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Democratic Think Tank Takes Aim At "Exploitation" In The Uber Economy

The Center for American Progress report targets Uber and other popular apps that use subcontractors to power their success — without providing benefits and protections. A widening partisan divide.

Posted on January 15, 2015, at 4:00 a.m. ET

Joshua Roberts / Reuters

Larry Summers last fall.

A key Democratic think tank is sharply criticizing the new "gig economy" led by companies like Uber, Airbnb, and TaskRabbit in a new report released on Thursday.

The Center for American Progress, a liberal policy group with close ties to the Obama administration and Hillary Clinton, knocks the way the ascendant companies use subcontractors — instead of full-time employees with benefits and protections — for their labor.

The report, written by the Commission on Inclusive Property, co-chaired by former top Obama and Clinton aide Larry Summers and Ed Balls, also contends that while the sharing economy offers workers job flexibility, it leaves many workers who use it as a primary source of income without traditional benefits. The report suggests that companies that use independent contractors should be forced to offer them benefits — a responsibility the companies are eager to avoid.

"Firms have structured themselves to be capable of growing quickly by reducing their commitments to employees," the report reads. "By reducing the need to provide a stable, predictable income for the people doing the work, these companies free up capital and reduce overhead costs. Second, these firms also reduce costs by avoiding typical, minimum-mandated corporate expenses such as employment taxes and benefits."

That lack of predictable income can lead to "exploitative employment conditions, with little warning about when and how much they will work in a given week," the authors write.

The economics of these companies is at the center of a widening new partisan divide over labor and technology. Republicans have championed, in particular, Uber, as a force for free-market competition in the face of existing city and state taxi regulations. They see the popularity of the companies as, in particular, a potential opening with younger voters — Sen. Marco Rubio writes in his new book that Uber converts progressives into free-market conservatives. The party likewise focused on the issue of Uber and government regulation in last year's Illinois governor's race.

But the Center for American Progress calls for increased government oversight, urging regulators to "establish best practices and to make legal or regulatory changes to discourage abuse." And the group's political ties — its former chairman, John Podesta, is expected to chair Clinton's presidential campaign — mean that its white papers could quickly become platform planks.

While the report and (in an earlier BuzzFeed News report) several executives of sharing economy companies said the federal benefits — and specifically the Affordable Care Act — can solve independent contractors' health-care issues, other benefits remain intrinsically tied to employment. In addition to creating government programs to address the needs of families and workers who turn to the sharing and gig economy for their primary source of income and have no access to traditional benefits like workers' compensation and pensions, the Center for American Progress also suggests attempting to "modernize the employer-employee relationship to ensure that employers continue in their traditional roles."

Using the construction industry in the U.S. ("where firms use subcontractors and create subsidiaries") as an example, the report also warns against misclassifying workers as contractors to avoid employer responsibilities.

"To address these problems, basic legal protections for employees need to apply when an employment relationship exists, and these protections should not be negated by legal form. Firms that are in reality employers should be made responsible for basic protections such as overtime pay, workers' compensation, and unemployment compensation, as well as for following other protections provided by labor law. In some countries, certain rights are quite rightly bestowed on individuals after a continued period of employment by the same organization."