Amazon Flex

amazonflex

December 3, 2018

The knock on the back door was unusual as no one ever comes to our back door.  Even our two cats had a look of alarm.  Tentatively, I proceeded to open the door and was welcomed by a middle aged, smiling woman with an Amazon package and her five-year old daughter in hand.  This was my first meeting with an Amazon Flex Worker who delivers packages for $18-$25 per hour.  Launched in Seattle in 2015, Amazon Flex is now prominent across America and becoming more common for Amazon Prime deliveries.

As advertised on Amazon’s website, Amazon Flex allows people to “be your own boss, set your own schedule, and have more time to pursue your goals and dreams.  Join us and put the power of Amazon behind you”.

A few months ago, a client mentioned losing a long-time home helper to Amazon.  At that time, I had not heard about individual contractors delivering packages for Amazon.  I always assumed FedEx or UPS handled the “last mile” for Amazon.  My client told me that his former assistant now made more money delivering packages for Amazon and could even bid for delivery jobs that appealed to her location and transit patterns.  Yet again the “on-demand economy” had found a way to supply “flex” work.

As consumers shop more online, companies like Amazon are turning to independent contractors to drop parcels at homes and businesses.  With little more than a car, a smart phone, some initial video training and a willingness to please, certain workers are flocking to Amazon Flex.  Flex is necessary because Amazon is growing so quickly that it can’t just rely on FedEx, UPS, and the Postal Service.

Delivering packages has been a reasonably well-paid job. The Teamsters represent roughly 260,000 UPS workers, who make around $36 an hour. The American Postal Workers Union represents around 156,000 USPS clerks and support workers, who make, on average, $75,500 annually.  In contrast, Flex workers earn $18-$25 per hour (about $40,000 annually before tips) but have to pay the cost of operating their delivery vehicles.  Some critics of Amazon Flex argue that after these expenses, the Flex workers might be making less than certain minimum wage rates.  In addition, legal critics in certain states argue these “independent contractor” workers aren’t independent since so much instruction is dependent on Amazon. Whatever the legal rights and wrongs there seem to be plenty of people looking for an extra dose of income from delivering packages.

With my freshly delivered package in hand, I was a happy consumer, and even happier to see someone benefit from my consumption.   On reflection, I was reminded of how new technology continues to disrupt our old ways of doing things.  Perhaps soon, further automation will deliver packages at night via a driverless car or drone, and a robot with artificial intelligence that knows where you like your packages delivered.  I wondered if we’re headed full circle back to the day when fresh milk could be delivered every day to the backdoor.

 Gary B. Martin

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Get Paid Every Hour?

earnin

November 26, 2018

I recently became aware of “paycheck acceleration services” aimed at workers on a tight budget.  One app-based service called Earnin advances workers part of their earnings within 24 hours of completing a shift.  There are no fees but Earnin enables users to pay an optional “tip”.  Up to $500 can be advanced per pay period.  Users report the nature of their work and provide time sheets, which the app validates by tracking a worker’s location.  The worker’s paycheck is later reduced by any advances taken during the period.

As part of the arrangement, users may grant Earnin access to their transactional data.  This allows Earnin to study the habits of its users’ shopping at retailers like Walmart and Amazon.  In September 2018, the company posted its users’ average checkout price at each retailer. Walmart purchases were the most frequent and had larger transactions, with an average of around $44.  Earnin also identified a late February/early March spike in the average spending at Walmart, which was attributed to users receiving their tax refunds.

Paycheck acceleration services may well spare less prosperous members of society from bank account overdraft fees and payday loans at usurious interest rates.  Conversely, these new tools for “borrowing” from one’s future paycheck could create further financial risk for workers without any savings cushion.

A June 2018 survey by Bankrate.com found that 45% of respondents had less than 3 months’ worth of expenses saved.  Of those, about half had no savings at all.  Those without any cash reserves are now also missing out on higher interest rates for savings.  Over the last three years the Fed Funds rate has risen from effectively zero to its current 2.25% level.  Many banks now offer interest rates near 2% on FDIC-insured savings deposits, and 30-day Treasuries yield 2.25%. $400,000 in 1 month Treasuries now creates a dollar of interest every hour.  In November 2015, the same capital in Treasuries would have taken 16 hours to generate a dollar.

While researchers tell us that much of our approach to finances is hard wired in the brain or learned in childhood, certain behavioral approaches that promote saving can be learned.  Behavioral finance researcher Shlomo Benartzi and Nobel prize winner Richard Thaler pioneered an approach called “Save More Tomorrow” which asked 401k participants to commit in advance to saving more into their 401k account, next year.  They found that less than one third of participants were willing to immediately increase their savings rate.  However, of those, almost 4 in 5 committed to increasing their savings in one year’s time.  When the increase went into effect, only 2% dropped out within a year, and after four years all but 20% maintained the higher savings levels.

As with resolutions and dessert, it tends to be easier to put off a sacrifice to some date in the future.  For those contemplating changes in the New Year, there is still December to enjoy!

Cam Simonds

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