Monday, September 28, 2015

Probably The Smartest Piece On The 1099 Economy You Will See Today

I am surprised the IRS and the U.S. Department of Labor haven't already adopted this simple test:
Do you work for more than one company?
No? You aren't an independent contractor.
From Interfuidity:

1099 as antitrust
I have no idea what legal, regulatory, or policy process might achieve this outcome. But maybe it would be a good thing if it happened. 
Suppose the criteria for 1099 status really emphasized having multiple customers. For example, if you make money by offering people rides, the fact that you get to set your own schedule doesn’t cut it, if substantially all of your business comes from Uber. To qualify as an independent contractor, if you do substantial business with a regular, repeat customer, you must have multiple customers in that line of business for whom you do substantial work. Otherwise, there is a strong presumption that you should be considered an employee of your customer. 
Right now, the greatest danger to to the rest of us from “sharing economy” platforms like Uber is that these platforms benefit from network effects that render them “winner-take-all”. Today’s apparent innovators are really contesting a tournament to become tomorrow’s monopolists. The outcome we should be hoping to achieve is neither to strangle these products in their cribs (they are often great products that create real efficiencies), nor to permit wannabe monopolists to win their prize. We should want competitive marketplaces in the products these platforms provide. 
Much of the network effect that might render Uber-like platforms anticompetitive derives from density of suppliers. Customers flock to the platform that has the densest, richest set of offerings. When suppliers pick just one, they prefer to work for the platform that has the most customers. So once one platform pulls ahead, a cycle may kick in, virtual or vicious depending on your perspective, leading to a single dominant platform. But if suppliers “multihome”, if pretty much all of them sell through pretty much all of the networks, this “market cramp” can be interrupted and multiple platforms might survive. I’ve recommended before, in a vague way, that policy should be geared to encouraging multihoming. But that was going to be hard work, because platforms’ incentives are to make it hard as possible for suppliers to be promiscuous....MORE

HT: Alphaville's Further Reading post.