We’ve all opened the fridge during our hungriest moments, only to find little more than abandoned snacks and measly leftovers. The pangs of de-prioritizing grocery shopping are most often felt in the stomach. For many Austin locals and UT students, the end to the desolate refrigerator felt nearer after Texas grocer H-E-B concluded a deal to purchase Austin-based delivery startup, Favor.
The rise of on-demand services like Favor has created an increasingly large gig economy in Austin. A gig economy is a labor market characterized by the prevalence of short-term contracts or freelance work as opposed to permanent jobs. Austin was fourth in a ranking of the fastest growing gig economies from 2012 to 2014. The main issue with the gig economy is the people caught in the middle of these startups and the goods they deliver — the people who work for on-demand services.
Austin’s rapidly growing technology scene provides a distinct contrast to its revered, local culture. In a similar way, the city is soon going to have to confront how the growing gig economy affects thousands of workers. There currently is little legal precedent set on the classification of gig workers. Their ambiguous working situation often gives them an invisible status — as their gig jobs provide little security.
There are several challenges associated with being a gig worker. The first is that your employment is always limited by the classification as a contractor, rather than an employee. The justification is that they theoretically set their own working hours. Gig workers are expected to supply their own vehicles, pay for maintenance, gas, repairs and other related expenses. This is all while receiving no employee benefits, such as premiums on health insurance and contributions to retirement plans.
The same limited classification leads to gig workers having almost no rights as workers. Regulations on the rights to minimum wage, overtime, expense reimbursement and workers compensation benefits are not defined for gig workers. In fact, a recent study from MIT shows that per hour worked, median profit from driving for ride-hailing companies such as Uber and Lyft is $3.37 an hour before taxes, and 74 percent of drivers earn less than the minimum wage in their state.
As H-E-B ventures into the delivery sector, they need to be making clear rules on whether drivers will be classified as part-time workers of the company or contractors via Favor. This small distinction can be transformative for the thousands of gig workers in Austin. At the moment, neither H-E-B nor Favor have disclosed any details of the deal. The lack of information about the deal makes it difficult for us to determine the future for several Favor drivers — adding uncertainty to their already inconsistent schedules.
The Favor/ HEB merger demonstrates how established companies can find room for growth by leveraging the capabilities of technology companies, rather than fighting them for control. However, it’s important to not forget who makes it all happen — the gig workers fighting for a place in this ever changing economy.
Krishnan is a computer science freshman from Plano.
