Small Business

Jeb Bush, Uber and the new American contract worker

Jeb Bush exits an Uber car outside Thumbtack headquarters in San Francisco on July 16, 2015.
Deborah Findling | CNBC

Republican presidential candidate Jeb Bush was in Silicon Valley on Thursday and dropped by Thumbtack, a San Francisco start-up that helps users find and hire local professionals—everyone from painters to wedding DJs. Bush also traveled by Uber, the popular ride-hailing service that lets users order rides with a smartphone app.  

As Bush and Democratic candidate Hillary Clinton roll out election campaigns, both front-runners are beginning to address the growing ranks of start-up freelancers who make up the so-called sharing economy. Since the recession and recovery, more workers have become contractors for start-ups, including Uber, Airbnb and Lyft. Individuals share small-scale products and services like offering homes and apartments for rent, or driving passengers to destinations. 

The small-scale tasks are often brokered through mobile technology, and the platforms connect freelancers with available short-term gigs. In an economic address Monday in New York City, Clinton called out the sharing economy as a potential factor in dampened wage growth. 

While the debate over raising the federal minimum wage of $7.25 an hour looms in the background, the front runners for now are taking aim at the struggles of modern employment that often includes a patchwork of small, part-time gigs to make ends meet.

Read MoreHillary Clinton calls out 'gig' economy

"Candidates are realizing the connection between low wages, work that is subcontracted and inequality in our country," said Rebecca Smith, deputy director of the National Employment Law Project, an advocacy group for lower-wage workers.

This is definitely not just a Silicon Valley issue.
Employment expert Rebecca Smith
on the growing on-demand economy
Eduardo Munoz | Reuters

While contract workers as an employment group have been around for decades, dozens of start-ups have emerged by which freelancers and available assignments are connected through digital platforms. Instead of phone calls and emails, short-term gigs are swiftly brokered through a few taps on a smartphone or tablet. 

This trend sometimes is referred to as the on-demand economy. And more than 53 million Americans are freelancing, composing 34 percent of the U.S. workforce, according to a 2014 survey by research firm Edelman Berland, commissioned by the Freelancers Union.

Read MoreThe new freelance trend: Sharing office space

As the economic recovery takes shape, it turns out many American workers are stitching together part-time work. But freelance freedom and flexibility don't come with traditional full-time benefits, including health care or retirement savings. And lower-paying, small task jobs generally outpace higher-paid consultant gigs on digital job boards.

"The businesses in the on-demand economy, while many may be headquartered in Silicon Valley, do business across the country and globally," said Smith of the employment law project. "This is definitely not just a Silicon Valley issue." 

Uber's California problem

Uber faces $7.3 million fine

While Bush toured Silicon Valley including Thumbtack, Uber faced a potential $7.3 million fine for not turning over information to California regulators. 

The California Public Utilities Commission contends that Uber has not complied with state laws to provide details on ride requests. The commission argues that not providing such data violates state law, and the company risks losing its state operating license.

Uber said it is appealing the California ruling. "This ruling—and the associated fine—are deeply disappointing," said an Uber spokesperson in an email to CNBC. "We will appeal the decision as Uber has already provided substantial amounts of data to the California Public Utilities Commission, information we have provided elsewhere with no complaints."

How cities broadly regulate start-ups such as Uber and Airbnb has proved to be tricky. Workers hoping for extra cash with a few side gigs are basically becoming freelance drivers and property rental agencies over night. The collection of related local tax revenues remains unclear. 

Another big question is how to classify such workers, who traditionally have been represented by hotel, taxi and limousine trade organizations—and many of whom argue their industries unfairly are held to higher standards, including rules related to employee background checks. Identifying freelance workers in the new on-demand economy as contractors or employees also has big, financial consequences for start-ups that run on armies of freelancers. 

Classifying future workers

Presidential front runner Clinton has vowed to ensure that workers are being paid and protected. "I'll crack down on bosses that exploit employees by misclassifying them as contractors or even steal their wages," she said Monday.

The California labor commission in June ruled in favor of one Uber driver's claims that she's an employee, awarding her $4,000 in expenses related to her work. Uber has appealed the decision, and in the past has argued its drivers are contractors, not employees.

The U.S. Labor Department also waded into the debate with new guidelines for identifying employees and independent contractors. "Misclassification of employees as independent contractors is found in an increasing number of workplaces in the United States, in part reflecting larger restructuring of business organizations," said administrator David Weil in a statement released Wednesday.

And last week, fellow presidential front-runner Bush weighed in on the plight of the worker, calling on Americans to work longer hours.

Jeb Bush visits Thumbtack headquarters in San Francisco on July 16, 2015.
Megan Hawkins | CNBC

Whether you call it the gig, sharing, collaborative or on-demand economy, the larger question remains whether this explosion of contract work actually translates to better wages, jobs and work-life balance.

There are 1.2 million fewer jobs in mid- and higher-wage industries than there were before the Great Recession, according to NELP data. 

In contrast, there are 2.3 million more jobs in lower-wage sectors than before the recession. Between 2009 and 2013, wages declined in many lower-wage occupations that often don't pay minimum wage, including retail salespersons, cashiers, waiters, restaurant cooks and home-health aides, according to the NELP.

Of course, the new collaborative economy has generated work for pockets of Americans, some of whom are older and have been shut out of the jobs market.

Read MoreLured by income and flexibility, retirees becoming Uber drivers

But the sharing economy isn't suited to all workers, and contract employment isn't always what it's cracked up to be. Said NELP's Smith, "These companies are selling themselves as new and forward looking when, in fact, they're treating their workers in ways that existed in the early 20th century."

Additional reporting by CNBC's Kate Rogers.