Dave Ashton, founder of SnapCar, a French on-demand transportation company, has posted his “Case Against Full-Time Employees.” The piece is receiving tremendous amounts of attention on LinkedIn today, nearly a quarter million views as of this writing.
Ashton’s is a one-sided argument for calm amidst the radical changes in organizations that are shaking the foundations of industrial employment. There’s no doubt we need calm deliberation at this time, but the part-time/full-time dichotomy is a false one. It’s time to think more broadly about the role on-demand intermediaries play in the local economy.
Following the lead of our panelists did at BIA/Kelsey NOW, Ashton argues the keys to the kingdom lie in the supply-side of the labor equation:
It’s mostly thanks to technology. Geolocalization has enabled what is truly a revolution: the virtually costless pooling of supply-side resources. It’s the pooling that foments greater supply and incites demand from a broad audience, enabling independent contractors to earn a living in ways they previously could not. That, along with the demand you provide for their services, is what is attracting them to gig economy jobs.
While I agree that organizations now have the logistical capability to manage on-demand labor, Ashton’s analysis doesn’t do justice to the depth of the problem. It is no longer a matter of thinking in terms of full-time vs. part-time labor, but developing systems that minimize downtime for labor and recognizing the value of their ongoing skills-building made available to organizations on-demand. An on-demand employee should probably make more than a full-timer, because they carry all the risk and must invest in their job competence to stay current. Yet, Ashton shows them compensated at the same rate, just through different engagement structures:
The result is a very misleading picture of the relative compensation of full-time and on-demand workers. The difference in tax rates reflects complexities of the French tax system, but at the end of the day on-demand workers pay the same or more in taxes because they are self-employed and must shoulder the cost of calculating and paying French social security taxes themselves.
Many on-demand companies conveniently neglect the reality that having on-demand access to reliable workers — for any type of task, not just manual ones — costs more on an hourly basis than full-time labor in most fields. Any consultant who has had to carry their own health care, training costs and other G&A functions necessary to interact with client billing systems can justify their increased price, because they do not require the client carry the cost once they finish the project. Why does this not apply to all on-demand labor?
Anyone responding to that question, “Well, these people just drive cars,” is missing the obvious fact that it requires self-management skills, customer relationship savvy and significant technical investment to play in the on-demand market. A smartphone may look cheap to some executives, yet it is a major purchase for most people. Phone subsidy programs are a double-edged sword for on-demand workers, because they serve as a lock-in mechanism for the on-demand provider, even if they lower the barrier to entry for low-income workers. Remember, these people are simply small businesses of one, with all the burdens of operating that business.
Ashton also neglects the social cost of health insurance. His analysis simply wipes out the problem by ignoring it. Business needs to invest in society to retain access to consumers. If we abandon workers to fend for themselves, educate themselves, support their retirement and insurance burdens (in France or anywhere else), we will eventually lose them as customers as they cut back in response to the menial wages offered on-demand. At NOW, our VC panelists warned explicitly that growing prosperity is required, not optional, for the on-demand market to grow.
I’ll offer this alternative view of the FTE vs. On-Demand argument for discussion: Both the rider and driver are an on-demand customer now. Each needs to see the clearly articulated value — and follow-through of real value in the engagement with a company — to remain engaged with a brand, service or, even, individual provider of labor. We all need to recognize that this is an essential transformation of traditional roles in the marketplace.
Solving for this new dynamic, in which the on-demand service provider becomes a third-party/intermediary for two clients, one the customer purchasing a service and the other an on-demand laborer providing the service, is the next big breakthrough we’re watching for in the industry. Uber has started to talk in these terms and we expect many more companies will follow.