Middleman Apps, Contract Workers, Birth Rates, Infant Mortality, and Wal-Mart Banking

Are the myriad of apps that exist to soothe routine pain points making our lives better? To app users, the answer would be yes—after all, increasing efficiency and free time while providing jobs for other people seems like a win-win, right? The Upshot brings you an article—Why We Sit Back and Let Apps Do Our Chores—centered on a new app that handles your shipping. There is an app or site for almost everything annoying now—grocery shopping, doing errands (TaskRabbit), going to get food that isn’t delivered (Favor), cleaning house, getting delivery or takeout (Seamless/GrubHub), getting transportation (Uber/Lyft), and so on.

All these services aim to make our lives easier, but it’s easy to forget that there’s a person who has to complete each of these jobs. More often than not, these workers are classified as independent contractors and thereby receive no benefits, insurance, disability, and more. Kevin Roose provides perspective on the issue (Does Silicon Valley Have a Contract-Worker Problem?):

“When you order a service from [a Silicon Valley start-up], the people who get paid to perform it don't file W-2 tax forms because they’re not officially employed. Instead, they file the independent contractor form, the 1099-MISC. The most famous examples of 1099 companies are on-demand car providers like Uber and Lyft, but there are dozens of others: Homejoy, Handy, Postmates, Spoonrocket, TaskRabbit, DoorDash, Washio.”

Classifying workers as contractors can be financially advantageous for companies while offerings workers flexibility to choose their own hours. This, however, is a best case scenario—as “middleman” companies grow and employee more people, many will work for them as a full-time job.

“Start-up workers generally "fit into three buckets,” explains Josh Felser, a venture investor at Freestyle Capital. “There’s the control-your-hours contractor. That group seems to be very happy with where things are. There’s the full-time employee. And then there’s the middle group — where they’re acting like full-time employees and being paid like contractors. That group is disenfranchised.” –Roose

The boundary between contractor and employee is something many companies tiptoe carefully. The overall perspective on “middleman” apps and services is that they increase efficiency, provide employment, and help solve the problem of opportunity cost. That said, these jobs are not ideal as full-time work, and should instead be viewed as good for high-school and college students, or people who want extra income. Data shows that young people have recently been facing persistent unemployment—14.3% among youths 16-24 in July 2014—in part due to the sectors they are typically employed in being quite sensitive to economic changes. Perhaps this group of workers stands to gain the most from the flexible-schedule jobs provided by apps.

Economists remain in favor of Uber-like car services, saying they increase consumer welfare. The University of Chicago hosts the IGM Economic Experts Panel, which polls a number of prominent economists weekly about various issues.

Princeton economists have found that recessions have long-term negative effects on fertility that actually increase over time:

“Their calculations show that a one-percentage point increase in the unemployment rate experienced between ages 20 and 24 reduces the short-term fertility of women by six conceptions per 1,000 women. When following these women to age 40, the same unemployment rate increase leads to an overall loss of 14.2 conceptions per 1,000 women.”

The increase over time can be accredited largely to the women who forgo births early on, and continue to not have children as they age. The researchers believe that these lower rates are partially caused by the fact that individuals—particularly young men—entering the workforce during a recession will have lower lifetime earnings, making them less attractive candidates for marriage. Women may also choose to not get pregnant or have abortions due to unsteady financial situations in times of economic downturn. My takeaway is that recessions are bad for virtually everything except overpopulation. 

For the women who do actually end up giving birth, their child will be more likely to survive if they are wealthier. Emily Oster (a FiveThirtyEight writer and Chicago economist) and others explore the causes of high infant mortality rates in the US as compared to other developed countries (in this case, Europe) in a new paper. They find that the gap between the US and other countries largely stems from inequality. From the abstract:

“This postneonatal mortality disadvantage is driven almost exclusively by excess inequality in the US: infants born to white, college-educated, married US mothers have similar mortality to advantaged women in Europe. Our results suggest that high mortality in less advantaged groups in the postneonatal period is an important contributor to the US infant mortality disadvantage.”

While this is not an entirely shocking finding, it adds to the stack of evidence showing that socio-economic status at birth determines a great deal of one’s expected future outcomes and/or survival.

Last but not least, FiveThirtyEight brings you an overview of Wal-Mart’s new initiative to provide banking services for customers.

“There are more Wal-Mart stores in areas where a higher percentage of the population is unbanked — that is, without a checking or saving account. According to the most recent National Survey of Unbanked and Underbanked Households, conducted by the Federal Deposit Insurance Corp. (FDIC) in 2011, an estimated 8.2 percent of U.S. households are unbanked, or about 10 million households.”

Wal-Mart has been trying to get into banking since the late 90s, and providing these accounts and cards could allow them to pay employees with this integrated system, further reducing payroll costs. Rule of thumb: all corporations have quasi-hidden motivations.  

---