The pandemic has devastated wide swaths of the U.S. economy, causing more than 22 million job losses and about 25 percent of small businesses to close, many of them for good. But some companies have thrived amid this catastrophe—indeed, thrived because of it. Instacart, the grocery delivery service, is booming, with sales up 500 percent year-over-year and the company cruising to a $17.7 billion valuation. Their workforce—of mostly low-paid contract workers—has swelled to 500,000 people while the company has taken in $500 million in investment since March.
And yet, somehow, Instacart is also losing unimaginable sums of money. According to The Wall Street Journal, in eight years of business, Instacart has had one month of profitability, in April 2020. That’s after raising $2.4 billion in total investment capital. And now, to add to their problems, supermarkets reportedly are tiring of Instacart’s high fees (usually more than 10 percent per order). “We don’t think we make money from an Instacart order,” Mark Skogen, CEO of Skogen’s Foodliner Inc., told the Journal.
Instacart isn’t an outlier. Tech companies from Uber to Lyft to Grubhub remain in business only because they have access to a vast stream of cheap labor and money from investors who are confident they’ll make up their losses on a future IPO driven by irrational exuberance. DoorDash, which leads the food delivery market, lost $600 million in 2019 and had its first profitable quarter this year—before sliding back into the red. After a buzzy IPO caused its stock price to spike in early December, its value has steadily declined. Like its peers, DoorDash has been accused of gouging workers and merchants alike while failing to generate sufficient revenue.
This obscene business model isn’t new, but the pandemic has magnified it, proving that gig companies, even at their fullest demand, are unsustainable money-losers and parasites. If they’re paying poverty wages and charging merchants outsized fees even during their boom times, then who is benefiting from this system beyond a clutch of stock option-holding executives and venture capitalists? And how will this arrangement not get infinitely worse for workers and merchants alike when the pandemic ends?
As a society, we recognize gig workers as essential parts of a delivery-and-logistics ecosystem that ensures that people quarantining at home can get the food and supplies they need. But those workers are victims of an exploitative labor arrangement sustained by cheap venture capital that subsidizes artificially low prices for consumers. The homebound office worker can get pad thai delivered at any time of day, but no one else in the arrangement is happy: The guy delivering it is broke, exposed to disease, and reliant on tips; the restaurant owner has to deal with Grubhub’s onerous fees.
Allowing masses of underpaid workers to be exploited in order to provide widespread convenience was always a depraved bargain, built on a rickety ethical and economic foundation. At some point, gig companies, no longer coasting on promises of increasing market share leading them to monopoly, would have to find ways to extract profits. That can only come from keeping labor in a box—as the industry has done with measures like Proposition 22 in California—and chiseling restaurants and merchants for higher percentages of their sales. Customers might have to start paying more, too, but companies would rather hold off on raising prices for consumers until they’ve achieved indomitable market position, at which point consumers have no other options (call it the Amazon method, with Uber being its most zealous student).
On the labor front, the nominal upside of the Covid-19 disaster was that at least it showed us which workers were essential. It didn’t necessarily follow that those workers received the benefits and pay they deserved, but we understood who was being exploited and what labor activists should be fighting for. These workers, in turn, could organize to reap better conditions from the delivery and platform companies that were flourishing from unprecedented demand.
Can that understanding hold? To activists and critics, the gig economy has never been sustainable or just. But now workers find themselves fighting platform owners who are willing to spend hundreds of millions of dollars not on health benefits or increased wages—or even on shoring up company finances—but on curbing their labor power. The forces arrayed against labor are at once formidable and doomed to some kind of existential crackup. For workers, there’s little choice but to plow ahead, organize, and extract what concessions they can from their employers as they watch IPO windfalls redeem the unprofitable decisions of their executive overseers.
The rest of us can make certain choices—do I take an Uber or a pricier yellow cab?—but individual consumer habits are unlikely to fundamentally change the economic playing field. Instead, legislators, technologists, workers, and others must do what they can to divorce the positive elements of these services—providing convenient app-based delivery and transport—from its exploitative underpinnings. That can only be done by creating something other than a rent-seeking, parasitic model. Nonprofit platforms that are controlled by workers and small businesses would be a start. But as long as VC cash keeps flowing and a lack of government support leaves a vast pool of Americans unemployed, gig companies will have access to all the cheap, desperate labor they need.