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Analysis

Gig workers bear the brunt of US labour market slowdown

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Chase Copridge sleeps in a van, then spends 16 hours a day sitting in a car. Parked outside grocery stores in the San Francisco Bay area with other drivers, he waits for a job to come through on Instacart, DoorDash or Amazon Flex, whichever app he is working for that day.

But delivery assignments have been few and far between as a winter surge of Covid cases triggered new lockdowns in several states, prompting increasing competition for app-based work. Before the pandemic, Mr Copridge says he easily made up to $400 in a single day but that sum was at an all-time low of between $100 and $150 in recent weeks — at the end of a devastating year for the US economy and his own finances.

“That’s the reality of gig work,” he said. “Time taken away from your family and friends and other avenues of life just to get by.” 

The struggles of the 33-year-old driver in California are emblematic of the broader travails of the American jobs market, which after a faster-than-expected rebound from the initial pandemic shock, is showing signs of another serious slowdown.

US employers slammed the brakes on rehiring workers shed during the coronavirus crisis, creating just 245,000 jobs in November compared with 611,000 the previous month.

As employment in restaurants, movie theatres, stores and other parts of the service economy comes under pressure, more people are turning to gig work such as delivery, putting downward pressure on earnings, workers say.

The same-day delivery service Shipt, which is owned by the retailer Target, said the number of independent contractors it now pays to pick groceries off store shelves and deliver them to customers has more than doubled since the end of 2019. The grocery delivery service Instacart hired 300,000 new shoppers in April alone and announced plans to hire 250,000 more.

At the same time, pandemic restrictions are cutting into areas of the gig economy such as car-hailing. Uber said in August that its gross bookings on rides fell 75 per cent between April and June.

One of the most troubling features of the labour market slowdown has been a surge in applications for jobless benefits disbursed through a federal programme set up specifically for gig workers and the self-employed who do not have access to regular state benefits.

A bar chart showing people in service sectors hit hardest throughout the pandemic

According to the labour department, 455,037 people filed for the so-called Pandemic Unemployment Assistance scheme in the week to December 12, almost double the number from two weeks earlier, and the number of new applicants was still high in the week to December 26, at 308,262.

“You’ve really seen since August very little improvement in the economy [and that] is running full force into this new surge of the pandemic,” said Eliza Forsythe, a professor of economics at the University of Illinois at Urbana-Champaign. “People that are in service sector jobs, customer-facing jobs, lower wage workers and gig workers have been hardest hit throughout this period. That same group of people is again losing jobs and going back on unemployment insurance.” 

Even in states such as Texas that have fewer Covid-related restrictions on activity, low-wage workers have been struggling to regain business.

Willy Solis said his earnings have dropped in recent weeks, while expenses have been cutting into his diminished income

Willy Solis has driven through the suburbs of Dallas for apps including Shipt since late 2019 to help bridge the gap between construction jobs. Mr Solis says his earnings from being a Shipt shopper have dropped in recent weeks, and expenses including petrol, insurance and additional personal protective equipment have been cutting into his diminished income.

Mr Solis — who also works with the Gig Workers Collective, an informal union of Shipt shoppers and drivers for Instacart and DoorDash — said many others also complain of reduced workloads. “There are fewer orders in our individual queues,” he said.

Shipt said in a statement that the company’s shoppers were being offered more orders than at this time in 2019, in addition to complimentary PPE and holiday bonuses.

This week US workers such as Mr Copridge and Mr Solis received an important reprieve. After months of tortuous negotiations and tense stand-offs, Congress and the White House passed a $900bn economic relief bill that includes a $600 cheque for people earning up to $75,000 a year as well as aid to small businesses. Most importantly for the millions of low-wage and gig workers on the front lines of the crisis, the legislation also brought back emergency unemployment benefits worth $300 a week to each recipient for 11 additional weeks.

Column chart of Weekly new claims for Pandemic Unemployment Assistance, thousands showing Applications for jobless benefits continue to be elevated

“There’s huge relief,” said Andrew Stettner, a senior fellow at the Century Foundation, a think-tank. “It averts poverty, it averts extreme distress, but for a lot of people in that place it’s still a limited package. They are still in a hard spot.”

Michele Evermore, a senior policy analyst at the National Employment Law Project in Washington, said recipients of unemployment benefits would still have to wait a few weeks before receiving their payments while states reconfigured their systems, so the delay in reaching a compromise on Capitol Hill had already taken a toll on the most-stricken workers in the labour market.

And she expressed concern that minority groups will not get the same access to the relief benefits as other workers. “Fewer people get benefits and those benefits are smaller in states with the highest population of black workers, Latino workers and indigenous workers,” she said.

In California, Mr Copridge expressed a sense of powerlessness, saying that until the economy recovers fully, he does not see any viable alternatives to gig work. The stimulus cheque will help subsidise the cost of his car, but even if a mooted increase to $2,000 were approved it would not be a game-changer.

“For most people in the Bay Area, that isn’t going to do jack for them,” he said. “We’re hustlers, but we’re also victims.”



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Analysis

Musk well-positioned to steer cryptocurrency’s future direction of travel

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When Elon Musk revealed three months ago that Tesla had bought $1.5bn worth of bitcoin, fans of the digital currency claimed the move would hasten its wider adoption as a tool of corporate finance.

On Wednesday, however, Musk withdrew his personal endorsement, swearing off accepting the cryptocurrency as payment for Tesla’s cars and undermining the company’s justification for using it as a destination to park its spare cash.

As usual, Musk’s comments provided immediate fuel for crypto traders as well as ammunition for the warring crypto tribes on Twitter. But it was harder to tell whether his announcement would have any effect on wider perceptions of the currency, or what role Musk’s views will play in the next phase of crypto adoption.

“He’s always saying things every two days and isn’t consistent,” said John Coffee, a professor at Columbia Law School. Tesla’s pretensions to pushing bitcoin into the mainstream of corporate use always sounded secondary to its interest in pure financial speculation, Coffee added. “I think his first investment was much more of a currency investment than anything else.”

Whatever lies behind Musk’s on-again, off-again love affair with bitcoin, his effect on market prices has been hard to ignore. The currency’s price jumped 15 per cent on the day that Tesla’s investment was revealed, and fell 6 per cent in the 24 hours after this week’s announcement.

The latest drop came just days after Musk jokingly denounced dogecoin — another cryptocurrency that he had heavily promoted — as “a hustle” on US television, sending its value down 15 per cent.

“Without question, he’s become the single most important factor in crypto,” said JP Thieriot, chief executive of crypto exchange Uphold. That influence extends beyond Musk’s ability to move prices and helps shape how people think about digital currencies, Thieriot suggested.

Even Musk, however, can’t force cryptocurrencies into mainstream commercial use. He said this week that Tesla had backed away from accepting payment in the currency because of the environmental effects of the energy-intensive “mining” that goes into validating transactions — a well-known issue he has ignored in the past. 

Many crypto experts said that Musk’s change of heart appeared to reflect an acceptance that bitcoin was not suitable for payments. Other companies that had accepted bitcoin as a form of payment in the past, including Dell and Microsoft, also later dropped it.

“I don’t think a lot of people want to spend their bitcoin,” said Wilson Withiam, an analyst at crypto research group Messari. “If there was actual money behind it, would [Tesla] have actually done that?”

Musk’s change of heart extended beyond the issue of payments. He also swore his electric carmaker off becoming an active participant in the bitcoin market, saying that it “will not be selling any bitcoin”.

The commitment came two weeks after Tesla surprised Wall Street with a $101m profit from selling part of its holdings, raising worries that the company’s performance would increasingly be tied to crypto trading.

The pledge not to sell may have reassured some investors, but it also effectively undermined Tesla’s case for using the currency as part of its everyday corporate treasury operations.

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Zach Kirkhorn, Tesla’s chief financial officer, told Wall Street two weeks ago that the liquidity of the bitcoin market justified Tesla holding the cryptocurrency, since it meant the company could buy and sell actively.

That flexibility was particularly important, he said, as Tesla faced greater cash demands to finance plants in Texas and Germany while also dealing with extreme financial stresses in its supply chain caused by the global semiconductor shortage.

“Being able to access our cash very quickly is super important to us right now,” Kirkhorn said. With one tweet that promised to lock in the company’s crypto investment, Musk has torpedoed that rationale.

Some bitcoin backers said that Musk had still helped prepare the way for the wider adoption of bitcoin by corporate treasurers by encouraging other companies to view it as a valid holding — even if there have been almost no examples of others announcing they were buying the currency.

His initial enthusiasm for bitcoin had generated interest — including among treasurers — that was likely to continue well beyond his recent turnround, said Rayne Steinberg, chief executive of digital asset management group Arca. “People were talking about it, it entered the zeitgeist.”

Some corporate treasury experts, however, said that Tesla’s flirtation with cryptocurrency holdings had done nothing to encourage wider adoption.

“It created conversation among treasurers, but I don’t think it changed anyone’s mind,” said Jerry Klein at Treasury Partners in New York. The overriding requirement for treasurers to preserve the value of their companies’ cash had completely ruled out cryptocurrencies, Klein added.

But if Musk’s dabbling in bitcoin failed to change the currency’s standing in the corporate world, his latest intervention has raised another prospect: that he could become a kingmaker for a future cryptocurrency to rival or even supersede bitcoin.

Using his celebrity to draw attention to bitcoin’s large energy consumption — and that many participants in the network are in China, relying on coal-fired power stations — could hasten the search for alternatives, according to supporters. Surveys of millennials and Gen Z, who are big buyers of cryptocurrencies, showed that they were also deeply concerned about climate change, said Thieriot at Uphold. “Eventually, those things have to converge,” he said.

Musk’s comments provoked an immediate scramble for attention among backers of cryptocurrencies that claim to have less adverse effects on the environment. Those included Bitcoin Zero — a carbon neutral version of bitcoin — and Cardano, one of several networks that use a so-called proof of stake mechanism to validate transactions, consuming less energy.

Most newer networks, however, have struggled to win attention and a share of crypto investment. Most of the displaced attention has focused on ether, the digital token used on the ethereum network. With a total value of $440bn, its tokens are worth almost half as much as bitcoin.

Ether is already used by some investors as a form of digital money, and its long-planned move to a proof of stake system could finally be completed within the next year, putting it in a strong position to win wider support, said Withiam, the analyst at Messari.

Musk did not show his hand about which cryptocurrency will win his favour as he turns away from bitcoin, saying only that it would be a token that consumes less than 1 per cent as much energy. His open-ended comment is bound to leave crypto investors guessing — and guarantee that all eyes stay fixed on his tweets for the next clue to his thinking.

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Analysis

UK’s voter ID plan ‘an expensive distraction’

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When the Queen announced in parliament this week that the British government was planning legislation that would require voters to carry photographic identification, her words stirred up worries nine miles to the east, in the London borough of Newham.

Junaid Ali, organiser of the Hope for Humanity Food Bank, which operates from a rundown shopfront in the deprived, multicultural West Ham area of the borough, said families using the service on Tuesday told him they would struggle to find the documents voters are expected to need.

“A lot of the families do not have identification,” Ali said.

Such stories — allied with the near-absence of in-person voter fraud — have raised suspicions that the proposed legislation is an attempt to make it harder for some sections of Britain’s electorate to vote.

A study commissioned by the Cabinet Office and published on March 31 found that 9 per cent of UK adults lacked photographic identification that was still valid and had a recognisable photograph.

Ali said many people reliant on the food bank were citizens of Commonwealth countries such as Pakistan — who have the right to vote in the UK — but that many spent long periods without identity documents while the Home Office processed their visa and immigration applications.

“For asylum-seeker families, the ID is held by the Home Office,” Ali said.

A man hands over ID at a polling station in New Hampshire, US
In the US there have been accusations that new voter ID laws in the likes of Georgia and Florida are part of an attempt to stop black and other minority groups from voting © Suzanne Kreiter/The Boston Globe/Getty Images

The UK government’s move received backing from former US president Donald Trump on Tuesday who said the UK measures were “exactly” what the US should do. There have been widespread accusations that new voter identification laws across a swath of Republican-controlled states — including Georgia and Florida — are part of an attempt to stop black and other minority groups in America from voting.

Jessica Garland, director of policy and research for Britain’s Electoral Reform Society, the election-rights pressure group, queried why a crackdown on in-person voter impersonation was a priority for the government when it was a rarely recorded offence.

“There’s no evidence that there’s a problem that the policy is trying to solve,” Garland said. “We really think this could be quite an expensive distraction.”

Despite vocal opposition to the proposals, the government has so far refused to back down, perhaps raising the prospect of another embarrassing U-turn further down the line.

“Having photographic identification is ensuring a problem doesn’t arise,” Jacob Rees-Mogg told MPs on Thursday. “This country has an electoral system of which people can be proud and of which people can have confidence. We mustn’t allow that confidence to slip.”

The arguments surrounding voter identification have been familiar to Angela Wilkins, leader of the Labour party group on Bromley council, in south-east London, ever since the council hosted one of the pilots for the voter ID scheme at local elections in 2018.

Chart showing that in the 2017 election voters without driving licences or passports were more likely to vote Labour than Conservative

The Electoral Commission, the UK elections watchdog, said after the pilot that the majority of voters had been able to meet the requirements, although some were turned away. It added there was no evidence the requirement significantly deterred people from voting.

Wilkins, however, said she believed the commission had underestimated how many people were put off.

“A lot of people didn’t even attempt to go and vote because they knew they couldn’t because they hadn’t got the right ID,” Wilkins said.

It is unclear, meanwhile, how far the proposed legislation would address issues raised by the UK’s biggest election fraud scandal of recent years, in the 2014 local elections in Tower Hamlets, a London borough that neighbours Newham.

That case — which led to the removal of Lutfur Rahman as the borough’s mayor — related mainly to false registrations of people with no right to vote and a range of other issues, including the exercise of unlawful religious influence over voters’ decisions by Muslim religious leaders.

Former mayor of Tower Hamlets Lutfur Rahman, centre
Former mayor of Tower Hamlets Lutfur Rahman, centre in blue tie, was removed from his post after an election fraud in 2014 © London News Pictures/Shutterstock

The Tower Hamlets case took place while prime minister Boris Johnson was mayor of London. Johnson closely followed the case and after the ruling against Rahman in 2015 said: “I’m very glad that justice has taken its course and the cloud has been lifted from Tower Hamlets.”

But Johnson is also a longtime sceptic of ID cards. Writing in the Telegraph newspaper in 2004 as a Conservative MP, he said: “If I am ever asked, on the streets of London, or in any other venue, public or private, to produce my ID card as evidence that I am who I say . . . I will take that card out of my wallet and physically eat it.”

Garland said the fraud in Tower Hamlets had been caught and there had not been another similar case since.

“To introduce this measure for an entirely different kind of fraud . . . seems like the wrong lesson to be drawn from that,” she said.

It is not clear, either, whether the legislation will follow a key recommendation from the Electoral Commission — that councils should offer a free, official form of photo identification for those lacking other forms. Voters in Northern Ireland — where photographic identification has been needed since 2003, and whose experience the government has cited as evidence the proposals can work — are offered such a card.

The plans are also likely to encounter some political opposition when introduced to parliament. Libertarian-minded Conservative MPs are unhappy with the proposals; one described them as “the very sort of thing we used to tear pieces out of Labour for”. But any rebellion is unlikely to undermine the government’s 80-seat majority.

Ruth Davidson, the former leader of the Scottish Conservative party, described the plans as “total bollocks”, adding they were “a solution to a problem that doesn’t exist”.

She told ITV: “I think that given where we are and the year we’ve had, we’ve got real problems to solve in this country, and the idea that this is some sort of legislative priority I think is for the birds.”

The House of Lords is also likely to seek to amend the legislation. Liberal Democrat and Labour peers are particularly unhappy with the proposals.

Garland said the introduction of a free, official form of ID would be the “absolute minimum” required to make any system fair.

In West Ham, however, Ali said the new plans had simply added to the suspicions of his food bank’s already marginalised users about the government’s intentions towards them.

“They have concerns that it might be another way to check the data of people,” Ali said. “They’re quite scared.”

Additional reporting: John Burn-Murdoch in London and Lauren Fedor in Washington



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Analysis

Future of retail

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FT reporters examine the future of retail after a year disrupted by the pandemic



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