The “gig economy” has become the cause celebre for people who think labour needs help from government in its struggle with capital. Politicians from the radical left and anti-establishment parties say the rise of casual work is a sign that work relationships are sliding back in time and that the state must step in to address this decline in standards.
John McDonnell, the UK Labour Party’s economics spokesman, says so-called “zero-hour contracts” and the gig economy have produced workplace “insecurity not seen since the 1930s”. Luigi Di Maio, leader of Italy’s ruling Five Star Movement, describes food delivery drivers as “the symbol of an abandoned generation”.
But new evidence from Britain and Italy shows that this new wave of casual workers is not the homogeneous block of disgruntled people conjured up by McDonnell and Di Maio. Indeed, politicians who look for a “one-size-fits-all” regulation for these employee/employer relationships might end up helping half of these workers, and hurting the rest.
Gig economy companies, such as Uber Technologies Inc or Deliveroo, connect drivers and riders to customers while taking little responsibility for them. Workers log into these software apps whenever they want to work, but the firms don’t regard them as employees (even if they sometimes offer limited benefits). Zero-hour contracts are where the employer isn’t obliged to provide any minimum number of working hours, while the worker doesn’t have to accept any work offered. Such contracts also exist in more traditional areas of the UK economy, including the care, retail and leisure industries.
Britain’s Labour party has promised to give all these workers access to maternity or paternity rights, sick pay and protections against unfair dismissal. Italy’s Di Maio is considering going further by making food riders employees and bringing them under a sector-wide employment agreement. But while such measures would offer greater protection, they might also prove too expensive for companies, which may hire fewer workers as a result or leave the market altogether.
So politicians must ask themselves who these workers really are. It’s true that many of them work largely for a single employer, putting in as many hours as a typical employee, and would like a traditional contract. For these people, it’s easier to argue that companies are “exploiting” their power by not treating staff fairly and that the government should step in.
But plenty of other gig economy workers prefer a casual relationship with their employer, either because they value their freedom or prefer to work for several companies. In this case, catch-all claims of exploitation don’t stand up. Regulating both of these groups in the same way would only destroy a part of the job market that suits companies and a big proportion of workers.
Two recent studies, in Italy and the UK, suggest that the “precarious economy” is much more complex than its opponents suggest. They show a roughly equal split between those who are broadly satisfied with their employment terms and those who’d like a steadier working relationship.
Italy’s statistical agency INPS surveyed 2,764 people working for 50 gig economy companies. About half were satisfied with their job; more than 30% were happy but would rather more stability and higher pay; and less than 20% wanted a more traditional job. Neither was there much evidence of gig workers working as many hours as traditional employees. Nearly 50% of respondents worked fewer than four hours a week, while slightly less than 10% worked more than 30 hours. About half the sample would like more hours, but the rest were satisfied or wanted to work less.
The UK data are similar. A survey by Stephen Machin and Giulia Giupponi, two researchers at the London School of Economics, involved more than 20,000 self-employed, gig economy and zero-hours respondents. On average, workers on zero-hour contracts worked about 19 hours per week. Very few did more than 40 hours. Again, there was a near-equal split between those who’d like more hours (44%) and those satisfied (40%). Gig economy workers were similar.
These data are a challenge to policymakers. A radical solution, such as forcing companies to hire workers as employees, risks undermining the large number of workers who value flexibility. On the other hand, there appear to be cases for which greater protection is indeed warranted.
But there is a way to square the circle and improve the lot of both groups: Politicians could grant certain social benefits to gig workers, particularly where there’s lots of demand for them. The Italians and Brits who spoke to the researchers especially valued retirement savings and unemployment benefits, while there was less clamour for paid maternity or family leave.
The beauty of this approach is that you wouldn’t have to make Uber and Deliveroo drivers full employees, which would create huge costs for companies. Some countries, such as Italy, already have employment contracts that give workers a limited suite of social security benefits. These could be tweaked. The UK and other countries don’t have these contractual arrangements, but they could create them. Britain’s Taylor Review, which examined the gig economy in-depth, recommended that the government there should create a new employment status for the “dependent contractor”. They would enjoy fewer rights than employees but more than completely independent contractors.
This would, of course, place an extra burden on cash-strapped governments to monitor areas like gig economy sick pay. Britain is already struggling to reform its benefits system. But modern work practices demand modern thinking, not a return to outdated arguments about capital vs labour. – Bloomberg