TIME Labor

Why Startups Are Making the Expensive Switch to Traditional Employment

"After a while you realize that some of the trade-offs you were making weren’t really good trade-offs"

Correction appended, Aug. 5

On-demand valet service Luxe announced Tuesday that they were expanding to an eighth city, Philadelphia—but that development was tiny compared to news that went out late last week: the company announced that the hundreds of workers who run around cities like Philadelphia in bright blue Luxe jackets, picking up and delivering people’s cars wherever users are, will all be converted from independent contractors to traditional employees.

That’s a move that will cost Luxe, as well as other hot startups that are reverting to doing things the old-fashioned way (at least in part) amid a mess of lawsuits over the status of workers in the on-demand economy. But they stand to gain a lot in return.

Many Silicon Valley companies have followed in Uber’s tracks and developed business models that assume their armies of workers will be treated as contractors. While the brass can’t legally tell contractors when to be on the clock, how to do their job or what to wear, they also don’t have to pay them overtime or guarantee them minimum wage or remit payroll taxes. The savings for companies is huge—probably in the billions per year for a business like Uber.

But while traditional employees cost more, employers get to exercise far more control over them, telling them precisely what to do and how to do it and, for that matter, in what color and style of outfit.

“It has to do with controlling the user experience,” says Luxe CEO Curtis Lee of why they are “making the switch” two years after the service started in San Francsico.” After a while you realize that some of the trade-offs you were making weren’t really good trade-offs.”

Under the contractor model, Lee says, the leaders at Luxe hadn’t been able to schedule workers for unpopular hours like late nights on Friday and Saturday; they could only bribe them to come online with higher rates of pay, as Uber does with surge pricing. They couldn’t provide thorough training or demand that they be considerate of other valets. “Now we can actually say, ‘Hey, you need to address the customer in a certain manner,'” Lee says.

Kevin Gibbon, CEO of San Francisco-based Shyp, says they made the same change earlier this summer because they wanted more “quality control” over couriers responding to on-demand shipping orders. Sometimes the closest courier wouldn’t feel like doing a job, so users would be left waiting for a more willing courier who was 30 minutes away. Other times couriers would respond to a request and then refuse to take whatever the user wanted to ship, perhaps because it was too unwieldy. Under a contractor model, there wasn’t much they could do about that. “As a contractor you have the right to accept or reject a job,” Gibbon says. As employees, part of the job description can include accepting all requests.

As an employer, Shyp will have to reimburse employees for job-related expenses like gas and car maintenance. Managers will have to make sure workers are taking breaks. Yet Gibbon hopes that they’ll also get more loyalty from couriers, who will feel more attachment to the company and will be more likely to stick around—saving Shyp from onboarding someone new and gaining them the productivity of a more experienced courier. People who want more a career path and less of a temporary gig might be attracted to working for them instead of dozens of other startups, he says.

Both Gibbon and Lee deny that the slew of worker-status suits against companies like Uber, Lyft and delivery company Postmates have anything to do with their decisions to abandon the contractor model. But plenty of startups may look at a company like Homejoy and see a cautionary tale. The on-demand cleaning service recently put up its mop for good, saying the “deciding factor” was four lawsuits it was fighting over worker classification.

One of the companies fighting a class-action suit is Instacart, a rapidly growing $2-billion startup that facilitates on-demand grocery delivery. When the business started, most of their contractors were both shopping for groceries and then delivering them, but over time those jobs have split. While some workers still do both jobs, many either spend all their time shopping in a store or out delivering the bags. Instacart recently announced that after a successful pilot, they would be offering some in-store shoppers the chance to become employees.

“We quickly learned that there were a lot of improvements and efficiencies with this new model,” says Andrea Saul, VP of communications, who could not comment on the pending lawsuit. “Shoppers got better and more accurate at picking items, so we had fewer order issues. Shoppers also got faster at picking items, so we had more on time deliveries.”

Instacart also noticed a better retention rate among those granted employee status and found them easier to integrate into the company culture. “Ultimately, even though the model was costlier for us, the change improved our customer’s experience,” says Saul. The lawyers pursuing the case applauded the change but say it doesn’t affect the years of expenses, for instance, they believe are due to more than 10,000 workers. Those delivering groceries continue to shell out for their own gas and car maintenance.

The main argument that companies like Uber make is that forcing them to classify their drivers—or cleaners or delivery people—as employees would force them to do away with the freedom and flexibility that attracts many workers to the on-demand economy. Contractors get to work as much as they want when they want. “If I don’t want to go out one night because my stomach’s upset or there’s a Game of Thrones marathon on or my cats are being really cuddly, I’m just not going to go out,” says Chicago-based Christopher Gutierrez, who loves driving for Lyft. “I can’t have middle management telling me things and having to abide by different codes.”

In a recent motion fighting a class action suit, Uber’s lawyers said they might be forced to change their entire business model, making drivers work in set shifts and requiring that drivers work only for Uber.

The smaller companies making this change say they’ll be able to retain flexible hours. Luxe’s Lee says they’ll set no maximum or minimum valets have to work or tell part-time workers they can’t also work for Lyft. While he expects more companies to follow in their footsteps, he also says that he doesn’t believe that the traditional employment model works for every company. Like a growing chorus of Silicon Valley disrupters and academics, he believers America should rethink employment.

“There are two old paradigms that were created long, long ago in a different world,” he says. “There really needs, eventually, at some point, to be maybe like a third classification.” The great unknown is what, even if there was the political will to create such a thing, that third category would look like.

Correction: The original version of this story misstated when Luxe announced a change in the employment status of its workers. It was July 30.

TIME China

Here’s Why Chinese Workers Are Wearing ‘No-Face’ Masks

Staffs Wear No-Face Masks To Reduce Pressure During Working Time In Handan
ChinaFotoPress—ChinaFotoPress via Getty Images Chinese workers wearing no-face masks.

The government is worried about overwork-related deaths

Like Casual Fridays? Try “No Face” day.

On Tuesday, a handful of service companies in Handan, a city in China’s Hebei province, encouraged workers to wear masks to work so that they could relax their faces instead of smiling all day. Customers were greeted with a sea of Guy Fawkes faces and masks imitating the character “No Face” in the 2001 anime movie Spirited Away. The mask day was designed to “reduce pressure during working time,” according to China FotoPress.

In China, workplace pressure is a mounting concern among companies and the government. According to the China Youth Daily, about 600,000 Chinese people die from overwork each year. And while that statistic might not be trustworthy, its publication in the state-run newspaper means the government is concerned about the prevalence of overwork-related deaths. There’s even a word for this kind of death: guolaosi. Many labor experts in China agree that Chinese white-collar workers far outwork the legal limits on overtime each week.

Despite the health risks, working to the point of extreme is still lauded by many in Chinese society. When Chinese bank regulator Li Jianhua died at his desk last year finishing a report, his employer, the China Banking Regulatory Commission, released a statement saying he was a “model for party members and cadres.”

TIME Economy

Warren Buffett: $15 Minimum Wage Will Crush the Working Class

Warren Buffett And BofA CEO Brian Moynihan Speak At Georgetown University
Drew Angerer/Getty Images

The billionaire has a surprising position on beloved issue for the left

Warren Buffett is a favorite of the American left for his support of such policies as higher taxes on the rich and healthcare reform.

But advocates for workers rights may be a little less pleased with the billionaire investor after he published an op-ed in The Wall Street Journal Friday, decrying the efforts in many cities across the United States to raise the minimum wage to as much as $15 per hour.

Buffett admitted that the middle class has increasingly hurt by an economy that rewards people with “specialized talents,” but not the vast majority of Americans who hold “more commonplace skills.” However, Buffett argues that trying to solve the problem of stagnant wages for working Americans by raising the minimum wage is misguided. Writes Buffett:

In my mind, the country’s economic policies should have two main objectives. First, we should wish, in our rich society, for every person who is willing to work to receive income that will provide him or her a decent lifestyle. Second, any plan to do that should not distort our market system, the key element required for growth and prosperity.

That second goal crumbles in the face of any plan to sizably increase the minimum wage. I may wish to have all jobs pay at least $15 an hour. But that minimum would almost certainly reduce employment in a major way, crushing many workers possessing only basic skills. Smaller increases, though obviously welcome, will still leave many hardworking Americans mired in poverty.

Instead, Buffett says, we should expand the earned income tax credit, also known as a “negative income tax,” in which the government subsidizes the wages of workers making under a certain amount. “The EITC rewards work and provides an incentive for workers to improve their skills,” Buffett writes. “Equally important, it does not distort market forces, thereby maximizing employment.”

MONEY Best Places

These Are the 25 Best Cities for Finding a Job

Chamber of Commerce, Raleigh, NC
Visions of America—UIG via Getty Images Chamber of Commerce, Raleigh, NC

A new report shows the best places to find a new gig.

A new Glassdoor study ranked America’s 50 biggest cities and come up with the best 25 for workers.

The formula weights each city’s housing affordability, how employees rate their job satisfaction on Glassdoor’s site, and how easy it is to get a job (the ratio of openings to population).

Thanks in great part to its location in the university-heavy “Research Triangle,” Raleigh, N.C., is the top-rated metropolitan area for jobs. Like Austin and Seattle, which also rank in the top five, the city has benefitted from a tech boom in recent years, as companies and workers have left higher-cost areas like San Francisco and New York.

Scroll down for the top 25 cities—or check out the full ranking at Glassdoor, which has Riverside, Calif., and Las Vegas landing at the bottom of the list.

  1. Raleigh, NC – Glassdoor Job Score: 4.1
  • Number of Job Openings: 24,146
  • Population: 1,242,974
  • Median Base Salary: $50,950
  • Median Home Value: $198,400
  • Job Satisfaction Rating: 3.3
  1. Kansas City, MO – Glassdoor Job Score: 3.9
  • Number of Job Openings: 28,786
  • Population: 2,071,133
  • Median Base Salary: $46,000
  • Median Home Value: $138,500
  • Job Satisfaction Rating: 3.2
  1. Oklahoma City, OK – Glassdoor Job Score: 3.9
  • Number of Job Openings: 16,759
  • Population: 1,336,767
  • Median Base Salary: $38,100
  • Median Home Value: $129,400
  • Job Satisfaction Rating: 3.3
  1. Austin, TX – Glassdoor Job Score: 3.9
  • Number of Job Openings: 33,198
  • Population: 1,943,299
  • Median Base Salary: $50,000
  • Median Home Value: $226,400
  • Job Satisfaction Rating: 3.3
  1. Seattle, WA – Glassdoor Job Score: 3.9
  • Number of Job Openings: 69,423
  • Population: 3,671,478
  • Median Base Salary: $70,000
  • Median Home Value: $344,700
  • Job Satisfaction Rating: 3.3
  1. Salt Lake City, UT – Glassdoor Job Score: 3.8
  • Number of Job Openings: 17,970
  • Population: 1,153,340
  • Median Base Salary: $44,000
  • Median Home Value: $224,000
  • Job Satisfaction Rating: 3.4
  1. San Jose, CA – Glassdoor Job Score: 3.7
  • Number of Job Openings: 51,439
  • Population: 1,952,872
  • Median Base Salary: $99,000
  • Median Home Value: $863,800
  • Job Satisfaction Rating: 3.5
  1. Louisville, KY – Glassdoor Job Score: 3.7
  • Number of Job Openings: 16,295
  • Population: 1,269,702
  • Median Base Salary: $40,000
  • Median Home Value: $131,100
  • Job Satisfaction Rating: 3.2
  1. San Antonio, TX – Glassdoor Job Score: 3.7
  • Number of Job Openings: 29,980
  • Population: 2,328,652
  • Median Base Salary: $40,000
  • Median Home Value: $147,600
  • Job Satisfaction Rating: 3.3
  1. Washington, D.C. – Glassdoor Job Score: 3.7
  • Number of Job Openings: 116,770
  • Population: 6,033,737
  • Median Base Salary: $61,000
  • Median Home Value: $361,200
  • Job Satisfaction Rating: 3.4
  1. St. Louis, MO – Glassdoor Job Score: 3.7
  • Number of Job Openings: 31,365
  • Population: 2,806,207
  • Median Base Salary: $45,000
  • Median Home Value: $133,200
  • Job Satisfaction Rating: 3.3
  1. San Francisco, CA – Glassdoor Job Score: 3.7
  • Number of Job Openings: 94,933
  • Population: 4,594,060
  • Median Base Salary: $70,000
  • Median Home Value: $728,000
  • Job Satisfaction Rating: 3.5
  1. Columbus, OH – Glassdoor Job Score: 3.6
  • Number of Job Openings: 25,242
  • Population: 1,994,536
  • Median Base Salary: $43,000
  • Median Home Value: $146,700
  • Job Satisfaction Rating: 3.2
  1. Dallas-Fort Worth, TX – Glassdoor Job Score: 3.6
  • Number of Job Openings: 102,311
  • Population: 6,954,330
  • Median Base Salary: $50,000
  • Median Home Value: $157,900
  • Job Satisfaction Rating: 3.2
  1. Boston, MA – Glassdoor Job Score: 3.6
  • Number of Job Openings: 86,565
  • Population: 4,732,161
  • Median Base Salary: $56,000
  • Median Home Value: $367,600
  • Job Satisfaction Rating: 3.4
  1. Minneapolis-St. Paul, MN – Glassdoor Job Score: 3.6
  • Number of Job Openings: 48,231
  • Population: 3,495,176
  • Median Base Salary: $52,000
  • Median Home Value: $210,300
  • Job Satisfaction Rating: 3.2
  1. Atlanta, GA – Glassdoor Job Score: 3.5
  • Number of Job Openings: 69,642
  • Population: 5,614,323
  • Median Base Salary: $49,180
  • Median Home Value: $155,200
  • Job Satisfaction Rating: 3.2
  1. Memphis, TN – Glassdoor Job Score: 3.4
  • Number of Job Openings: 14,776
  • Population: 1,343,230
  • Median Base Salary: $42,000
  • Median Home Value: $107,000
  • Job Satisfaction Rating: 3.2
  1. Indianapolis, IN – Glassdoor Job Score: 3.3
  • Number of Job Openings: 23,863
  • Population: 1,971,274
  • Median Base Salary: $44,000
  • Median Home Value: $130,100
  • Job Satisfaction Rating: 3.2
  1. Chicago, IL – Glassdoor Job Score: 3.3
  • Number of Job Openings: 124,633
  • Population: 9,554,598
  • Median Base Salary: $50,000
  • Median Home Value: $186,900
  • Job Satisfaction Rating: 3.2
  1. Houston, TX – Glassdoor Job Score: 3.3
  • Number of Job Openings: 74,442
  • Population: 6,490,180
  • Median Base Salary: $52,000
  • Median Home Value: $157,900
  • Job Satisfaction Rating: 3.2
  1. Baltimore, MD – Glassdoor Job Score: 3.3
  • Number of Job Openings: 45,558
  • Population: 2,785,874
  • Median Base Salary: $46,000
  • Median Home Value: $244,100
  • Job Satisfaction Rating: 3.2
  1. Richmond, VA – Glassdoor Job Score: 3.2
  • Number of Job Openings: 17,933
  • Population: 1,260,029
  • Median Base Salary: $45,000
  • Median Home Value: $186,300
  • Job Satisfaction Rating: 3.2
  1. Pittsburgh, PA – Glassdoor Job Score: 3.1
  • Number of Job Openings: 29,456
  • Population: 2,355,968
  • Median Base Salary: $43,000
  • Median Home Value: $124,500
  • Job Satisfaction Rating: 3.1
  1. Nashville, TN – Glassdoor Job Score: 3.1
  • Number of Job Openings: 27,850
  • Population: 1,792,649
  • Median Base Salary: $41,600
  • Median Home Value: $176,700
  • Job Satisfaction Rating: 3.2

 

TIME Innovation

Five Best Ideas of the Day: April 2

The Aspen Institute is an educational and policy studies organization based in Washington, D.C.

1. McDonald’s is raising wages for 90,000 employees. That’s a good start, and a strong message to other fast food outlets.

By Shan Li and Tiffany Hsu in the Los Angeles Times

2. “It must be right:” The human instinct to trust the authority of machines can be dangerous when life is on the line.

By Bob Wachter in Backchannel

3. As college acceptance letters roll in, women should ask about sexual assault prevention on campus.

By Veena Trehan at Nation of Change

4. When corporate values clash with policy in conservative states, big business has a powerful veto tool.

By Eric Garland in Medium

5. Amazon’s Dash button isn’t a hoax. It’s a step toward a true “Internet of Things.”

By Nathan Olivarez-Giles in the Wall Street Journal

The Aspen Institute is an educational and policy studies organization based in Washington, D.C.

TIME Ideas hosts the world's leading voices, providing commentary and expertise on the most compelling events in news, society, and culture. We welcome outside contributions. To submit a piece, email ideas@time.com.

TIME

These States Have the Most Jobs For College Grads

157337135
Getty Images

You'll never guess which little states hold the biggest opportunities

New college grads looking for work online have the best shot at getting jobs in Massachusetts and Delaware, a new study finds.

Since as many as 90% of jobs that require a bachelor’s degree or higher are advertised online, Georgetown University’s Center on Education and the Workforce took a comprehensive look at online job listings around the country to figure out where the jobs are, along with what types of jobs they are.

As might be expected, large states with big populations — notably, California, Texas, and New York — have the most online job ads, but this doesn’t tell the whole story. Georgetown did a deeper dive into the data to see which states have the most online job ads relative to the number of working, college-educated residents, providing a more accurate measure of the labor market for bachelor’s degree-holders in each state. “Strong job growth doesn’t necessarily translate into good job prospects [because] job growth also tends to bring increased competition,” the report points out.

When the numbers are crunched in a way that takes into account the number of workers, a clearer picture of job opportunities emerges: Massachusetts, Delaware, Washington state, Colorado and Alaska have the highest number of ads seeking candidates with bachelor’s degrees or higher per worker, respectively. Higher still is the nation’s capital: Washington, D.C. has three times the national average of online job ads relative to workers with college degrees. “The college-educated job seeker who is willing to move to a state with a high concentration of job ads per worker has a greater likelihood of landing a job than remaining in or moving to states with fewer job ads per worker,” the report says.

West Virginia residents with college degrees, in particular, might want to think about relocating: This state has the weakest online job market, followed by (respectively) Rhode Island, South Carolina, Mississippi and Hawaii. The good news is that the states with markets higher than the national average are geographically disparate, with most regions represented.

When it comes to the kinds of jobs employers looking for college grads are trying hardest to fill, the story is the same as it’s been since the recovery in the labor market began. “We found that two large occupational clusters – managerial and professional office and science, technology, engineering, and mathematics (STEM) – dominate the online college labor market, accounting for three out of every five online job ads,” the report says. Employers in the industries of consulting, business, financial and healthcare services are responsible for more than half of all the online job postings seeking college-educated candidates, while STEM jobs have more than three available job postings for every worker, more than twice as many as any other field. The states that saw the biggest growth in STEM jobs between 2010 and 2013 are Wyoming, Missouri and Wisconsin, and relative to the number of college-educated workers, Georgetown says Delaware, Massachusetts, and New York offer the best job prospects for college grads with STEM degrees.

 

TIME Innovation

Five Best Ideas of the Day: March 20

The Aspen Institute is an educational and policy studies organization based in Washington, D.C.

1. The prison system is costly and rarely rehabilitates prisoners. Imagine a better way to transition inmates to freedom.

By Mark A.R. Kleiman, Angela Hawken, & Ross Halperin in Vox

2. Lawmakers should listen to the budget hawks, not the defense hawks.

By Robert Gard and Angela Canterbury in Defense One

3. For teenage girls, it’s possible to shift “attention bias” — literally focusing them on happy faces instead of sad ones — and fight the risk of depression.

By Jennifer Kahn in Pacific Standard

4. The next generation of American workers isn’t prepared to take over the jobs of departing baby boomers. The cost of this failure will be enormous.

By Jennifer Bradley in the Brookings Essay

5. As a four-year college education slips further out of reach, community college has some important lessons to teach us.

By Josh Wyner in the Miami Herald

The Aspen Institute is an educational and policy studies organization based in Washington, D.C.

TIME Ideas hosts the world's leading voices, providing commentary and expertise on the most compelling events in news, society, and culture. We welcome outside contributions. To submit a piece, email ideas@time.com.

MONEY Workplace

How to Deal When You’re Promoted Above Your Peers

Illustration by Mikey Burton

When a promotion kicks you out of the coffee klatch, you’ll need to keep your former peers from becoming your future critics.

Right after you celebrate that well-earned promotion, reality hits: You’re now the boss of people who had been your peers. “When you become a supervisor, the relationship structurally changes, whether you like it or not,” says Good Boss, Bad Boss author Robert Sutton, a Stanford University professor who studies organizational behavior.

Going forward, your work will be judged on your ability to lead people with whom you used to consort and complain. If that’s not enough pressure, you’re now at risk of being the one complained about. Make the transition seamless with these steps.

Meet One-on-One

Sit down with each person to discuss the change in leadership. “You’re in learning mode,” says Linda Hill, a Harvard Business School professor and co-author of Being the Boss. Ask staffers to share their short- and long-term goals, skills they’re building, and obstacles that get in the way of doing their jobs. You’ll convey respect and gain valuable info that can help you achieve buy-in.

Also, if you were promoted over a colleague, “address the elephant in the room” and alleviate worries about your ability to work well together, advises Atlanta social media strategist and job coach Miriam Salpeter.

Step Back Socially

You can be a great manager and preserve friendships by slightly altering your behaviors. Continue attending happy hour, for example, but stay for only one drink, suggests Hill. Allow your staff space to vent. “We all need to blow off steam sometimes,” says Katy Tynan, author of Survive Your Promotion! (Just make it clear to your people that if something is really bugging them, they can talk to you, she adds.)

Also, disconnect from your subordinates on all non-work-related social media. “Many times you’re doing people a favor, since it puts less pressure on what they can and can’t share on their profiles,” says Salpeter. Do let employees know before unfriending them, though, so that they don’t take it personally.

Prove You Don’t Play Favorites

Prepare to make—and to justify—difficult decisions, particularly regarding raises and promotions. To be seen as objective, try to grade everyone using the same metrics, and be sure people know what those metrics are, says Keith Murnighan, a professor at the Kellogg School of Management at Northwestern University.

To show humility, solicit feedback from subordinates on your own performance, says Gentz Franz, a University of Illinois lecturer who studies job succession. “It’s incumbent upon managers,” he says, “to open the lines of communication if they want to create a collaborative work environment.”

TIME Retail

Walmart Must Pay $188 Million to Settle Claims of Cut Rest Breaks

The company said it may appeal the decision

Walmart has been ordered to pay $188 million over claims by employees that the company regularly cut their breaks for meals and rest. The payment would be a settlement for a class-action lawsuit that went all the way to the Pennsylvania Supereme Court. The ruling would hurt Walmart’s earnings, the company said, by reducing its profits from continuing operations by 6 cents per share. Wal-Mart said it may appeal the decision.

The lawsuit involved 187,000 Pennsylvania-based Walmart employees. They worked at the retailer between 1998 and 2006.

[Reuters]

TIME ebola

Nearly Half of Liberia’s Workforce Is Out of a Job Since Ebola Crisis Began

Liberia is the hardest hit nation in the Ebola outbreak

Nearly half of Liberia’s working population at the beginning of the Ebola crisis is no longer doing so, according to a new report released Wednesday.

The West African nation has been the hardest hit in the regional outbreak, accounting for more than 7,000 cases and nearly 3,000 deaths, according to the World Health Organization. To measure the economic impact of that devastation, the World Bank, Liberian Institute of Statistics and Geo-Information Services and the Gallup Organization conducted phone surveys and found that not only is a massive part of the country’s work force out of job, but food insecurity is worsening.

Wage workers and the self-employed have taken the biggest hit, the report finds. Prior to the epidemic, more than 30% of working household breadwinners were self-employed, but now that rate is just above 10%. Many people lost jobs because their business or government offices closed.

Agricultural workers were significantly burdened at the start of the outbreak, too, since transportation routes were interrupted and people avoided large gathering spaces like markets, but the report shows Liberians are beginning to return to work as the harvest approaches.

Read the full report here.

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