Last week, we talked all about the 17-years-long, abysmally low $7.25 federal minimum wage. This week, we are putting the spotlight on the millions of “gig” workers across the country who aren’t even entitled to the minimum wage thanks to the machinations of corporations.
You could say that America has always had gig workers in some shape or form. They are self-employed “independent contractors” that typically take up short-term contract work. This includes musicians, writers, interpreters, artists, plumbers, babysitters, house cleaners, and more.
Gig work is on the rise in America. In 2024, no fewer than 20% of Americans performed some kind of gig work, including 30% of students and 26% of parents with young children. This growth is particularly pronounced, though, for app-based platform companies like Uber, Lyft, DoorDash, and Instacart. Between 2019 and 2023, the number of workers at these companies tripled. This growth is so pronounced that gig work has essentially become synonymous with working for these kinds of companies.
For this week’s Closer Look, we want to dive deeper into gig work and workers. We’ll focus on how they’re different from traditional employees, and how they are often misclassified by employers looking to skimp on benefits and other labor protections. Then we’ll spotlight some encouraging developments we’re seeing in the states that will help gig workers, particularly those on app-based platforms. Let’s get started!
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Short on time? Here’s what you need to know
- Gig workers are on the rise in America, particularly at app-based companies like Uber, Lyft, DoorDash, and Instacart.
- Gig workers (or “independent contractors”) are different from traditional employees. They pay their taxes differently, and traditional employees are entitled to legal protections like a minimum wage, overtime pay, unemployment insurance, workers’ compensation, the right to organize and collectively bargain, and more.
- Employers looking to save a buck by skimping on employee benefits have an easy out: misclassify them as independent contractors. The cost to workers from this misclassification is enormous, as they often lose out on thousands of dollars in annual income and job benefits.
- States have stepped up to the plate to compensate for federal inaction to protect gig workers. Several states have proposed or passed legislation to combat worker misclassification, while others have granted gig workers the right to unionize and boost their pay.
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How are gig workers different from traditional employees?
One of the easiest ways to distinguish between traditional employees and independent contractors—AKA gig workers—is the way they pay their taxes. Traditional employees have both their income and payroll taxes automatically deducted from their paychecks, and file their annual income taxes using a W-2 form. They also only pay part of the payroll taxes associated with their position, with their employers picking up the rest. (As a reminder, payroll taxes fund Social Security and parts of Medicare.) Meanwhile, independent contractors have to calculate and pay quarterly estimated taxes themselves, accounting for both their income and payroll taxes owed. And because they are considered both the “employer” and “employee,” they pay both parts of the payroll tax, though the “employer” portion is deductible from their income taxes.
Another important, less well-known distinction between traditional employees and independent contractors involves the legal protections they are entitled to. Traditional employees are entitled to, among other things, a minimum wage, overtime pay, unemployment insurance, workers’ compensation, health and safety protections, the right to organize and collectively bargain, and protections against discrimination and sexual harassment. Often traditional employees are provided paid sick days, paid time off, and paid family and medical leave from their employers as part of their compensation package as well. Independent contractors are not guaranteed any of these.
The issue of misclassification
Employers looking to save a buck by skimping on employee benefits have an easy out: misclassify them as independent contractors. Judging by the numbers, it’s clear that many employers are increasingly taking this route. A 2020 study from the National Employment Law Project found that 10-30% of employers misclassify their workers as independent contractors. Women, immigrants, and people of color are also more likely to be misclassified than other workers.
The cost to workers from misclassification is enormous. This past April, the Economic Policy Institute analyzed 11 commonly misclassified jobs—including construction workers, truck drivers, cleaners, home health aides, retail sales workers—and found that workers in these occupations are losing out on thousands of dollars in annual income and job benefits by being classified as independent contractors. For example, a typical construction worker loses $20,399 and a truck driver loses $23,266 annually.
Pay for gig workers at the app-based platform companies is particularly egregious. Uber, Lyft, DoorDash, Grubhub, and Instacart now rank among the top three employers in the US with workers on food stamps and Medicaid. They fail to receive the same kinds of benefits their tech counterparts in Silicon Valley are taking in.
One of the main justifications that employers like to wave around for classifying their workers as independent contractors is that it gives workers the flexibility they desire. But what they neglect to mention is that employers don’t have to choose between job flexibility and employment protections for their employees. The Fair Labor Standards Act, which established the minimum wage and overtime pay, does not stipulate that workers must work fixed hours or schedules in order to enjoy wage standard protections. And even though workers do value schedule flexibility, polling shows that, if they did have to hypothetically choose between having flexibility or having one stable, full-time job with benefits, they’d go for the latter.
Construction workers, truck drivers, cleaners, and delivery drivers are doing more or less the same tasks they were forty years ago as traditional employees of their companies. We fail to see why they should be classified, paid, and treated differently today—especially when the fruits of the labor are going nowhere but up and into companies’ bottom lines.
State developments giving us hope
In 2024, the Biden administration’s Department of Labor established a more stringent test for employers to follow when classifying workers as traditional employees or independent contractors. This would have gone a long way to combat worker misclassification, but unfortunately the current Trump administration has stopped enforcing it and also proposed replacing it with a weaker test.
Thankfully, states have stepped up to the plate to make up for federal inaction to protect gig workers. In 2025 and 2026, 12 states have proposed or passed legislation to combat worker misclassification, including by instituting penalties on employers who willfully misclassify their workers.
Other states have not necessarily tackled the issue of misclassification head-on, but have made great strides in helping gig workers in other respects. Massachusetts has made significant inroads for their gig workers. This past May, drivers for ride-share apps like Uber and Lyft in Massachusetts announced that they formally unionized. The App Drivers Union, as it’s being called, will represent 70,000 drivers and be the first of its kind in the United States. This is a groundbreaking example of sectoral bargaining that could provide a template for other gig workers to follow. These Massachusetts drivers will have the ability to bargain collectively across an entire industry—instead of the traditional workplace to workplace method—which is especially helpful for app-based platform workers who are naturally dispersed/fragmented.
California and Illinois aren’t far behind Massachusetts. In October 2025, California Governor Gavin Newsom signed a law which gives gig drivers in the state the right to unionize and collectively bargain as a sector. Illinois legislators passed a similar law, which is currently awaiting the governor’s signature.
States have also taken specific measures to boost gig workers’ pay. Over the last few years, Minnesota, Washington, and New York have all set minimum pay rates for Uber and Lyft drivers. For example, in Minnesota, drivers are paid $1.28 per mile and 31 cents per minute and must earn at least $5 per trip. In cities like Minneapolis and St. Paul, this comes out to roughly $34.58 per hour. (New York City and Seattle have special minimum pay rates.)
Conclusion
At this point, you might be wondering: why does a group of millionaires care so much about gig work?
We care about all workers being paid properly for the work they do because all of them make up the backbone of our consumer-driven economy. It’s easy to forget that, once they clock out, workers are consumers who buy products and services, which keeps businesses and the whole economy humming.
There’s no question that true independent contractors deserve better benefits than they enjoy now, but that’s an issue for another day. For now, we’ll say that employees who are making millions and billions for their employers should be classified, paid, and treated as such. Companies that want to make extra bucks should have to do it by actually offering better products and services, not by skimping on benefits and labor protections for their workers.