Workers on tap. How governments should deal with the rise of the gig economy

Watch it by all means, but welcome it

THE Archbishop of Canterbury sees it as “the reincarnation of an ancient evil”. Elizabeth Warren, a senator from Massachusetts, says that, for many workers, it is the “next step in a losing effort to build some economic security in a world where all the benefits are floating to the top 10%”. Luigi Di Maio, Italy’s deputy prime minister, is going after it as part of his “war on precarious work”.

For many, the “gig economy”, in which short-term jobs are assigned via online platforms, is a potent symbol of how modern capitalism has failed. Critics rail that it allows firms to rid themselves of well-paid employees, replacing them with cheap freelancers. Workers who once relied on an employer to pay into their pension, or to cover their health care when they fell ill, must instead save for the future themselves. On this reading, the gig economy turbocharges insecurity and the erosion of workers’ hard-won rights. There is a grain of truth to this. But it misses the bigger picture.

For one thing, despite city streets clogged with Uber drivers and Deliveroo cyclists, gigging is not about to take over the world. Across the OECD club of mostly rich countries, the share of workers in full-time positions, which dropped after the financial crisis of 2008-09, has been rising. In America the average job tenure has barely changed in the past 30 years. Depending on whom you ask, 1-5% of Americans gig—but many of those have salaried jobs as well.

However, the fact that it is smaller than you might think is not the gig economy’s strongest defence. That rests on how gigging brings important benefits to the economy. The advantages for consumers are clear. With a swipe or a click, almost anyone can get Rover walked in the park or a vital document copy-edited within hours.

Crucially, benefits also accrue to workers. The algorithms that underpin gig-economy platforms improve the “matching” between giggers and jobs, leading to less dead time. The evidence that gig workers face a pay penalty compared with conventional employees is patchy; many say they value the extra autonomy they enjoy compared with salaried workers. Gig platforms are a useful way of topping up income or smoothing out earnings if other sources of work dry up. They can also break open closed industries. Research shows that the arrival of Uber in American cities leads on average to a 50% surge in the number of self-employed taxi-drivers.

But the gig economy is not perfect. Platforms argue they are no more than neutral marketplaces in which workers and customers meet. By this logic, workers ought to count as self-employed. But the standards to which some platforms hold workers tell a different story. Food-delivery riders are often told to wear a uniform; drivers for ride-hailing apps need to maintain a good rating or can be kicked off the platform. Platforms have a legitimate interest in maintaining their quality of service. But it cannot be right that some firms specify how workers must submit to the duties of acting like employees even as they reject the responsibilities of acting like employers.

One proposal, being floated in America, is to create a third category of worker, sitting somewhere between self-employed and employed. Yet the boundaries between classifications will always be fuzzy. Britain already has such a third category. It is also the place where arguments about the legal status of gig workers are most vigorous.

Better to rely on two other mechanisms. The first is the market. Unemployment is low and pay is starting to rise—Amazon this week announced big bumps in the minimum wages it pays American and British workers. The platforms will need to respond. Some gig-economy firms are voluntarily offering their workers health insurance. Competition between gig firms also helps. Italian food-delivery riders boast of how they play platforms off against each other in their efforts to get better pay and benefits. Innovations such as Australia’s GigSuper, a fund which makes it easier for gig workers to save for a pension, are also welcome.

A helping hand

The other mechanism is to help workers claim their existing rights. One option is to make it simpler for disgruntled gig workers to use the judicial system. Precedent-setting rulings on the status of gig workers may be piling up, but the barriers to going to court in the first place are often too high. Another option is to help giggers organise, in order to mitigate the low bargaining power the self-employed often face compared with employees. A third option is to boost the credibility of the system for detecting and prosecuting deliberate infractions of employment law. America has just one labour inspector for every 100,000 employed people, the world’s joint-lowest ratio. Simply insisting that firms follow the rules would give workers greater protection while ensuring that the gig economy lives up to its enormous promise.

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