s in the political and economic interest of some people to make us believe that becoming a low wage nation is inevitable. It’s hardly inevitable. Being a low wage country is a choice and we should make it different.
Tim: Thank you so much for your time.