The Gig Economy: a Pressure Cooker of Problems

20 February 2018

What do companies such as Deliveroo, Uber and Handy all have in common? They have all become hugely successful in the era of the gig economy. But what is the gig economy and what problems does the market face in today's society?

What is the 'gig economy'?

Whilst people may associate the word 'gig' with a live concert, the 'gig economy' actually refers to a labour market defined by a high number of short-term contracts, and/or freelance work. In 2017 The Royal Society for Arts, Manufacturing and Commerce estimated that 1.1 million people now work in the UK's gig economy, nearly as many workers as in the NHS England. Whilst traditional gig work included freelance designers and consultants, over 40% of the market is now made up of manual, personal, driving and delivery services; each ride, clean or DIY job counts as one 'gig'.

Two competing views about the gig economy have emerged in recent press. The first supports the innovative structure the gig economy provides, as individuals have the freedom to choose the days, time, and duration they work. The second viewpoint sees the gig economy as a form of exploitation that offers minimal workplace protection; based on the presumption that individuals are classified as independent contractors and consequently may not be entitled to a regular wage, holiday pay or sick pay.

As a result, the future of the gig economy has become a hot topic in both commercial and legal press, with judgments and articles being written on the employment status and treatment of workers, and the regulatory framework in which the gig economy operates.

Problems facing the gig economy

The status of individuals working for companies in the gig economy has been the subject of various legal disputes. For example in August, the Central London Employment Tribunal found independent contractors of one company to be 'workers', despite the wording of their contracts stating the contrary. This is an important finding as 'worker' status grants these individuals rights they would not otherwise have had as contractors. Consequently, these individuals may now be entitled to claim compensation for the benefits they previously missed out on. However, this is not harmonised across judicial decisions with employee status appearing like a tug-of-war between big business and the government. This is best shown by the decision involving Deliveroo, where the gig workers were not determined to be workers.

The gig economy has also faced criticism for its working model, though this has not yet been the subject of any court proceedings. There are concerns that gig work is exploitative and triggers a race to the bottom in terms of pay and conditions. The popularity of flexible working conditions creates a system whereby gig companies are able to undercut their competitors and remain successful whilst providing less protection for their gig workers.

The gig economy is also facing difficulties with the way it is regulated because companies that claim to operate solely in the digital space (via an app) have been declared by the courts to be fully operating businesses. For example, in December 2017, the ECJ ruled that Uber was officially a taxi company and not a digital service, a decision that could alter how Uber operates in the future and the way it liaises with national governments. In light of this decision, it is possible that other businesses who claim to solely operate in the digital space may also be declared by the courts to be fully operating businesses.

These developments are putting the spotlight firmly on the gig economy and there is no doubt that 2018 will crystallise further the currently unsettled legal space in which some digital businesses operate.

What does this mean?

Increased regulation of the gig economy will likely lead to further expenditure, which could result in companies limiting the amount of individuals they allow to work on their platforms. More concerning is the increasing number of countries that have banned apps that employ gig workers. Prime examples are the bans already in place in Italy and London, with Taxify being banned in the latter after just 3 days of operating. Further bans elsewhere could lead to apps and employers in the gig economy being frozen out of markets entirely, decreasing both competition and access to flexible work. The effects of higher regulation are double-edged as they not only impact the company but also take away a reliable source of income from gig workers.

However, change is needed, as gig workers can be exploited by those they work for, and are currently under-represented in parliamentary discussions concerning employment. In November 2017, a cleaner working for a Handy was blocked from working with a regular client and automatically fined £25 for not showing up when, in reality, the cleaner was ill. Despite the situation being rectified following a post on social media, it goes to show that both company and indeed government policies need to be updated in order to ensure that gig workers are protected.  

A look to the future

The gig economy has innovatively shaken the way employment, technology and consumer services operate, but the market could stagnate if policy doesn’t reflect the decisions individuals are making to involve themselves in this market. As long as imperative employment rights are adhered to, then workers should be free to choose when and how they work, and accept the possible uncertainty that comes with this choice.

How the gig economy deals with the twin pressures of increased government regulation and expectations of better rights for gig workers will play a crucial role in deciding whether these market-disrupting companies are here to stay, or whether they are simply a flash in the pan.

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