A New Skill is Identified: Shopping

Recently I read about a new business, called Instacart, that does your grocery shopping for you. This is different from well-established grocery services, such as Peapod and FreshDirect, because the company owns no food warehouses or trucks, and you don’t have to place your orders many hours in advance. Instead, mere minutes after you place your order on the Web, Instacart enlists someone in your community—an independent contractor, not an employee—to go to one or more existing food stores, buy what you ordered, and deliver it to you in the contractor’s own car.

The shoppers earn between $15 and $30 per hour, depending on how fast they deliver the goods. This is considerably better pay than most jobs at a supermarket, but (like so many work arrangements that the new economy is creating) the work offers no fringe benefits. It is also not likely to provide full-time work, although for some people that’s an advantage.

Instacart makes its profits by charging a flat delivery fee ($3.99 for most orders), plus a markup on the store’s prices. One estimate is that the markup averages about 20 percent.

In some ways, this work arrangement resembles the ride-sharing services Uber and Lyft, in that it uses the Web to match consumers of a service with fairly ordinary people who have that service to offer. One important difference is that the service that Instacart offers—shopping—is not regulated, as taxicab transportation is. Instacart also is unlikely to displace many existing workers, because there are very few professional grocery shoppers, certainly compared to cab drivers.

The work does not require any formal credentials, but it does require a skill that you will probably not find in any existing skill taxonomies: shopping skill. My shopping skill was tested recently when my mother was incapacitated by a hip fracture and I had to buy her groceries. Unlike an Instacart shopper, I was tasked with the additional goal of finding the best prices. As a child of the Depression, my mother knows the going prices of nearly every item she customarily buys at several markets in her Manhattan neighborhood, including the open-air green market in Union Square. Instacart clients don’t require this kind of accountability.

However, Instacart clients do expect speed. This means that the shoppers must know what stores stock a wide range of grocery items and have them in high quality, plus where the items are located in the store. Every year about this time, when summer berries and fruit come ripe, I wander helplessly through the aisles of my local supermarket, trying to find the Sure-Jell pectin for making jams. Is it in the aisle with cooking supplies? Gelatin? Seasonal items? I’m never sure, and even the clerks (if you can find one) sometimes send me to the wrong aisle.

It will be interesting to see whether this kind of work continues to expand beyond ride-sharing and grocery-shopping. Tyler Cowen, an economist at George Mason University, sees the bright side of this trend: “When you ask what kind of niches we’ll see for people who used to be in traditional middle-class jobs, this is the kind of labor that could fit into that. I wouldn’t want to suggest people will become grocery-delivery millionaires, but if you don’t have a college education but you’re smart and responsible, could you make a living doing this and maybe piecing it together with some of these other kinds of jobs? Absolutely.”

I’m not so sanguine about this trend. It reminds me of the old joke that there will always be work because people can do each other’s laundry. That’s true, but as our economy relies more and more on imported manufactured goods, we need to find work that leads to exports.

Employee or Contractor?

In June, I blogged about the theory that the employer-employee relationship is being replaced by a relationship in which workers are hired guns. I argued that the “Hollywood model,” much hyped in the 1990s, still has not caught on and is unlikely to because workers value the security and the continued health insurance they get from regular employment and employers value the creative workers they have identified and cultivated.

On the other hand, there is a definite trend toward the pretense of this arrangement--that is, a relationship in which the employee acts like a salaried worker but contractually is a hired gun. The workers behave exactly like salaried employees, putting in the same 40-hour weeks, working at the same site, answerable to the same supervisors, maybe even wearing a uniform with the company logo, but on paper they are independent contractors. As I acknowledged in the earlier blog, this arrangement helps employers avoid carrying the overhead of a large staff of salaried employees. The company also can prevent its workers from unionizing by arguing that most are independent contractors who have no right to collective bargaining. This actually happened last summer at an Ohio company, Baker Communications.

The Government Accountability Office reported in 2007 that 10 million workers were classified as independent contractors, an increase of more than 2 million in just six years, and certainly many of these new contracts were phony. The Bureau of Labor Statistics has estimated that the number of workers misclassified as independent contractors is as high as 30 percent in some states. One reason the government is concerned about this trend is that it cheats the tax collector of funds that normally would go to the accounts of Social Security, Medicare, and unemployment insurance.

Therefore, the IRS is scrutinizing the tax returns of people who file as independent contractors to make sure that the employment relationship is legitimate. If you are an independent contractor, you need to be sure that your work relationship meets the legal requirements. For example, you can’t be working for the same employer and doing the same work you did on payroll or doing the same work under the same conditions as people who are on payroll.

Ironically, one industry has recently begun to attempt the opposite pretense: that independent contractors were actually regular employees. There’s an obscure provision in United States copyright law, effective this year, that allows musicians to regain control of their work 35 years later, provided they have applied for such control at least two years in advance. You may or may not remember the music of 1978, but it was a very fruitful year for American musicians such as Bruce Springsteen and Billy Joel, and the record companies stand to lose a lot of revenue if they lose the rights to the masters of these performers’ songs.

Therefore, the record companies are arguing that the musicians who recorded for them were not independent contractors and that the recordings were “work for hire,” like the books that I write for JIST as a salaried employee. I don’t know whether there are any other industries that face a similar hazard from using independent contractors. It’s likely that most of them write contracts with explicit work-for-hire terms, as I have sometimes signed in my days as a contractor, so this situation is probably uncommon.

On the other hand, even when contractors are unable to carry away the output of their labors, employers need to consider that the contractors may take their talents and work experience to a competitor. Some employers of contractors attempt to prevent this by inserting noncompetition clauses into contracts, but a contractor with very valuable skills may be able to have such clauses removed. (I was able to do so with a former employer, something that I was unable to do while still a salaried employee of the same company.) Furthermore, noncompetition clauses sometimes don’t hold up in court, or the employer sometimes is reluctant to attempt enforcement, because such a clause undermines the pretense that the employee is a hired gun.