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The growth of the "on-demand" services sector has spurred a vigorous debate on the changing nature of the U.S. economy and the implications for American workers. The “on-demand” economy refers to the growing number of businesses that connect service providers to customers through the assistance of information technology -- particularly “apps” accessible on smart phones. Uber and Lyft drivers are the most commonly-cited examples of the growing phenomenon, but there are others, including maid and handyman-type services, grocery and restaurant food delivery, data programming for academic research, and even short-term management consulting. Many other on-demand businesses are now in developmentand expected to emerge in the coming years.

Technology is what makes these new firms viable. Entrepreneurs and developers create internet software and “apps” that connect a service and a customer, making it much easier and more convenient than ever before. This technology isn’t just breaking new ground with customer service – it’s also pioneering new ways to organize, manage, and deploy workers. Many of the people who work in the on-demand economy are not employees, but rather self-employed independent contractors. Consequently, they have fewer obligations than typical workers do, but also get much less in terms of the social protections that have been extended to workers in various federal and state laws.

The on-demand economy is still nascent and its long-term trajectory is far from clear. But there is an expectation that it will grow as technology improves and customers find its convenience more and more attractive. It is therefore appropriate to consider at this time what the effects of the on-demand economy might mean for workers, and whether adjustments in public policies are warranted.

A useful starting point for considering this subject is the proposal by Harris and Krueger to create a new category of worker, the “independent worker,” to address the growing number of people working in the on-demand economy. A discussion of that proposal follows, along with a description of an alternative approach that would be more consistent with existing law and less disruptive to the dynamic growth of this new sector of the national economy.

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Access Rights Type:
Fresh Perspective Series