Today is Memorial Day.  Most of you don’t recall that it’s to remember our brave citizens who lost their lives to keep us free.  Instead, you consider that it’s a day off, the kickoff of Summer swimming and holidays.  Only in that case is it appropriate to discuss a new segment of our workplace.

Don’t you love the term “on-demand economy”?   In my mind, it means one of two scenarios- both of which have an underlying necrotic philosophy.

First- the scenarios.  One is when companies use part-time employees on a rotating, unknowable shift schedule to fill their needs.  Where they ask (ok, they demand) an employee show up to work at 9:45 and work until 12:10, only to return later that day at 4:45 and work until 7:00.  Other employers decide that an employ works 9 to 5 on Monday, 4 to midnight on Tuesday, and all day Saturdays and Sundays.  Making sure the hours never exceed 30, so they don’t have to provide any benefits.  The hours are solely chosen to have the employer meet their peak demands.  And, they provide only a day’s notice of scheduling to the employee, who are forced to adjust child care, transportation, sleep- everything.

The second scenario is when there are no employees.  Instead, the firm secures the services of an “independent contractor”, one who theoretically works under his/her own control, responsible for all employment taxes (the employee AND employer share of social security and Medicare, health care, etc).  This latter scenario is the one employed by Uber, TaskRabbit and their siblings.

The underlying philosophy behind both scenarios is that workers are interchangeable, of no value to the firm, except to fit an immediate need.  There is no responsibility of the firm to provide anything but a chance at miniscule compensation to this person.  Who, generally, ekes a living- and often relies on state and federal support to make ends meet.  Oh, and they are called “good-for-nothing”, “lazy”, “drug-addicts”, and worse by a certain political party.

This second category is often called ‘free-lancers’ (because they can theoretically come and go as they please) or the ‘1099 economy ‘(because these “workers” receive 1099’s and not W-2’s to indicate the compensation levels they receive).  Amazingly, this segment of our census amounts to 1/3 of the total potential workplace at 55 million folks- and was the subject of a new study by Andrew Jiang (Y Combinator) and three grad students at Stanford (in the computer and data specialties), Isaac Madan, Shaurya Saluja, and David Choi.

Most of the 1330 surveyed were white (57%) and male (72.7%), with the bulk of them Millenials (67.5% between the ages of 18 and 34). The study did find more Californians (34.6%) and New Yorkers (11.4%), which may or may not be truly representative of this workforce segment.  The type of work they did varied as well- 52.5% did manual labor (housecleaning via “HomeJoy”, 40.7% were non-licensed limo/taxi drivers, 12.2% effected deliveries, and 4.3% relied on AirBnB and similar passive activities.

About 1/3 of these folks are not relying on this type of work to be their primary source of income.  25% run side businesses, 25% have another full time work experience, 20% perform these activities seasonally, and 7.5% are day traders.  [I couldn’t believe that folks still do day-trading!]  What that really means is that 32.5% are using this to insure that they don’t go belly-up doing what they love (side business and day trading), 25% may not be making enough at their primary jobs, but about 43% use this as their primary income for all or part of a year.

The key finding (from my point of view)  is that these folks only grossed $ 18 an hour.  That’s BEFORE expenses.  Which, if you are an Uber driver, means gas, maintenance, car payments, insurance.  Oh- and then there’s the employment taxes- 15.3% of net revenue.  (It should be noted that Uber is currently increasing the “commission” it takes from its staffers from 20 to 30%!  Meaning even lower revenue for these “employees”.)  Oh, more than a quarter of those survey cited tax considerations were their primary worry.  (That’s because they don’t understand the vagaries of self-employment.)

Right about now, I should state that I dated someone who informed me she was going to rely on Uber to “make ends meet”.  Maybe that’s why I can’t resist demonstrating the true scenario of this “glorious opportunity”.

Using the $ 18 hourly gross revenue figure, we can discern what they really make.  First, we need to assume they WERE employed full time (which we all know they are not), which would mean they gross some $36,000 a year.

They probably have car payments (since you need a relatively new car to be a Uber driver) of $ 250 a month (clearly on the low side), insurance costs of $ 750 a year (which may also be low when and if the insurance company discerns you are driving others for a living),  and then there’s gas and oil costs.  If they drive 25000 miles a year (I am assuming they are driving in cities, where the average speed would be 12 mph), we can assume their out of pocket costs for gas and oil would run $4500 a year.

Now that the $ 36K of gross has been adjusted to $27500 (after deducting car payments, insurance, and fuel), we have a few other considerations.  (Not to mention that their car payment is probably higher and there are maintenance costs for the vehicle.)  For these folks to be employed 2000 hours a year, it means they probably have at least 750 hours of down time- seeking out the next gig, driving to the next pickup, etc.   So, they really are working 2750 hours a year.  (You notice those “wages” are now looking a lot more like $ 10 an hour.  But, that estimate is still way too high.)

That’s because they have social security and Medicare tax considerations.  Not the 7.65% real employees pay- but 15.3%, because these folks are now the employer AND the employee.  Which reduces their income from $ 27500 down to $23,292.50.  And, let’s not forget they also owe federal income taxes of  $ 1517, if they are single.  And, there is the possibility of owing state income taxes.   (If they are married and the only breadwinner, they will also receive federal and state support like Welfare and an Earned Income Tax Credit [EITC]- more, if they have kids, because they are those “lazy, shiftless poor”.  Right- working 2750 hours a year.)

The really big problem for these folks is they don’t understand the employer tax scenario.  So, they don’t put away that $4000 or so (let alone make the required quarterly estimated tax payments to the IRS) they owe the government for employment taxes.  And, comes April 15, they are devastated to find how much money they owe.

So much for the 1099 economy…