'This is why people are so angry': Tech giants like Google, Facebook, and Uber built their empires on the backs of contractors. A pandemic is showing just how horrifically that model failed American workers.

• Over the course of the last decade, the tech industry has spurred the rise of the gig economy.
• "Gig economy" has since become something of a catch-all phrase to describe many sorts of non-standard work: independent contracting, temping, or working for a third-party contract firm.
• Most companies in the tech world rely on non-standard workers: Uber or Instacart for tasks like driving and delivery services; Google and Facebook for tasks like content moderation and data analysis. Those workers aren't offered the perks of direct employees.
• But it isn't about technology at all, experts argue - the reliance on this type of work is a consequence of the insecurity of workers in the US.
• Visit Business Insider's homepage for more stories.

This article is part of an ongoing series exploring the millions of people seemingly invisibly making tech work, often without the benefits of the trillion-dollar companies they work for.

Edan Alva has been in the tech industry for about 15 years - but he's never been a standard employee.

Alva, who is based in the Bay Area, spent a decade working for PayPal, and has spent the last five years driving for Lyft. But his PayPal employment was through a third-party contract firm, and the Lyft work is independent contracting.

"During that 10 years, I had four different employers, but I did the same work at PayPal," Alva told Business Insider.

Alva began driving for Lyft while he was still working at PayPal. He'd pick up a passenger or two during his commute from Alameda to San Jose, which paid for the cost of the drive. When he lost his job, he tried to make Lyft his full-time job, but said relying on it as his primary source of income was "impossible."

Alva said he's picked up driving work for other companies, like HopSkipDrive and Zum, both of which specialize in driving kids to and from school. While those rides pay more, he said, they're more limited because of school hours. These days, he's essentially working from about 7 a.m. to about 9 p.m., with only a few hours off in between to take a break or volunteer for Gig Workers Rising, a campaign to support and educate drivers and other platform workers.

"Every day is a balance of, what are my options for income? What is the best combination for me to make the most for that day? And how do I juggle that with my personal obligations with my son and stuff that I need to do because it needs to be done?" Alva said.

He described driving each day as "Russian roulette."

"You are constantly on the verge of losing everything," he said. "One accident, something that happens wrong, and suddenly you don't have the money to pay for your rent and you're homeless."

It's a scary way to live, Alva said. "And if people are depending on you, it's even scarier."

Kelly Sullivan/Getty Images

The rise of the 'gig economy'

Sometime around 2009, a new phrase was introduced into the American vernacular: gig economy.

Soon, the phrase became a catch-all for the rise of tech platforms like Uber or Instacart, multi-million-dollar (eventually, multi-billion-dollar) companies that built a platform for non-standard work.

A decade later and the tech world has been built on the backs of these non-standard workers, from independent contractors who are fighting for the right to receive the benefits of full-time employees to staffers at third-party contract firms who perform some of tech's most menial tasks.

Somewhere along the way, the promise of the shiny new gig economy - the promise that it was the future of work - has transformed into a multi-billion-dollar industry that relies on a faceless workforce to pick out groceries or train an AI or sift through the worst of humanity's online behavior.

"We think of the gig economy as being driven by technology when it's really being driven by business decisions," Louis Hyman, an economic historian who teaches for Cornell University's School of Industrial and Labor Relations, told Business Insider. "Which is hard for people because they like to think that it's all about the app. It's really about a fallout of how the service economy has failed American workers so miserably."

Hyman argues that non-standard work in the tech industry has been mislabeled - or, in Silicon Valley parlance, rebranded - as "progress."

Maya Pinto, a senior researcher and policy analyst at the National Employment Law Project, agrees.

"I think the term 'gig economy' lends itself to exceptionalism," Pinto said in an email to Business Insider. "It serves the companies that are using different types of non-standard work really well to refer to themselves as a separate and new economy that is creating a lot of really desirable jobs. But these companies are transforming and degrading jobs inside an existing economy."

The gig economy has come under particular scrutiny in the wake of the coronavirus pandemic. As the virus has spread across the globe over the last few months, it's had an outsize effect on non-standard workers who aren't necessarily able to work off a laptop at home. Facebook, for example, hasn't been able to figure out how its army of 15,000 content moderators can do its work at home, and those workers have been put on paid leave. At Google, where temp workers outnumber full-time employees, contractors in Pittsburgh were told to continue commuting into the office as recently as last week.

Even more gig workers - like Uber drivers or DoorDash delivery drivers - don't have access to paid sick leave or health insurance. While many companies have introduced measures to help protect their employees (like suspending carpool services or introducing contactless delivery), these populations remain particularly vulnerable.

'A failure of language'

It's almost impossible to pinpoint how much of the workforce, and therefore how much of the tech industry, is made up of non-standard workers.

According to Pinto, the tech industry relies on a few main types of non-standard workers: individual workers, who may or may not be mislabeled as independent contractors; specialized contract firms; and staffing agencies.

Combined, these types of workers would fall in a separate bucket from traditional tech workers who are employed by the tech company itself and receive benefits from that company.

But measuring exactly how much the tech world relies on workers from the other bucket, the non-standard workers, becomes complicated very quickly.

For instance, a 2014 study found that 20.4% of US workers relied an independent arrangement for work, which could include independent contracting, freelancing, working for a temp agency, or working for a contract company. A year later, a different study on alternative work arrangements pegged it at 15.8%. A 2017 study from Upwork found that 36% of Americans are freelancing, while a Bureau of Labor Statistics survey from the same year found that about 10% of the American workforce relied on "alternative employment arrangements" for their main job. And many times, these studies are unable to account for people who pick up contract work on the side.

Confused? You're probably not alone.

Hyman called the inconsistencies "a failure of language." While the surveys are sound, he said, the categories offered don't line up to workers' realities. He described a recent Cornell study where Uber drivers in New York State were asked whether they were full-time, part-time, temporary, or unemployed - the survey respondents answered all of the above.

Hidden risk

This all becomes extra complicated when the companies themselves fail to classify their employees correctly. But the AB-5 law in California, which went into effect at the beginning of the year, implements a new test for classifying workers, and specifically concerns independent contractors.

While that group can include dentists or plumbers, in the tech industry, it includes the types of workers that drive for Lyft, clean for Handy, or deliver for DoorDash. So far, Uber and Postmates have refused to comply with the new law, but last month, a judge in Los Angeles rejected their bid to block the law from going into effect.

Classifying an employee as an independent contractor can reduce costs to the company - like payroll taxes and premiums for workers' compensation - by as much as 30%, according to the NELP. And while a company may not misclassify on purpose, the cost savings may be a factor in how these employment relationships come about, according to Sarah Thomason, a research and policy associate at the UC Berkeley Labor Center.

"There's definitely employers that are realizing, 'Look, I'm going to save a lot of money if I hire these workers as independent contractors instead of as employees,'" Thomason told Business Insider. "And they may not have the intention to break the law, but they're thinking that their interpretation of it is that this is fine. Or there are some that realize that they should not be doing that, but they're doing it anyways."

But independent workers have a major disadvantage, according to Thomason: They lack access to the rights that are tied exclusively to having a traditional W2 employment relationship, like minimum wage, overtime pay, sick leave, recrimination protection, and worker's compensation.

The biggest risk of taking on this non-standard work, Thomason said, is one that might not even occur to anyone with a standard work arrangement: What happens if you get hurt?

"If they get injured on the job or something happens, that's all on them to try to cover the costs," Thomason said. "It's very risky, especially if you are already earning very low wages. It can push somebody immediately below the poverty line."

The flip side of the argument for classifying employees as independent contractors is flexibility - the option to work for multiple employers and choose your own hours. But Alva, the Lyft driver from the Bay Area, said flexibility in this industry is a myth.

"There is an illusion of flexibility," Alva said. "If you earn less than minimum wage and you're trying to rely on that job for existence, you need to work a lot in order to get very little money. And if you want to earn money, you have to work at the times when's there is a high demand - it's in the morning and in the evening at the end of work. There is no real flexibility here."

But it's more than just the amount of hours: More rides means more wear and tear on the vehicle, which means more costs to the driver. More hours means less time to take care of yourself, which means a higher likelihood the driver could get sick. Being an independent contractor means drivers don't get sick days, though, so taking any time off means less money coming in.

"It's sort of this never-ending nightmare to get into," Alva said.

Unionization for some

For tech workers who work for third-party contract firms, it's a slightly different story. Those employees are non-standard workers because their firm is contracted by a tech behemoth like Amazon, but they have a W2 employment relationship with the contact firm, meaning they have access to rights like overtime pay or sick leave.

But that subset of tech workers has its own issues. A report from The Verge last year revealed the harrowing experience of working for Cognizant, a contract firm that handles content moderation for Facebook. Workers there described panic attacks on the job and doing drugs to ease their anxiety after being subjected to videos and photos that depicted violence, pornography, or hate speech. A content moderator from another contract firm sued Facebook in 2018, saying that she experienced PTSD after sifting through "highly toxic" content as part of her job.

Not all of these types of workers sift through graphic or violent posts - some of these workers fill our surveys, provide transcription services, or verify receipts.

At Google's offices in Pittsburgh, for example, contract workers have more technical roles like data analysis. But they still aren't considered Google employees - as Slate reported, they don't receive the generous perks Google is famous for, they're paid less than workers who are employed by Google itself, and they have essentially zero job security. And temps, vendors, and contractors, or TVCs as they're called, make up more than half of the company's workforce - there are 115,000 direct Google employees and 135,000 TVCs, according to The Guardian.

Because of that, a group of those workers recently voted to unionize.

Who counts in this economy?

But even with the passage of new laws or nascent unionization efforts, the tech industry is still grappling with various forms of inequality, Hyman, the Cornell professor, argues.

"One of the questions we have for ourselves is who counts in this economy going forward, not just in the US but abroad," he said. "People think it's machines, but it's actually people. It's just people they'd rather not care about."

Gig workers, for example, are primarily black and Latino. In cases like content moderation, many companies outsource the work to countries like the Philippines. And as Mary L. Gray - who wrote the book "Ghost Work" along with fellow Microsoft researcher Siddharth Suri - told The Verge in a recent interview, while many of these workers are college-educated, they face inequality in other ways.

"These are the folks who, for reasons of social capital, don't have access to a network that was going to boost them into the full-time job," Gray told The Verge. "That's the pattern I see sociologically or anthropologically. They're first-generation college-going more often than not. This is a group of people who don't have strong social ties to elites."

For many people, the choice to pursue a non-standard employment situation may have something to do with income volatility - essentially, that many Americans don't know how much money will be in their next paycheck.

According a 2016 JPMorgan study, 55% of American households said their income varies 30% month to month. In order to "smooth out" that monthly discrepancy, Hyman noted, people may turn to borrowing, or they may look to the "online platform economy": picking up gig jobs from companies like Uber or Handy.

And now, these are jobs that may disappear or become unsustainable as the coronavirus continues to spread: workers may have to start choosing between providing additional income their families need and putting their families - and themselves and their larger communities - at risk by continuing to work during a pandemic.

"This is why people are so angry. This is why people are so afraid. This is why people are both driving for Uber and then pissed off at Uber," Hyman said. "But [Uber is] providing an opportunity for work for workers that would have no alternative if this didn't exist. It's a consequence of the insecurity that the American working class faces, it's not a cause of it."

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