THE ‘GIG ECONOMY’: Report shines spotlight on a fast-moving, ‘disruptive’ sector

Professor Christopher Forde

About the Author Asset 28

Christopher is a Professor of Employment Studies and a Member of the Centre for Employment Relations Innovation and Change. His research interests look at the changing nature of work and employment, including the gig economy. He holds a PhD from Leeds.

–For a system which is supposed to empower workers by increasing their control over when and how they earn money, the ‘gig economy’ has a surprisingly bad reputation.

The chief criticism directed at the gig economy – which sees businesses engaging workers on short-term contracts or a freelance basis to undertake tasks – is that employment is precarious. The work can be intermittent and pay is typically low. The employment status of workers (whether they are self-employed, ‘workers’, or something else) varies from business to business and has been the subject of a number of high profile recent legal cases. Whatever their status, the reality is that many gig economy workers don’t qualify for social and employment protections like paid leave, pensions and sick pay. Furthermore, if you don’t work, you don’t get paid.

Yet the gig economy – also known as the platform economy or the ‘on-demand’ economy – provides income for thousands in the UK alone and its supporters claim that it gives workers genuine flexibility.

Three distinct groups of gig economy workers – moderate beneficiaries, random surfers and platform-dependent workers Gig economy businesses certainly polarise opinion: when taxi firm Uber lost its licence to operate in London in September 2017 over concerns about corporate responsibility, a petition to overturn the decision attracted more than 500,000 names within days. Yet London is just the latest in a lengthening list of places (including in Japan, Spain, Italy, Germany and Taiwan) which have sought to put restrictions on the company’s activities.

Whatever your perspective, the gig economy has grown exponentially in recent years through enterprise, innovation and willingness to take chances. Innovative use of technology has been key to the success of the gig economy. Typically, businesses will use technology to remain in contact with workers, and orders will be placed, processed and settled online, keeping costs down. Platforms see themselves as agents which link (for a fee) a worker to a third party (typically a client or customer) willing to pay for a service. Crucially, the platform does not typically see itself as an ‘employer’ of the workers who use their technologies to connect with clients or customers.

The best-known, like Uber and the logistics firm Deliveroo, have looked to rewrite the rule book by using technology to develop new business models which are disruptive to the way traditional industries operate. Others, like Amazon Mechanical Turk (known as MTurk) – which allows businesses to place so called Human Intelligence Tasks (HITs) online – such as writing product descriptions, copying website addresses, checking information and linking them to workers around the world – are less well-known but are becoming equally influential in reshaping the world of work.

BUT AT WHAT COST TO THE WORKERS IN THE GIG ECONOMY?

The Centre for Employment Relations, Innovation and Change (CERIC) at Leeds University Business School has recently published one of the most comprehensive reports into the gig economy. Commissioned by the European Parliament, The Social Protection of Workers in the Platform Economy draws upon multiple data sets, 50 interviews with key stakeholders in European countries (UK, Germany, Spain, France, Italy, Poland, Bulgaria and Denmark), and makes comparisons to the USA. We also conducted a survey of 1,200 workers in the gig economy to hear their experiences first-hand.

Our research showed that the gig economy is fast-growing but perhaps not as widespread as some imagine. It is difficult to gather precise data, but we estimate that between 1% and 3% of workers in the EU are involved in the gig economy in some way, although for many this is not their primary source of income. Typically, people will work part-time with one online platform and supplement their income with work with other platforms or more traditional employers. This work might be local (such as providing taxi or delivery services, or supplying trades) or global (via sites like MTurk).

WHAT THE WORKERS SAY

Our survey of 1,200 gig economy workers provided illuminating results. Sites like MTurk are truly global in nature, with workers in the US and Europe competing with others around the world, bidding for and completing HITs. Given the wage differentials between more and less advanced economies, this raises issues around what constitutes a fair wage for fair work. The sums paid for completing HITs are typically quite small (generally measured in cents rather than dollars), so workers will complete a large number each day to accumulate a wage.

Job satisfaction and emotional wellbeing were relatively high, but there was dissatisfaction with the lack of task autonomy, career prospects, pay and job security. On average people were working 23 hours per week, with a median pay of $6 (US Dollars, around £4.50) per hour. As noted above, pay is generally low, and so people often combine work in the platform economy roles with other jobs.

The gig economy is a catch-all for what is a vast and varied sector. To better understand it, our report identified three distinct groups of gig economy workers – moderate beneficiaries; random surfers; and platform-dependent workers, based on how much they rely on the gig economy for income, and the amount of work undertaken in the gig economy, alongside other, more traditional forms of employment.

MODERATE BENEFICIARIES
(37% of those that we surveyed) will typically have jobs outside the platform and use it as a reliable means to supplement income
RANDOM SURFERS
(38% of those surveyed) are similar to moderate beneficiaries, although they tend to have a higher probability of previous long-term unemployment and have a lower financial dependence on platform work.
PLATFORM DEPENDENT WORKERS
(25% of those surveyed) derive a large share of their income from gig economy work, typically without other paid jobs. These workers tend to be significantly worse off than others, earning 43% to 62% less than other two groups on average.

Governments and regulators cannot simply leave the economy to regulate itself: they need to ensure that workers are not excluded from basic protections.

SOCIAL PROTECTION FOR GIG ECONOMY WORKERS – MISSING OUT BY CHANCE OR DESIGN?

What is particularly interesting is that access to social protection is extremely variable across gig economy workers. Social protection can be seen as a general term which covers policies and programmes that are designed to reduce poverty and vulnerability, and which help with the management of economic and social risks, such as unemployment, exclusion, and sickness. Social protections vary from country to country. For example, some countries, like the UK, have a universally accessible healthcare system for citizens, whereas others have an insurance based system. A number of forms of social protection are only accessible to workers or employees (rather than self-employed or freelance workers). Others only become available upon payment of a certain proportion of income.

Bike riding down a main road

Delivery services on bikes are at the heart of the gig economy

Our study found that all too often, gig economy workers simply do not do accumulate enough hours of work or income to qualify for protections such as unemployment benefit, sickness protection, or protection against accidents at work. In some countries, such as France, specific protection schemes have been set up for groups of gig economy workers. However, in others, independent contractors and self-employed gig economy workers remain unable to access key forms of social protection. Indeed, some gig economy platforms such as Uber have lobbied hard to retain their classification as a ‘platform’ rather than an employer of their taxi-drivers.

Furthermore, in many cases, where workers in the gig economy can access social protection, it is because they are holding down multiple part-time jobs, including one which is a traditional (or non-platform) economy job. In this sense, part of the success of the gig economy is being ‘subsidised’ by the more ‘traditional’ employment practices of employers outside of the gig economy, who are obliged by law to offer certain forms of social protection to employees or workers.

Our research has shown that workers in the gig economy do need better social and employment protection. A key trend we found is that the more reliant a worker is on the platform economy, the less social protections they are likely to enjoy. A strong correlation exists then between platform working and precarious employment.

To improve provision for workers, our report proposes that there should be a move away from an exclusionary approach to employment classification and social protections (where the default position is that certain groups of workers are not entitled to protection), towards an inclusive approach that recognises the sources of vulnerability that new forms of work entail. The aim should be to establish a framework that ensures the inclusion of all those workers (gig economy or otherwise) who need social protections, rather than the exclusion of those who do not meet a particular legal definition.

A reduction or abolition of minimum income thresholds and an abolition of continuity of employment for access to social protection schemes would also help gig economy workers to benefit from social protection. Beyond this, there is an urgent need for full and easily accessible information for all workers, including those engaged in platform-mediated work, concerning their legal rights and entitlements. Trade unions also need to be able to access platform workers to inform them about their policies and to potentially organise them.

The gig economy is already significant and will become more so in future. We recommend that policy issues should be addressed now, before they become urgent. Governments and regulators cannot simply leave the economy to regulate itself: they need to ensure that workers are not excluded from basic protections.

The changes outlined will not only support workers in the gig economy, but also the industry itself as it matures and evolves more corporate responsibility. It should also help improve its reputation.

Find out more

  • Asset 25 The Social Protection of Workers in the Platform Economy
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