A sustainable gig?

28th February 2020

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Chris Seekings reports on corporate social responsibility in the gig economy, and whether the sector can survive amid growing pressure to boost workers' rights

The gig economy is redefining the way we work, giving us the freedom to pick and choose our own hours as we see fit. It has also led to a precarious existence for many workers, failing to afford them the same basic rights enjoyed by their full-time counterparts. This has ignited a new debate around corporate social responsibility (CSR), with large companies such as Uber, Deliveroo and Fiverr all accused of neglecting their duties to society.

Despite these charges, interest in gig work continues to grow, with 57m US workers now thought to be involved in the sector – 36% of the country's labour force. Economists, sociologists and trade unions are all searching for ways to untangle this increasingly popular and prominent form of employment from a business model that is seen by some as unsustainable.

Legal definitions

The issue with workers' rights stems from the legal definition of gig economy 'workers'. In a nutshell, companies such as Uber argue that their workers are self-employed, and thus don't qualify for pension, holiday and sick pay benefits. Others believe they should be classed as full-time employees, and therefore entitled to the same legal rights.

The UK's Court of Appeal recently ruled that gig workers should be given the same protections as full-time employees, while a law has been passed in California with the same intent. “But companies like Uber are actively pushing back,“ says Erin Hatton PhD, associate professor of sociology at the University of Buffalo. “It has not been resolved, and as far as I know, gig workers are not yet eligible for basic employment protections in any US states.“

The self-employed must also deal with a higher tax burden in the US, paying double what a traditional employee would for Medicare and social security. “The idea behind it is that they are the entrepreneurs, supposedly, and so have to pay all the taxes and responsibilities that employers are liable for, as well as typical taxes.“

Large companies in the gig economy argue that they are merely a platform connecting workers with jobs, but many are not convinced. “They class them as self-employed, even though what they do has every semblance of an employment relationship, Trades Union Congress (TUC) senior employment rights officer Tim Sharp tells me. Some have had considerable success challenging employers in employment tribunals, but this is time-consuming and expensive, and wins in tribunals are not automatically applied to other workers.

The business case

Gig economy firms say it is not financially viable to treat all their workers in the same way as full-time staff. They also argue that they provide flexible employment for groups with greater barriers to the workforce – such as women who work part time and people with disabilities – and build better societies through innovation.

Digital platforms have much lower costs to offset than traditional businesses and do not own many capital assets, so could in theory afford to protect their workers more. In practice, however, this may not be the case. Big companies in the sector continue to make a loss, and Uber admitted last year that, even with its current business model, it might never be profitable.

Kelle Howson, postdoctoral researcher at the University of Oxford, believes that the company may be playing a long game by hoping to create a monopoly, but suspects there is more to it than meets the eye. “Uber could be aiming to extend its influence over transport infrastructure more broadly, as well as to profit in other ways from the immense stores of data it is building up,“ she continues. “It is not only labour surplus that is valuable to gig economy companies, but data and potential for scaling and diversification.“

It is also important to remember that not all companies in the gig economy are like Uber. The sector is heterogeneous in character, and much of it is funded by venture capital, with many firms qualifying as start-ups and just starting to find their feet. The question is whether their models are sustainable, and if they can ever truly be compatible with CSR. “If a business cannot be sustainable while allowing its workers basic rights like sick leave and minimum wages, it's not a very good business, Howson adds.

“If a business cannot be sustainable while allowing its workers basic rights like minimum wages, it's not a very good business“

Sharing success

Despite protests to the contrary, there is a good argument that gig economy companies could actually be better off if they were to enhance the rights of their workers. “There are two types of business models: squeezing your staff as much as possible, or investing in them substantially,“ Hatton says. “Both of those models tend to yield around the same profit, it's just that one is more focused on the long term.“

She explains that the current model deployed by many companies often results in high worker turnover, and that the service can suffer, too. “If you invested in them and provided more training then you would increase stability in the workforce,“ she says. “You wouldn't have this constant churn of people coming and going, and you could certainly imagine a much better service.“

The TUC has been particularly critical of gig economy labour practices in the UK, which it says often leaves workers feeling alienated from employers. “If there is one thing that epitomises CSR it is an organisation's commitment to a positive relationship with its workers,“ Sharp says. Unfortunately, many of the working arrangements in the gig economy are established simply to distance employers from those who graft for them – it doesn't need to be like that.

Daily grind

This hostility to the current structure of the gig economy could give the impression that most workers are dissatisfied with their jobs, but that is not necessarily the case. Those that I have encountered have generally seemed content with their arrangements, and a poll by McKinsey found that 78% of gig workers believe they're happier than others in traditional jobs. “I think it depends on many variables, such as the type of work they are doing, the person and their resources,“ Hatton says. “Maybe their regular job isn't cutting it, so more shifts on the side are really important to them. But I do think that the people who rely on these jobs for financial survival, and have done so for long enough to see the full range of costs, have a general feeling of dissatisfaction.“

Flexibility and independence are cited as the main reasons for undertaking gig work, but it appears that the more reliant workers are on gigs, the less independent and flexible they become. There is also a huge oversupply of labour due to the low barriers to entry. “It means that wages are often decreasing over time, so workers need to work longer and longer hours just to break even,“ Howson explains. “They often have no ability to negotiate their fee.“

Job security is also a growing concern, with the increasing sophistication of algorithms and ratings systems giving digital platforms an uncomfortable level of control over their workers. “In many cases, they face the risk of losing their income through 'deactivation' from the app, for example, if a customer complains, with no way to appeal those decisions,“ Howson says. “Gig workers are now organising all over the world to demand better working conditions.“

“Many working arrangements in the gig economy are established to distance employers from those who graft for them“

A fresh start

It is still too early to tell exactly how the gig economy is impacting society at large. “It's hard to measure the effects because of the different types of work and lack of adequate data,“ Hatton says. “Time will tell, but I suspect overall it will have an exacerbating effect on inequality because you will see disproportionate numbers of marginalised workers increasingly pushed into this line of work and struggling to make ends meet.“

There is a consensus that the gig economy is not sustainable in its current form. Large companies are already struggling to turn a profit, and the pressure to enhance workers' rights is only going to grow. The Fairwork Foundation has called for all gig workers to be at least guaranteed the national living wage and all basic employment rights, such as pensions, sick leave and paid holiday, as well as calling for a ban on zero-hours contracts. It described the 'Charter of Principles for Good Platform Work' unveiled recently in Davos by six large gig companies as an attempt to undermine the forces of resistance that have begun to chip away at the power of platform. “We would like to see an end to sham employment which exploits legal loopholes and hurts workers, says Howson, who works at the foundation. The alternative is a race to the bottom in terms of erosion of employment rights across the board. Digital platforms are innovative, and will be able to adapt to regulation that provides slightly better protection for workers.“

The gig economy may not have to look radically different to the way it does today, and one can imagine a more productive and secure workforce if CSR, investment, training and greater legal protections all work hand in hand. Courier firm Hermes's agreement with the GMB union to offer holiday pay and guaranteed wage rates last year is an example of how gig firms can have a closer relationship with workers. “These agreements allow employers and workers to thrash out ways of working that combine flexibility with fairness and greater security, Sharp says. “Without this, CSR is simply a chapter in a business's unread annual report, not a set of values it operates by. There is no reason why the gig economy has to be the poster child for corporate irresponsibility.“

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