Investors Question Etsy’s Perks, Culture in Search for Stronger Growth

Investors Question Etsy’s Perks, Culture in Search for Stronger Growth

From getting certified as a B Corporation in 2012, to its proposal for a social safety net for gig economy participants, to its expansive parental leave policy and other generous employee benefits, the online handicrafts marketplace Etsy has made a point of positioning itself as a socially responsible business that takes good care of both its employees and the users who rely on it to sell their creations. Since going public two years ago, however, Etsy’s growth has stalled and its stock price has fallen considerably as investors balked at a business philosophy that appeared to them insufficiently profit-minded. Now, Max Chafkin and Jing Cao report in a recent Bloomberg Businessweek feature, activist investors are stepping in to push the company in a more pro-growth direction, which means rethinking some elements of its culture and particularly spending less money on compensation and employee perks:

The answer, as [tech investor Seth Wunder] saw it, was that the company had been careless with its spending—Etsy’s general and administrative expenses amounted to 24 percent of total revenue. (EBay and MercadoLibre.com, the Latin American online marketplace, each spend about 10 percent of revenue on such expenses.) Etsy had been hiring like crazy, having increased its staff 55 percent since the end of 2014, and doling out all manner of perks: an elegant Brooklyn headquarters with Manhattan views, art installations, and a “breathing room,” along with salaries and benefits common at much, much more profitable tech companies. Wunder’s Black-and-White Capital began buying Etsy stock, eventually acquiring 2 percent of the company. The stake is relatively modest—Black-and-White is Etsy’s 16th-largest shareholder—but it was more than enough to launch an activist campaign.

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Another Look at the US Gig Economy

Another Look at the US Gig Economy

A new report from Pew looks at how many US adults make money from digital platforms, including “gig economy” labor platforms like Uber, capital platforms like Airbnb, and sales platforms like Etsy. Overall, the report finds, 24 percent of Americans earned money in what it calls the “platform economy” in the past year. Pew’s Aaron Smith highlights the findings on who uses these platforms to find work, noting that in total, 8 percent of American adults have earned money on a digital work platform:

Participation in technology-enabled gig work varies by a number of factors, with age being among the most prominent. Some 16% of 18- to 29-year-olds have earned money from online gig work platforms in the last year – roughly five times the share among those ages 50 and older (3%). The median age of U.S. adults who are gig platform earners is just 32 years old. When it comes to the specific types of work that they do, young adults are especially likely to gravitate towards online task work. Fully 12% of 18- to 29-year-olds have earned money doing online tasks, but that share falls to 4% for Americans ages 30 to 49 and just 1% among those 50 and older.

Along with these differences by age, platform work is also more prevalent among blacks and Latinos than among whites. Some 14% of blacks and 11% of Latinos have earned money in the last year from online gig work platforms, but just 5% of whites have done so. Blacks and Latinos are each more likely than whites to have earned money doing online tasks (7% of blacks and Latinos have done so, compared with 3% of whites). But blacks in particular are more likely than whites to have earned money doing physical tasks like working as a ride-hailing driver, or by taking on jobs involving cleaning or laundry (5% of blacks have done each of these activities in the last year, compared with 1% of whites).

The main reasons respondents gave for using online platforms to find work were to have something to do in their spare time, to fill gaps in their income, and to have control over their schedule. Most gig economy workers are financially dependent on the work they do through these platforms; 29 percent told Pew that the income they earned through these platforms was essential to meeting their needs, while 27 percent said it was an important component of their budget. We can compare this finding with other studies published this year, which have found that most gig economy workers rely on these platforms for a sizable chunk, but not a majority, of their income, and that most depend on multiple income streams.

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Etsy Proposes a Social Safety Net for the Gig Economy

Etsy Proposes a Social Safety Net for the Gig Economy

Etsy, the online handicraft retailer, published a detailed report this week proposing what it calls a “social safety net” for gig economy workers in the US, including Etsy sellers as well as on-demand workers such as Uber drivers. The premise of their public policy proposal is that gig economy participants need three things they currently don’t have:

A single place to manage benefits, regardless of income source
Tying benefits to employment excludes too many workers and results in economic inefficiencies. We propose creating a Federal Benefits Portal, which would tie all benefits (retirement, health insurance, paid leave, tax-advantaged savings accounts, disability, etc.) to the individual, providing a single marketplace to view, choose and pay for their benefits, regardless of where or how they earn income.

A simple, common way to fund those benefits
Although payroll has been a useful way to administer benefits, it excludes everyone working outside traditional employment. We propose using tax withholding as the universal means to administer benefits contributions, enabling both employees and 1099s to withhold their Social Security and Medicare taxes from their pay, as well as an additional percentage of pre-tax income to fund benefits. All withheld pay and matching contributions would be routed to an individual’s account on the Federal Benefits Portal, where they could allocate consolidated contributions across plans.

A way to manage income fluctuations
Those outside traditional employment often experience considerable income volatility, and lack income protections like minimum wage or unemployment insurance. We propose combining all existing tax-advantaged savings accounts (health, dependent care, parking and transportation) into a single MyFlex Account, which anyone could use to manage short-term income fluctuations throughout the year. To manage more catastrophic income loss, we propose expanding the Earned Income Tax Credit and allowing it to be administered quarterly.

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Etsy Goes All-In on Parental Leave with Gender-Neutral Policy

Etsy Goes All-In on Parental Leave with Gender-Neutral Policy

The online handicraft retailer Etsy has introduced a new parental leave policy that offers both mothers and fathers 26 weeks of paid leave, 18 of which they can take at any time during their first two years as a parent. As Etsy’s communications director Juliet Gorman explains on the organization’s blog, the other eight weeks must be taken continuously in the first six months, so that parents can bond with their new children and mothers who have just given birth can have time to recover. Gorman also stresses that the policy was designed to be “flexible, gender-blind and to counteract unconscious bias”:

We believe that what’s good for families is good for business. … Research shows that both mothers and fathers face biases and unique pressures at work. Compared to women without children, mothers are half as likely to be recommended for a promotion and offered an average of $11,000 less in salary. Fathers who take leave also experience lower performance ratings and steeper reductions in future earnings. This is wrong-headed. As a business, Etsy needs people who are clear on our priorities, motivated, and focused on achieving our long-term goals and we know that being a parent is not mutually exclusive to being this type of employee. In fact, we believe that policies that retain talented parents strengthen our overall employee base.

Most organizations’ parental leave policies are not gender-neutral. For example, the recently expanded policies at Hilton and the Pentagon provide some paternity leave for new fathers, but are primarily aimed at new mothers. In some sense, this is understandable. After all, childbirth is physically demanding and women who have recently experienced it are under a unique type of stress. That’s why generous maternity leave policies are an important tool for retaining female employees: New mothers who don’t get the support they need and deserve from their employers are apt to just give up and quit. But policies that focus heavily on women and childbirth can give short shrift to dads, who need time to bond with their babies too, as well as women who become mothers through adoption or surrogacy.

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