An Exit Memo on the Gig Economy

TO: Interested Parties

FROM: Vikrum Aiyer, Fmr. Vice President of Public Policy & Strategic Communications, Postmates

RE: THE FUTURE OF ON-DEMAND WORK

DATE: February 16, 2021

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EXECUTIVE SUMMARY

Gig work was not designed to be a destination, but a means to an end. It was never going to be, nor was it meant to be, a panacea for 21st century American capitalism. But now the industry finds itself in a battle for the future of the American workforce. As I exit the gig economy after four years of running public policy at Postmates, I believe it is more important than ever that the leaders who remain in the industry make the choices and changes necessary to (1) mind the missteps of the past; (2) secure a future for flexible on-demand work that is sustainable and inclusive; and (3) empowers workers, small business owners, and communities for the long term (instead of getting trapped by the financial incentives of short-termism).

That future is by no means assured, but it is possible. Over the past year, we’ve seen that on-demand services are more essential than ever, providing a lifeline to households seeking safe access to food and resources, to Main Street merchants cut off from the revenue of in-person dining, and to workers seeking supplemental income against the backdrop of high unemployment. The pandemic and its fallout has reminded us all there is a lot that needs to be done to strengthen the safety net for all American workers, especially app-based workers, and on-demand platforms have an obligation to responsibly contribute to that effort. Drawing on my years working both in government and in technology, I urge my colleagues in the industry to:

• Extend a hand to labor and build sustainable relationships for the long-term;
• Prioritize the voice of workers and test portable benefits pilots before legislative action;
• Fight for small businesses and a more equitable future for e-commerce;
• Invest in R&D with a people-first lens;
• Approach government as a working partner not a sparring partner;
• Adhere to principles of stakeholder capitalism (where purpose can be an engine for profit).

These recommendations are by no means comprehensive, nor do they represent a silver bullet for solving the complicated challenges facing the on-demand industry. But it would be a mistake for us to think that mild tweaks to worker classification, or a single state ballot measure, create a durable path forward for meaningfully addressing what Americans truly worry about: the chance to work, take care of their families, and not fret about what comes next.

But here’s the harsh truth: so long as tech platforms, labor advocates, and other stakeholders are not willing to evolve and give an inch on their respective models, we’ll never see progress that both empowers on-demand work and improves the social safety net. While I know some on both sides will scoff at such words after leaving the industry, it’s not because they disagree. It’s because they too recognize that this war has reached a fever pitch — and trying to bridge the industry and worker divide is harder than ever to do. But that’s exactly why we need a clarion call to try.

After all, it was just five years ago that industry, academics, investors and labor leaders committed to a shared set of principles for delivering a portable and flexible safety net for gig workers.

Yet, since then, factions within Labor have emerged, divided on whether gig work should be a race to the top or shouldn’t exist at all. And tech has yet to meaningfully pilot new approaches that could balance flexible, independently contracted work, with a path towards bargaining higher standards for that work.

But the answer is not to continue to turn inward, hang a hat on a Prop 22 victory alone, and retreat into competing factions of gig apps and worker advocates. We must end this uncivil war that pits workers against capital, tech against labor unions, conservative versus liberal. Lasting generational change that delivers economic justice and upward mobility for workers in this country is rooted in an understanding that we’re better off if we work with each other, not against.

OVERVIEW & HOW WE GOT HERE

The sharing economy emerged when the United States and other major economies sought to claw their way out of the Great Recession. Millions of traditional jobs had been eliminated after the 2008 crash, forcing workers and businesses alike to adapt. New on-demand platforms meant people could earn extra income by giving a neighbor a ride in their car or hooking up a hungry teen with a burrito from a local taqueria. On-demand services created a new level of connectivity within our communities. They leveled the play field for main street retailers facing headwinds from the likes of Amazon. And they offered new ladders of opportunity for those who wanted to work on their own terms, who needed to supplement their incomes from other full- or part-time jobs, or both. Due to the low barrier of entry to this work, and the flexibility that came with it, delivery workers — many of whom were immigrants and people of color — no longer had to work invisibly for restaurants paying under the table with little accountability. They were no longer beholden to the ups and downs of any one establishment, or rigid scheduling shifts that didn’t fit the demands of their lives.

The adoption of app-based work was, in large part, a response to entrenched, structural flaws in the American economy that had been growing even before the Great Recession — including stagnant wages, skyrocketing inequality, a broken healthcare system, and an inadequate safety net.

Most people came to on-demand delivery apps to put in a few hours of work a week and earn a little extra money, not replace a full-time job. They rented out their homes, sold goods online, or hopped on a bike to make deliveries. Most Postmates couriers (89%) worked only 3–5 hours a week. Not surprisingly, the few who tried to cobble together full-time employment on platforms designed to provide supplemental income lacked the benefits and support traditionally expected from a full-time job. And while the creation of the Affordable Care Act helped pioneer a portable benefit for independent workers, state and federal authorities have not yet updated the social safety net or labor laws for a new reality where millions of Americans no longer fit into the binary categories of W-2 employees or independent contractors.

But some on-demand companies frustrated workers with opaque tip practices, and as recently as last month, challenged workers who had voted to unionize. Some have also used predatory practices with merchants too, such as charging a small business for a phone call or false advertising of partnerships that didn’t exist. And persistent conflict between platforms and worker advocates didn’t help anyone either.

Now, with the on-demand industry seeing increasing market consolidation, and COVID-19 disrupting the disrupters, the question of how platforms, regulators, and unions can come together to provide the income and support workers need with the flexibility they demand is more urgent than ever.

At Postmates, we had a clear vision: a third-way solution that moves past the old W2/IC binary with a system of portable benefits accounts, agnostic of classification, that strengthens the safety net for on-demand workers without sacrificing their autonomy. That’s not to say we always got it right, but we did our best to show up for our workers, seek cooperation with unions, and tried to brainstorm a system of bargaining that reflected the realities of this work. We also knew that a digital app could not thrive if we did not fight for progress in the analogue world. That’s why we advocated for progress on issues impacting LGBTQIA+ equality, housing and racial justice, women’s health, access to childcare, immigration, and universal health care.

California voters endorsed a version of our third-way approach at the ballot box last year, passing Proposition 22 with 59% of the vote. While a multifaceted coalition of disability, elderly, and consumer safety advocates joined on-demand workers in California to establish a regime of historic new benefits for app-based workers, California is just one state.

On-demand workers across the country deserve a comprehensive national solution rather than a patchwork of state-by-state court rulings and ad hoc legislating. President Biden understands that American innovation can be the driver to build back better after the pandemic and he is also deeply committed to protecting and empowering workers. It will be crucial to make sure those two values are not set up in opposition to each other in Washington. Both on-demand companies and labor unions need to engage in a robust, good-faith policy process in DC that builds on the California model (which offers new healthcare, accident, and wage protections) and charts a way forward for the nation.

Uber’s recent acquisition of Postmates does not mean the end of all that our team has learned and built over the years. Instead, I hope the model we helped pioneer and the values we fought for can inspire thought across the industry about how to navigate the years ahead. But make no mistake, the on-demand industry must take decisive action if it wants to ensure its own survival, independent of routine legislative attacks.

LET’S FIX ON-DEMAND WORK, NOT END IT

There’s a lot to improve in our industry and plenty of room for legitimate and constructive criticism. Yet some critics, lawmakers, and activists have seemed eager to destroy on-demand work rather than improve it. That would be a huge mistake that would harm workers, small businesses, consumers, and communities — as Americans seek work in an economy devastated by a pandemic. Heavy-handed regulations that force gig workers into W2 jobs, like AB5 in California, or arbitrary rate-setting restrictions on the commission structures on-demand platforms can negotiate with restaurants, as we’ve seen in many cities recently, may be well-intentioned but are already having unintended consequences. They could deprive workers of jobs and income opportunities, reduce platform availability, or even restrict consumer choice by driving further consolidation and denying consumers the services they depend on. If the industry and policymakers don’t make better choices in the years ahead, it could hasten this result.

The recommendations I’m proposing in this memo are designed to avoid that lose-lose scenario and improve the on-demand industry so that it works better for workers, merchants, and consumers. Gig work isn’t perfect, but it has become an important part of our economy and should be accorded the dignity and respect of any other job. COVID-19 amplified the significance of “essential” frontline workers — many of whom contribute to on-demand platforms. Seventy percent of essential workers don’t have a college degree and may not have the skills or opportunities to easily access the high income jobs that are providing relative security and stability even during the pandemic. It’s all the more reason why we need a better deal for gig work that strengthens benefits, protections, and skills and puts the industry on a sustainable footing for the long term.

SECURING THE FUTURE OF ON-DEMAND DELIVERY

1. Extend a hand to worker advocates (including organized labor) and build relationships for the long-term

On-demand companies should continue to extend a hand to worker advocates, including organized labor, and ensure future policy changes are inclusive, collaborative, and reflective of workers’ needs. Although moments of collaboration have not yet led to the comprehensive change flexible workers need, they represented time well spent by all sides. Just five years ago industry voices and academics (ranging from David Mack & Lenny Mendonca to Aspen & R Street) all committed to a shared set of principles with worker advocates (like SEIU and NWDA) for delivering a stable and flexible safety net for gig workers.

Some in the industry may think that winning Proposition 22 in California means they don’t need to give an inch to organized labor’s concerns, but that would be a mistake. These fights aren’t going away. Hopefully at least some of the activists will unclench their fists and be more open to working together in the future. If they do, the industry should meaningfully pursue these steps:

• Enhance Codetermination, providing 1–2 board seats with voting rights to workers — similar to a suggestion from Harvard’s Clean Slate Project — to ensure driver perspectives inform corporate decisions.
• Pass the Senator Warner (D-VA) & Representative DelBene (D-WA) bill, embracing portable benefits options that can close the gap between what’s available to W2 and independent workers. States also should experiment with benefit models with portable accounts funded by the platforms to inform federal solutions.
• Study the expansion of sectoral bargaining, including for all types of workers. Sectoral bargaining for independent workers would be an innovative reform that could provide sector-wide floors on earnings and benefits, while retaining IC classification. Some in organized labor have suggested extending the right to bargain for all workers — regardless of classification. Before industry dismisses this outright, and since this has not been done before in the United States, it warrants critical examination by Congress, the GAO, or university labor centers to explore how card check rules, antitrust laws, and federal preemptions would be accounted for. In concept, this could empower workers and prevent less scrupulous companies from gaining a competitive advantage with a race to the bottom.

There’s a lot of creative thinking happening about new models of organizing and giving workers a voice, and companies should be on the lookout for interesting ways the Labor Movement may evolve in the years to come. For example, California and Pennsylvania were able to secure additional sick leave requirements for workers last year without wadding into classification standards. In addition, leaders like Sharon Block, Chris Chafe, Jim Coniglario, Seth Harris and David Rolf have been working to evolve worker representation and regional bargaining, which could inform how the movement develops in the years ahead.

On-demand companies should see the growing interest in exploring new models for building worker power as opportunities for collaboration — not conflict. Companies should bring their own culture of innovation to modernizing worker representation and protection with new products and works council platforms. Similarly, Labor can also recognize that progress is possible through collaboration with industry leaders who have been eager to find a middle ground with mutually beneficial outcomes. The cannabis delivery industry’s relationship with unions is an instructive blueprint for how working partnerships can actually even help emerging technology industries unlock new addressable markets. Without efforts on both sides, however, America will continue to advance a binary model of workers with benefits, and workers without — a result that runs counter to the Biden administration’s vision to build back better and is a recipe for continued conflict.

2. Prioritize the voice of workers

A deal between labor and app-based companies has yet to be realized largely because the two sides are not even having the same conversation, let alone talking about — or listening to — the same workers. Platforms and unions should lift up the voices not just of workers who agree with their perspectives, but instead listen to and respect the full range of gig worker experience, from those putting in just a few hours a week to those trying to cobble together the equivalent of a full-time job — and build data driven solutions reflective of such varied approaches.

At Postmates, our most important advocates and advisors were always members of our Fleet — the people who deliver in communities and know better than anyone what does and does not work on the ground. If on-demand companies want to achieve the best public policy outcomes, then those policies have to be informed by workers themselves. Companies should have strong, consistent feedback loops with their workers so they can weigh in on corporate decisions.

At Postmates, we heard time and time again that our workers valued the flexibility and autonomy that came from delivering on our platform. That’s why we established a Fleet Advisory Board to regularly provide feedback on how to improve systems and support for our couriers. They were invaluable to Postmates’ growth and led to the development of crucial new policies like the industry’s first-ever family care relief program.

We also spent a lot of time running safety-net experiments in different markets to understand local needs and we invested in what works. Other platforms should explore experimenting with benefit options we found to be very successful like emergency cash grants, adult learning and career development courses, and long term health savings accounts. These experiments offered rich insights about the utilization of varied benefits most suitable to the needs of 21st century on-demand workers — data sets critical to informing any discussion around safety net reform with lawmakers. For example we learned that emergency cash transfers are particularly important for workers in these uncertain times, and at Postmates we worked hard to provide that benefit during the pandemic because too many Americans in this country — gig, full-time and part-time workers alike — cannot afford an unexpected expense.

At the end of the day though, even my own company could have gone further in prioritizing the voice of the work in its product-design. And unless industry and worker advocates redouble their efforts to understand the voices and experiences of app-based workers, neither will head into 2021 with a particularly legitimate claim to knowing what different types of gig worker profiles want. Industry will serve up examples of workers who enjoy working a few hours here or there. And labor-affiliated groups will build astroturf with profiles of workers who have been wronged by platforms. Instead of dueling dialogues we need any and all legislative discussions to bring the voice of the workers themselves to the table, with an eye towards building data-driven solutions from there.

3. Fight for small businesses and a more equitable future for e-commerce

COVID-19 continues to ravage the local restaurants that make our communities vibrant and have been so important to the success of platforms like Postmates. At the same time, e-commerce goliaths like Amazon are making it impossible for small businesses to compete, and so app delivery platforms provide an important opportunity for these businesses to market themselves and reach an expanded customer base. On-demand delivery companies must support their merchant partners to ensure their survival through the pandemic and beyond. The relationship is not only symbiotic, but supporting durable policies that govern the dynamic between platforms and small businesses will be a key driver of the economic recovery:

• End Predatory Pricing: First and foremost, predatory practices like charging restaurants phone fees must be eliminated entirely. The entire industry should be unified in rejecting opaque operations and be transparent in the services offered at differing commission rates.
• Listen: Once companies have removed bad faith policies, they should engage in listening tours with their merchant partners. By collecting feedback, companies can build trust and get a better understanding of how best they can show up for their partners. That includes which policies they can lobby for on behalf of merchants — like the passage of the Senator Wicker (R-MS) & Rep. Blumenauer’s (D-OR) Restaurants Act in Congress, and local policies that protect rather than harm small businesses.
• Provide Alternatives to Rate Caps: Last year several cities placed arbitrary caps on the fees on-demand delivery services could charge their merchant partners for deliveries that take place through their platform. Despite sounding fair, if the legally dubious rate caps remain in place, they will lead to higher prices for consumers, a reduction in services provided to merchants, and even a reduction in pay for couriers — many of whom are already suffering in our current economic crisis. There is no doubt restaurants are hurting and can benefit from a variety of public policies of relief — including those recently published by the National Restaurant Association — but capping rates in a three-sided marketplace only means the costs need to be made up elsewhere. We’ve already seen companies hike rates in markets like New Jersey, or shut off services for merchants in San Francisco. A better solution would be for companies to empower merchants with more transparency around how fees pay for differing services (including paying delivery workers a living wage and supporting COVID-19 relief programs), enabling merchants to elect services at the percentage rate most befitting of their needs. And rather than cities capping fees during the pandemic, companies should explore how they can provide long-term support to restaurants through cost-sharing relief funds.
• Center Equity in Merchant Selection: The reckoning with racial justice that was spurred this summer with the murder of George Floyd should have awoken everyone to the role we all can play in combating structural and systemic racism. Delivery companies should find meaningful ways to support the local Black- and Brown-owned businesses they partner with — both financially and with data driven tools to support their growth. Companies should pursue policy solutions that improve access to capital for Black-owned businesses and other POC-owned businesses, and work to support businesses in diverse communities — not just the wealthier neighborhoods of cities where pick-ups are frequent.

Delivery companies also should consider what more they can do to support small businesses that are having to compete with big box brands. On-demand delivery platforms can partner with these small businesses and offer educational programming, support services, or data similar to what Uber Eats now provides to ensure merchants can sustain a long-term partnership that supports the growth of their business. Democratizing access to even more tools to meet the goals of an individual restaurant or retailer can ensure a more equitable playing field between family-owned businesses and big chains.

4. Invest in the research and innovation that will ensure the future of commerce puts people first

The pandemic revealed serious, systemic vulnerabilities in our economy, and on-demand delivery companies can and should be on the cutting edge of how those vulnerabilities can be addressed going forward.

For example, as the landscape of local commerce shifts due to the pandemic, on-demand companies should invest in research that helps policymakers and opinion leaders better understand the value of “cloud kitchens” or shared kitchens. Eateries operating through on-demand platforms have the chance to thrive in this difficult time by expanding their footprint without the often cost-prohibitive capital investments required to open a storefront in expensive real estate markets. All too often this model has been dismissed by lawmakers wary of cloud kitchens hollowing out downtown streetscapes. But if in the future cloud kitchen models help small businesses remain in place and even proliferate — as opposed to being replaced by big chains or blighted by the exit of large downtown employers — the apps, lawmakers and developers alike should find ways to create regulatory sandboxes of experimentation.

Platforms should also look at how else food delivery can be made safer and more sustainable at scale, including experimenting with innovative forms of delivery. At Postmates, we’ve piloted SERVE vehicles in California that are autonomous with socially aware navigation, facilitating non-contact deliveries amid the pandemic. They complete short-distance deliveries that shouldn’t be taken in a car. And Postmates found that beyond its benefits for reducing carbon emissions in cities, SERVE can also increase the hourly earnings of delivery workers.

There are potential downsides of automation for the on-demand industry in the future, as there are across our economy, especially when the time comes that autonomous vehicles start putting drivers out of work. We all need to be clear-eyed about that reality — not just gig companies. But that should not sacrifice experimentation. Instead it makes it vital for tech firms to commit to local-hire and apprenticeship pipelines — such as San Francisco’s TechSF program or Swords to Plowshares Veterans workforce training program — in order to ensure that investments in R&D are also paired with training programs. Like all periods of great technological change, we’ll need to balance the benefits of innovation and experimentation — especially as the U.S. seeks to compete with China and other rising powers — with steps to account for disruption and displacement.

5. Approach government as a working partner not a sparring partner

Tech leaders and government officials need to look for ways to build bridges in the years ahead. We’re facing too many pressing issues that should encourage improved collaboration. The global pandemic, climate change, and our economy in crisis — it all demands that government have more tech expertise, and that tech have more empathy for the role of government.

I wrote about this important issue last year and hope to see tech leaders and regulators find common ground as working partners in order to:

• Tighten feedback loops that inform policy and information sharing between tech and government, similar to what Germany has achieved;
• Recruit and place more technical know-how in government;
• Improve data sharing with government so that it’s informative, mutually beneficial, and protects consumer privacy;
• Engage with the Biden administration and call for a commission on labor reforms that brings flexible workers, unions, and on-demand leaders around the same table.

I believe that there will be room for meaningful debate in Congress and with the Biden administration about how to provide better benefits to workers without exclusively focusing on the politics of classification. While the US Department of Labor is likely to promulgate rules that unwind the Trump Administration’s economic realities test, and the House is poised to advance legislation like the Pro Act which codifies an ABC test that California has already punched holes in — the Biden White House still has the chance to convene leaders representing unions, social justice groups, and on-demand delivery companies so that everyone has a seat at the table to determine the best way forward to crafting a new safety net for on-demand work, as dozens of Democrats have called for. This Administration knows that pitting workers and capital against each other is no means to building back better, nor is a binary system that affords some workers with benefits and others without. There’s a lot of work ahead and so it’s important that tech leaders let go of their distrust of government, and vice versa, so that the country can recover from this pandemic, and from years of innovation outpacing regulation.

6. Adhere to principles of stakeholder capitalism

What all of these recommendations would add up to is a reflection of a company’s values — and a reality that a marketplace only thrives if the communities in which it operates thrive too. On-demand platforms must fully embrace stakeholder capitalism and proactively implement product roadmaps that recognize that purpose-driven impact can also be a core driver for growth and user acquisition targets.

For the past four years, CEOs had frequent opportunities to stand up for their values by condemning the latest outrage from Donald Trump. But now companies wanting to be seen as socially responsible will have to go beyond table stakes lip-service and meaningfully advocate for the issues facing the communities they serve and employ.

At Postmates, we weren’t afraid to take on issues that others might have seen as controversial. We advocated for the expansion of benefits for all workers, including Medicare for All. Postmates was also a longstanding advocate for reproductive rights, and partnered with groups like Planned Parenthood and NARAL to normalize gender disparity issues as economic issues. We were vocal opponents of Trump’s anti-immigration policies, filing an amicus brief with the Supreme Court urging justices to deny his efforts to terminate DACA and partnering with the ACLU to launch know-your-rights campaigns in the app to support immigrant couriers when ICE launched raids across our top markets. And last summer we took a hard look at the work we needed to do to make our company and platform more inclusive and anti-racist.

On-demand platforms’ voices are most needed on the issues closest to our own industry. It was clear long before the pandemic that on-demand workers need a better deal and a stronger safety net, and so the industry needs to do more to fight for comprehensive, national solutions that provide better pay and benefits to workers while preserving flexibility and innovation. We need to lobby hard for government stimulus to go to the restaurant industry that’s on the brink. And they should continue to push for other policy changes that promote their vision for the world, from protecting women’s access to basic health services to mitigating the threats of climate crisis to making the economy more resilient for every person it supports.

Business cannot succeed in a failing world. It’s in the interest of gig platforms that the people who use them are able to access the kinds of wages, social protections, and financial security that enables them to also be users.

HOPE FOR WHAT’S AHEAD

The on-demand industry has changed so much over the years, and 2021 offers an opportunity for further evolution. I believe that the best is yet to come. Because all of the iterations of the gig economy — including the unprecedented lessons of the pandemic — bring wisdom for how to grow and improve. And make no mistake, the on-demand industry as a whole must improve how it approaches government, labor, and the future of work. This memo should make clear that there are plenty of ways the industry can go about making such improvements and delivering on its promises to workers, small businesses, consumers, and investors.

I personally learned and gained a great deal from my time at Postmates. But I know that wouldn’t have been possible without Postmates being willing to learn along the way too. We tried to treat our business with care, and the people who contributed to it with care too. And if the past year’s events taught us anything, it’s that we have to improve the ways in which we all take care of each other. The entire country will be stronger for it. And by doing so we can send appropriate market signals to the talent, investments and R&D required to power a resilient recovery. I hope this memo provides useful suggestions for how the on-demand industry can contribute to such an effort.

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