Labour Research August 2016


Are workers getting a fair share of this gig?

The “sharing” or “gig” economy is producing a realignment of employment relationships, as Labour Research finds out.

Amid the political and economic uncertainty of post-Brexit Britain, the so-called collaborative or “sharing economy” is predicted to continue to grow rapidly. 

The sector, also described as a “gig economy”, comprises enterprises such as the driver hire app Uber and accommodation-sharing platform Airbnb, through wh ich members of the public use digital platforms to buy services from, and sell services to, each other (see box on page 14). 

A report by financial services company PwC, published in June, predicted that the value of transactions within the UK’s five most prominent sharing economy sectors could increase by 20 times to £140 billion in 2025, up from £7 billion today. 

It also predicts that revenue for these platforms in the UK will increase from £1 billion today to £18 billion by 2025.

Revenues in the five key sharing economy sectors across Europe currently stand at €3.6 billion (facilitating around €28 billion in transactions), and could reach €83 billion by 2025. 

Components of sharing economy

A report for the European Commission by financial analysts PwC in April identified five key collaborative economy sectors:

• peer-to-peer accommodation: households sharing access to unused space in their home or renting out a holiday home to travellers. This includes peer-to-peer rental platforms such as Airbnb and holiday rental and home-swapping platforms. This is the largest sharing economy sector in Europe by transaction value (54% of transactions);

• peer-to-peer transportation: individuals sharing a ride, car or parking space. This includes the app-based ride-sharing service Uber, driveway-sharing platforms and the (business-to-consumer) car sharing network Zipcar. This is the largest collaborative economy sector in Europe in terms of revenue (47% of revenue);

• on-demand household services: freelancer marketplaces enabling households to access on-demand support with household tasks such as food delivery and DIY. This is the fastest-growing sharing economy sector in Europe, and includes restaurant delivery services like Deliveroo and DIY service platform TaskRabbit;

• on demand professional services: freelancer marketplaces, such as Upwork, enabling businesses to access on-demand support with skills such as administration, consultancy and accountancy; and 

• collaborative finance: individuals and businesses who invest, lend and borrow directly among each other, for example through crowdfunding and peer-to-peer lending. PwC’s report identifies four sub-sectors within the collaborative finance sector: rewards-based crowdfunding (for example, Kickstarter), equity crowdfunding (for example, SyndicateRoom), peer-to-peer lending (for example, LendingClub) and lending to small businesses (for example, Funding Circle).

Revenue for the digital platforms is generally generated by charging a commission on transactions made, with commissions ranging from 1%-2% for peer-to-peer lending, to up to 25% for ride-sharing services like Uber. 

Growth in the sharing economy has been higher in the UK than the rest of Europe, aided by the recent establishment of London as a global financial technology (FinTech) hub. 

According to PwC, the capital flowing through collaborative finance platforms in the UK is expected to increase to £70 billion per year by 2025, from £3 billion today. The PwC analysis was carried out before the Brexit vote. However, PwC economist Rob Vaughan said that this was not expected to alter the long-term trajectory for the sharing economy’s potential growth by 2025. 

Working in the gig economy

Yet for most of the so-called “crowdworkers” seeking to earn a living in the sharing economy, and whose share in these sums is relatively tiny, the future is not so rosy.

And for trade unions, reaching out to and organising these workers — while also protecting existing members from the downward pressure on wages and conditions that the emergence of these new forms of work engenders — presents a huge challenge.

Platforms such as Upwork (for freelancers) and Taskrabbit (for DIY and “handymen”) do not offer services themselves, but provide a platform for individuals to offer services in direct competition with one another, and often in a race to the bottom in terms of the price for labour offered. 

Those working through these platforms do so outside of traditional employment relationships and without the rights and protections that come with normal employment contracts. 

A joint study by University of Hertfordshire researchers and the Ipsos MORI polling agency, published in February, showed that 21% of respondents had tried to find work via “sharing economy” platforms in the UK and 11% had succeeded in doing so. Extrapolating from the 2,238 people aged 16-75 surveyed, this suggests that around nine million people had sought work and five million people had found work in the gig economy.

The study, carried out on behalf of the Foundation for European Progressive Studies and the UNI Europa trade union confederation, found that over a third of those working in the gig economy were relying on this for their main or sole source of income.

The income of these crowdworkers is usually fairly modest. Forty-two per cent have a gross income of less than £20,000 a year, while around 30% earn between £20,000 and £35,000. 

According to the study, the most common type of work undertaken by crowdworkers is office work, short tasks and “click work” done online; 57% are undertaking professional work; 53% are doing regular scheduled work in somebody else’s home; and 46% are undertaking taxi service or other driving work. 

Crowdworkers are more likely to be young and female — 54% are women, and just over half (51%) are under the age of 35. However, around one in six (16%) are over 55 years old. 

Threat to good jobs

General union Unite has recently published a report, A digital new world, covering developments in the information and communications technology industries. It says that the growth of the crowdsourcing of work — with organisations asking many people for a task to be done, but only paying one of them — is a “worrying” trend.

It also refers to the broader issues raised by homeworking, teleworking and flexible working, which “can have a negative impact on a worker’s general health, with feelings of isolation that can affect both morale and productivity”.

The growth in crowdworking needs to be set against the wider issues of casualisation, insecurity and low pay in the economy. A statement adopted by the ETUC European Trade Union Confederation in June warned that the rapid increase in crowdworking could lead to “an extension of the shadow economy and illicit work and the establishment of a new digital precariousness”, with workers subsisting on low wages, piecemeal work, and few or no social and employment protections. 

The growth of this form of work also relates to a hollowing out of the labour market. Here, well-paid mid-level jobs are disappearing while the proportion of insecure, unskilled, low-paid jobs has expanded, creating an “hourglass” labour market that also sees an increasing number of highly paid, high-skilled jobs at the top. 

A working paper for the European Trade Union Institute, by the head of its Forward-Looking Unit, Christopher Degryse, published earlier this year, describes how the “digitalisation” of the economy is hastening these developments. 

Estimates vary, with upwards of 40% of European jobs at risk in coming years, due to automation, digitalisation and wider technological developments. Degryse refers to a form of “digital Taylorism” that is emerging, in which the production process is broken down “into tiny simple and repetitive tasks that will be offered to the ‘community’ of crowdworkers”.

The absence of an employment relationship means workers get paid only when they work, and do not get sick pay, holiday pay and other similar entitlements. They also have to supply and maintain their equipment (including vehicles, licensing and insurance in the case of driver apps such as Uber). 

Degryse gives the example of a search undertaken on the Upwork site for a “virtual assistant” to carry out administrative support, secretarial or data-entry work. This resulted in 9,088 candidates offering their services from 40 different countries, from developed countries in North America and Europe to developing countries such as the Philippines and Bangladesh. Rates offered began at $3.30 an hour. 

This leads to American and European workers aligning the price of their services within a global market and in competition with workers from the developing world. Overall, Upwork has around 10 million freelancers registered globally. 

The ETUC statement describes such platforms as “designed like an invitation to multiply underbidding practices.”

Another troubling example highlighted by Degryse is Amazon Mechanical Turk. This is a platform developed by the online retail giant through which workers undertake tasks — such as identifying sound or video files — that cannot be correctly performed by software systems. 

Amazon allows employers hiring the freelance workers to decide whether or not they want to pay. The intention is to let employers set standards, but it has led to unscrupulous hirers stealing wages. 

Germany’s largest union, IG Metall, has established a website allowing crowd workers using these platforms to comment on and rate their experience. It also provides an advice line for users based in Germany.

Regulation of the digital economy

The CWU communications union has long campaigned for greater investment in UK digital infrastructure. However, it has also expressed concerns about the impact on workers of an unregulated digitalisation of the economy. 

Rather than “collaboration”, the reality of the sharing economy “often involves the exploitation of low-paid workers with no job security”, according to CWU head of research Bill Taylor. 

He told Labour Research there was a challenge for unions in thinking about how they can best represent and protect the interests of workers in this new environment. For example, this would involve ensuring that crowdworking is properly regulated “perhaps through a new status or a new form of employment contract guaranteeing employment rights”. 

More broadly, unions need to shape the development of the economy “to ensure that digitalisation doesn’t just destroy good jobs and replace them with bad ones” while also pressing for stronger employment laws that better protect workers and encourage employers to provide skilled work and invest in their employees, Taylor said.

The rapid expansion of collaborative economy platforms across Europe, and the wildly differing approaches to regulation being pursued by national governments, prompted the European Commission — the executive body of the EU — to publish guidelines for regulation by EU member states in June. 

It said these were intended to promote a “balanced and sustainable development” of these new business models. The Commission advocates a fairly light touch approach in terms of regulating access to the market. 

However, it suggests that member states need to ensure a high level of consumer protection, ensure relevant tax rules apply and give greater consideration to the application of labour law. 

In relation to labour law, it suggests that criteria such as whether workers act under the direction of the platform (that is, the platform determines the choice of activity, remuneration and working conditions); the nature of the work (for example, is it genuine, effective and regular); and whether the work is remunerated, should be used in deciding whether someone can be considered as an employee of a platform.

If these criteria are met (as unions argue is the case with Uber drivers, for example — see box below), then the individuals concerned are defined as workers under EU law, and EU employment law should therefore apply. This attempt to bring some consistent regulation to the sharing economy was welcomed by the TUC. General secretary Frances O’Grady said that while the sharing economy presented new opportunities, it had to be “fair for all and not a free-for-all”.

GMB recruitment and organisation at uber 

The GMB general union is recruiting and organising members working for the Uber driver platform. Working with the solicitors Leigh Day, the GMB has launched legal proceedings at the London Central Employment Tribunal against Uber. 

The union is claiming that Uber drivers are workers, and that there is a failure by Uber to pay their drivers a minimum wage and to provide any form of holiday pay. It says that Uber is also in breach of a legal duty to provide drivers with a range of other basic employment rights, for example in relation to health and safety and on raising complaints. 

The union released income details for an Uber driver last summer showing that the driver received £5.03 net per hour for 234 hours driving during one calendar month (after deductions for Uber’s commission, fuel, road tax, licensing, vehicle maintenance and other expenditure). This was £1.47 per hour below the national minimum wage of £6.50 per hour.

Uber claims that it is not an employer of drivers, and that it is simply providing a platform to link people up with cab rides. Uber refers to its drivers as self-employed “partners”. 

The GMB argues that the amount of control Uber exerts over drivers means that the relationship cannot be seen as one of self-employment.

For example, Uber can “deactivate” drivers, cutting them off from their livelihoods at a moment’s notice, with no right to challenge this.

Over the last year, Uber in London has both dropped the fares the public pays and increased the percentage commission that the largest group of drivers pay, decreasing the amount of money the drivers earn. 

At the same time, the lower prices that Uber can charge the public is having a detrimental impact on traditional cab hire and taxi firms. 

Writing on the Left Foot Forward blog earlier this year, GMB organiser Elly Baker said that taxi drivers in the UK were “rightly furious at the entrance into the market of this massive multi-national setting out to undercut them — with seemingly unlimited funds to plough into marketing and influencing decision makers”.

Steve Garelick, branch secretary of the GMB professional drivers’ branch, told Labour Research that the response to Uber from other taxi companies was to cut prices, often without discussion. This then reduced the incomes of their drivers, as part of “an unnecessary race to the bottom”. 

The GMB also protested on behalf of Uber members in December 2015 over the company’s launch of the UberPOOL service (through which passengers at different pick-up points can share a cab). Uber drivers were not able to opt out of participating in this service.

The union said that members were “greatly concerned about safety and security of themselves and passengers in a situation where multiple parties are in the car at the same time”. It called for greater safeguards to be put in place for ride sharing, and for drivers to be given the right to opt out of UberPOOL. 

The GMB also held a protest demonstration at Uber’s London office in November last year over the decision to increase the commission charged to new Uber drivers from 20% to 25%.

The ETUC resolution on digitalisation — adopted a few days after the Commission guidelines were published — called for an EU framework on crowdworking “to prevent the undermining or circumventing of minimum pay rates, working time regulation, social security, pension schemes, taxation, etc”, and to ensure national and EU employment legislation effectively apply to digital crowdworkers in online environments. This would also involve payment of minimum remuneration, access to social security and protection of intellectual property rights. 

UK involvement in EU-wide regulation will now depend on whatever new relationship it eventually forms, post-Brexit, with its erstwhile EU partners. 

O’Grady said that the UK government needed to build on the EU guidelines and ensure every worker in the sharing economy gets full employment rights and the opportunity to join a union, and to not be “exploited by a distant tax-dodging tech firm”.