A new Government Accountability Office report found that a growing number of gig economy workers earn so little that they rely on food stamps and Medicaid to make ends meet. Uber, Lyft and DoorDash are
now among the top employers of safety-net recipients in several states.
This is a symptom of a bigger problem – one unrelated to the impact of artificial intelligence on the job market. Rather, it has everything to do with how employers are rewriting the very rules of employment. Companies are increasingly stripping workers of employee status, along with the benefits and protections that a job has traditionally offered.
And in doing so, they’re creating a disposable workforce.
When I say “disposable,” I mean something much bigger than the gig platform workers that typically come to mind, like Uber drivers and DoorDashers. The workers I’m talking about stretch across the economy. They include contractors, from building cleaners to travel nurses; freelancers, from gig drivers to high-end programmers; and what I call marginal workers, who are employees in name only while being disconnected from any career ladder. Think adjunct professors sidelined from the tenure track, staff attorneys who handle grunt work with no path to partnership, and large numbers of low-wage service workers and part-time employees in jobs engineered for high turnover.
According to my research, 35% of U.S. workers – nearly 57 million people – are now disposable by design.
Employers have practical financial reasons for these arrangements. Disposable work saves them money on training and health insurance and eases legal obligations, such as anti-discrimination safeguards. It also lets them disregard the norms that a stable, long-term workforce builds up around fairness and basic decency. Additionally, a company can more easily expand or shrink its workforce by, for example, ending the use of freelancers, canceling a contract with a staffing firm or relying on the high turnover of marginal workers.
Disposability has consequences. One of them is in health care.
But financial incentives are only part of the story: Underlying the use of disposable workers is a belief, widely held in management circles, that only a small sliver of the workforce matters.
Consider a 2023 McKinsey report, which found that 5% of employees generate 95% of a company's value. The math is dubious, but the claim is telling. Corporate leadership sees most of their workers as replaceable and worth little on their own.
Disposability has consequences. My research shows that contractors, freelancers and marginal workers earn notably less than standard employees. Compared with standard workers, they’re also less satisfied with their jobs and less willing to work hard for the organization’s success.
The public also pays a price. For example, research shows that hospital infection rates rise when cleaning staff are contract workers, and that relying on contractors is linked to higher rates of industrial accidents.
You’d think convincing employers this is bad for business would be an easy sell. Decades of research show that there are benefits to a committed workforce, including higher productivity, lower turnover and stronger innovation. But firms exist to maximize profit, and many calculate that the costs of granting full employee status outweigh the benefits of the so-called high road strategy.
Most employers are honest and well-intentioned but given the chance to cut labor costs and maximize managerial discretion, they’ll generally take it.
Absent change, the use of disposable workers will increase. Illustrating this, Walmart built a system called Spark comprising thousands of independent delivery drivers who aren’t classified as Walmart employees. Amazon follows a similar strategy via its “Amazon Flex” delivery model.
And AI will make it worse. No company knows for sure what workforce the AI era will require, and firms will play it safe by leaning more heavily on disposable workers.
Congress can decide who counts as disposable
Putting guardrails around the use of disposable workers will take a mix of policy reform and collective action. To improve the circumstances of gig workers and other freelancers, the key is to better define employee status. For contractors and marginal workers, the goal is to raise the floor of job quality.
Congress can start by settling, once and for all, who counts as an employee. Current federal law is confusing: The Fair Labor Standards Act and the National Labor Relations Act provide different definitions of employee status. And either one can be reinterpreted depending on who’s in the White House and which judge hears a complaint.
A solution is federal adoption of the “ABC test,” which is now used in whole or in part by more than 30 states. This standard presumes that a worker is an employee unless a company proves otherwise through a simple three-rule test.
Enforcement is also important. Research shows that companies would need to face far higher odds of getting caught underpaying workers than they do today before it made financial sense to comply.
For contractors and marginal workers, pressure from customers, workers, unions and the elected officials who represent them can get results:
- The “Fight for $15” campaign pushed big-box retailers to raise wages.
- Non-union Google workers, backed by several U.S. senators, pressed for employment standards for contractors.
- Public backlash forced video game company Activision to reclassify freelancers and contractors as employees.
- And New York City is backing a delivery protection act that would require companies like Amazon to directly employ thousands of delivery workers rather than using a subcontractor delivery model.
These wins show change is possible. But the key to success is that the rise of disposability becomes a salient topic with the public and with policymakers. Without sustained pressure, disposability will become the default way America works, and the costs will keep piling up. We need to lift our eyes from an obsession with AI, recognize this pattern – and act.
Paul Osterman, a professor emeritus of Human Resources and Management at the MIT Sloan School of Management, is the author of "Disposable Workers: The Transformation of Employment."
This article originally appeared on USA TODAY: The job crisis is more than AI. Gig work makes you disposable | Opinion
