Exploitive Business Models: Corporate Profiteering and the Rise of Gig Work
By Lorena Roque
The COVID-19 pandemic and resulting recession impacted the financial security of millions of families. And now, with inflation and rising interest rates, Americans continue to face high prices as wage growth remains below inflation. However, evidence shows that corporations are price gouging to increase their profit margins even as they have used supply chain issues and input costs to justify raising prices.
Research by Groundwork Collaborative shows that during numerous quarterly earnings calls, corporate CEOs admitted to driving up prices as a profit strategy. In fact, these executives have called rising prices “successful pricing strategies” and boasted “our strategy is working” because supply chain issues have eased while price hikes have gone into effect. These corporations are using inflation as a cover to place higher prices on consumers, which in turn harms families’ abilities to pay for basic necessities such as groceries. This corporate profiteering is a result of intentional market consolidation which allows companies to monopolize industries and thus have more power to further increase prices. For example, Tyson, JBS, Cargill, and National Beef control 85 percent of beef production in the United States. Similarly, 4 companies control 85 percent of corn seed sales: Bayer, Corteva, Sungenta, and Limagrain. Because so few companies own most of the beef and corn, they can raise prices due to little to no market competition.
In another attempt to maximize profits and cut labor costs, corporations hire independent contractors rather than employees. One hundred and sixty thousand white-collar tech workers were laid off in 2022. Yet LinkedIn data shows that the number of job postings for independent contract roles in the technology industry tripled in 2021 and 2022. Replacing direct employees with independent contractors reduces labor costs for companies because contractors usually do not receive the same benefits as employees, including employer-sponsored health care, social security benefits, and unemployment insurance. This trend shows no sign of slowing down; indeed, a study by Zinnov and Microsoft estimates that every third employee in technology will be a gig worker by 2023.
Corporate profiteering and the exploitation of workers in the gig economy are two sides of the same coin. Both business models use exploitive business practices to increase their profit margins and cut costs. This labor trend is shown by 1099 tax forms, which are used to report non-employment income to the Internal Revenue Service. They indicate that the total number of people who report collecting money from platform gig work more than tripled between 2017 and 2021.
Digital platform companies such as Uber, Lyft, and Instacart have relentlessly mounted federal, state, and local campaigns to further erode worker rights and consumer protections. These digital platforms aim to legislate permanent carve-outs for their workers, allowing corporations to deny workers employee benefits and minimum wage, and misclassify them as non-employees. At the federal level, companies have backed the Worker Flexibility and Choice Act, which would require workers to enter a “worker flexibility agreement” and sign away their rights as employees, thereby weakening the Fair Labor Standards Act. At the state level, rideshare companies have introduced bills in Massachusetts where rideshare workers wouldn’t be classified as either an employee or an independent contractor, but rather in a new category, making rideshare workers ineligible from any workers’ rights. Other companies in tech, retail, and the construction industry are adopting this business model from the Coalition for Workforce Innovation (CWI), a corporate lobbying consortium which aims to pass laws that would allow the expansion of gig work to their industries. Google, Target, and Accenture are among the companies involved with CWI.
These business models hurt workers and consumers alike. To combat corporate profiteering and hold companies accountable, regulators at the Department of Justice and the Federal Trade Commission should aggressively crack down on monopoly power by enforcing laws on illegal price fixing and collusion. Congress should consider taxing excess profits to discourage profiteering and market consolidation across labor sectors. To protect gig workers, states must adopt and strengthen ABC tests, which are three-part legal tests in which a worker is presumed to be an employee unless the employer can prove otherwise. ABC tests help combat worker misclassification by distinguishing employee and independent contractor status. At the federal level, Congress must pass the Protecting the Right to Organize (PRO) Act to establish the ABC test under the National Labor Relations Act and prevent workers from being misclassified. Corporations must be held accountable by policymakers to protect consumers and the labor force.