What Happens When You Trade Security for Freedom
In the ever-evolving gig economy of the 21st century, it is necessary to examine the true cost of security versus freedom for American workers.
This post is inspired by the delivery trucks I watch zipping up and down my street each day. I have known my UPS delivery driver, Kenny, since we moved here in 2013 and he kindly introduced himself as “your UPS driver.” In contrast, I have no idea who those people are who are driving their personal cars at breakneck speed delivering those ubiquitous cardboard boxes with the smile-y logo stamped on the side.
By know you have may have heard the horror stories about folks who work at Amazon distribution centers (such as the February 2020 Frontline episode), but less is known about Amazon “Flex” delivery drivers. When you see them zipping through your neighborhood you might think to yourself, “Hey! Look at them. They are living the dream. They’re self-employed; they make their own hours; they can make as much money as they want.”
Or you may be trying to remember if you recently ordered something and if that speeding car will be stopping at your house.
Or you may not think about them at all.
I decided to momentarily fall down the rabbit hole to consider this question for the sake of you, dear Talking About Money Community members:
“Who has it better, UPS drivers with their security, or Amazon drivers with their freedom?”
Let’s begin.
The Compensation of UPS Delivery Drivers
First let’s take a peek at UPS delivery drivers like my UPS delivery driver, Kenny. UPS delivery drivers on the whole are W-2 employees. According to the IRS, employees are determined based on three criteria that examine the worker’s degree of control and independence:
Behavioral: Does the company control or have the right to control what the worker does and how the worker does his or her job?
Financial: Are the business aspects of the worker’s job controlled by the payer? (these include things like how worker is paid, whether expenses are reimbursed, who provides tools/supplies, etc.)
Type of Relationship: Are there written contracts or employee type benefits (i.e. pension plan, insurance, vacation pay, etc.)? Will the relationship continue and is the work performed a key aspect of the business?
According to data on Indeed.com, UPS Delivery Drivers make on average $74,093 per year. And aside from their base salary, W-2 employees enjoy a number of employee benefits, such as:
Payroll taxes
401(k) plan
Profit sharing
Stock bonus
Defined benefit pension plan
Defined contribution pension plan
Health insurance
Life insurance
Dental insurance
Vision insurance
Short-term disability insurance
Long-term disability insurance
Accidental death and dismemberment insurance
Prepaid legal fees
Paid holidays/vacation
Paid sick leave
Paid education and training
All told, employee benefits typically amount to an additional 30% of employee compensation. This means that for an experienced UPS delivery driver making around $75,000 a year, the additional employee benefits package could tally $22,500, leaving UPS delivery drivers with a total employee compensation package of $97,500.
Sounds good, right?
As you can guess from spying your UPS driver through your window, watching them work in the middle of a February blizzard or an August heat wave, this job is not easy. But for a W-2 employee, almost $100K/year in combined employee compensation is not bad.
The Compensation of Amazon Flex Delivery Drivers
Now let’s take a peek at the lived experience of Amazon Flex delivery drivers. As opposed to UPS employees, Amazon drivers are independent contractors. According to the IRS, “the general rule is that an individual is an independent contractor if the payer has the right to control or direct only the result of the work and not what will be done and how it will be done.” (Italics mine) I am guessing that since Amazon doesn’t care how the packages get delivered, only that they do get delivered, the way that the job gets done is up to the discretion of the driver.
Some people get lured into this job with the promise of the freedom to create your own schedule. And if you have family responsibilities or are in school, this might sound attractive. But how does this perceived freedom to make your own hours play out in the lives of Amazon Flex delivery drivers?
The Amazon website advertises that its contract drivers can make a starting wage of $15/hour or more. According to reporting on Indeed.com, average wages of Amazon Flex drivers are $20.73/hour. If this were a full-time W-2 employee, $20/hour might translate into around $40,000/year for about 2,000 hours of labor, plus an additional $12,000 worth of employee benefits, resulting in approximately $52,000 in total compensation.
As for the above-mentioned employee benefits? There are none. As independent contractors, Flex delivery drivers are trading predictable schedules and employee benefits for freedom and flexibility.
According to CNBC reporter Katie Schoolov in her article “What it’s really like to be an Amazon Flex delivery driver as Prime one-day shipping expands,” Flex delivery driver shifts are awarded through a competitive process on the Flex app, where contractors try to maximize their hourly wages by bidding on shifts, called “blocks.” One downside of the process is that drivers do not know where they are going until they “win” the shift. And driving to and from the shift is on the driver’s dime, as is filling the gas tank and maintaining their vehicle.
A lot of additional expenses are incurred in exchange for the “freedom” that Flex delivery drivers experience.
Considering Security vs. Freedom
In writing this post, my first thought was quite obvious: Pick security, you fool!
If you are going to be driving all over creation each day, wouldn’t you want to have the predictable schedule and employee benefits of a UPS delivery driver? I mean, they are so friendly, and with a combined salary and benefits package for experienced drivers of close to $100,000, wouldn’t anyone choose this job? I bet that they get to go on vacations sometimes.
And in watching the CNBC video I thought to myself, “This is awful. The drivers are using their precious time to compete for shifts, and then wait in line in their idling cars outside the Amazon distribution centers, all in a high-stress environment, just to earn a few bucks. Is it worth it?”
Again I came down in favor of security.
But I have to admit that I can relate to the need for freedom. After all, I myself have been self-employed since 2007, in large part because I needed/wanted/needed to be able to control my own time while I juggled pursuing my career and supporting my family. Did I take an enormous pay cut, both in terms of wages and employee benefits? You betcha I did. Did my household take a financial hit? Yup.
But year after year, while working my tail off for every gig and at every gig, I keep choosing to remain an independent contractor. Because the freedom to control my time is that valuable to me. Does this make me a hypocrite? Or just another American worker trying to fit it all together?