What is the gig economy and why is it so controversial?

By Nicole Kobie

What do delivery couriers, Uber drivers and TaskRabbits have in common? They’re all part of the gig economy, and their work may lead to new labour laws if the government heeds the call for changes made in Matthew Taylor’s review.

The Taylor Review, which was published July 11, 2017, called for a new category of worker that gives those in the gig economy some employment benefits and ensures a decent wage. Although it falls short of giving them full-time employee status and the full protections that would bring.

The government has now responded to the Taylor review saying there will be stricter enforcement of holiday and sick pay rights for people working within the gig economy. “We want to embrace new ways of working,” business secretary Greg Clark on February 7. Unions have criticised the government’s plans saying 1.8 million workers will be left without key rights.

The rapid growth in the gig economy suggests that this is the future of work, raising the question of whether a lack of job security, lower pay and fewer benefits is the future we want to build?

Why is it called the gig economy?

The gig economy gets its name from each piece of work being akin to an individual ‘gig’ – although, such work can fall under multiple names. It has previously been called the “sharing economy” — mostly in reference to platforms such as Airbnb — and the “collaborative economy”. However, at its core are app-based platforms that dole out work in bits and pieces — making deliveries, driving passengers or cleaning homes — leading some to prefer the term “platform economy”.

Not all gig economy roles are based around a technology platform. Gig economy workers can also work for more traditional companies, which have changed how their staffing system operates. Delivery drivers for Hermes, for example, also work on a piece-by-piece delivery basis, though their employer does not have the tech startup origins often associated with this type of work.

What about zero-hour contracts?

Gig-economy work and zero-hour contracts have similarities. Both treat workers as contractors and offer no guarantee of pay, but gig economy roles are normally paid per piece — such as a set rate to deliver a package or drive a fare to a location — while zero-hours contracts are paid hourly, but with no set minimum. Both are the result of companies trying to cut or limit staffing costs, and can leave workers unsure how much they’ll earn.

What’s the problem with the gig economy?

The companies ruling the gig economy say they bring the flexibility to work whenever you like. Critics — which include many of those working for the companies — argue that not only do workers lack protection and fair pay, but the roles aren’t as flexible as they seem, as workers are incentivised or pressured to work when the companies need them.

On top of that, workers aren’t paid benefits such as holiday or sick pay, and reports suggest some aren’t making minimum wage. A recent one by MP Frank Field suggested some gig economy workers pull in less than £2.50 an hour. That’s legally possible because gig workers aren’t seen by the companies they work for as employees but contractors — though a court ruling against Uber disagreed with that claim last year.

How can these issues be fixed?

The Taylor Review hoped to address this disconnect. It suggested the government creates a new category of worker known as a “dependent contractor” that sits between contractors and those in full employment, and brings with it some benefits and wage protections. The Trades Union Congress (TUC) has also pointed out that when employees are underpaid, the government earns less in taxes and national insurance, and pays out more in credits and benefits. They calculate the loss at billions of pounds a year.

In a speech to the Trades Union Congress in September, shadow chancellor John McDonnell said a Labour government would give gig economy workers similar rights to those in permanent work, including sick pay and maternity pay. His comments, predictably, were welcomed by trade unions who have long-argued that gig economy companies have been running roughshod over workers’ rights for years.

How many people work in the gig economy?

The number is difficult to judge. According to a parliamentary report, 15 percent of UK workers are self-employed — some five million people. But not all will be in what we consider to be the gig economy, as this also covers traditional freelance roles and contractors.

The Chartered Institute for Professional Development estimates that there are 1.3 million Britons employed in the gig economy, while TUC says that one-in-ten British workers are in “precarious work”.

Please share our hub with the world!