The impact of the Gig Economy on UK workers and its potential long-term impacts

The advent of the Gig Economy into the UK is relatively recent and yet its disruptive nature has had impact on the labour market whilst creating debate and controversy. In a research commissioned by the Department for Business, Energy and Industrial Strategy this business model is defined as “(involving) the exchange of labour for money between individuals or companies via digital platforms that actively facilitate matching between providers and customers, on a short-term and payment by task basis” (Department for Business, Energy & Industrial Strategy (BEIS), 2018). This same research reported that 4.4% of the population had worked in the Gig Economy in the past 12 months but with overall earnings being relatively low. While the people working in this sector cite flexibility and independence as advantages there are certain downsides of the increasing penetration of the Gig Economy. This essay will aim to critique some of the major problems that this model creates with regards to labour welfare and its possible long-term impact on workers in the UK.

Perhaps the most apparent impact of the Gig Economy is on its own labour force. The digital platforms connect workers to prospective customers without taking employer responsibility for the former or providing benefits to them such as holiday pay, sick pay and the national minimum wage (O'Connor, 2017). Companies that operate in this space thus utilise this model to reduce their overhead costs as well as employee-related liabilities (Ljungholm, 2018), creating and managing platforms that provide willing workers with a virtual market by connecting them to prospective customers but trying to absolve themselves of the responsibility of an employer-employee relationship. People working ‘casually’ for large organisations such as Amazon and Uber are exposed to the same occupational health risks as permanent employees of other companies with similar job requirements, yet the ‘gig’ workers have very little to safeguard them from any incidents on the job. There are aspects of higher stress levels too; Muntaner (2018) suggests that the ability of digital platforms to continuously monitor every aspect of the performance of the worker may put additional mental stress on her. Workers in the Gig Economy also have little or no job security as the they are not yet considered employees in most cases because they choose their own tools to work as well as when and how to ‘log on’ to the job (O'Connor, 2017). Without clear government regulation regarding National Insurance contributions of such platforms, the country may be exposed to higher negative externalities and market failure due to an increase in costs of the National Health Service. Recent figures estimate that the number of self-employed workers in the UK who work on their own (without any other employees) has increased from 2.4 million in 2001 to about 4.0 million in 2016 (Office for National Statistics, 2018); this increasing trend underlines the possibility of increasing public health costs in the future unless government regulations are implemented.

Another impact of the Gig Economy relates to worker skills and career development. The general age profile of the workers working in this sector is skewed towards younger people with almost 56% being aged between 18 and 34 (Department for Business, Energy & Industrial Strategy (BEIS), 2018). Companies operating in this space require basic levels of skills from their workers according to the job description but they do not invest in further training other than initial basic inductions (Department for Business, Energy and Industrial Strategy (BEIS), 2018). While this may not be a serious concern for some sectors (such as those with low-skilled job descriptions) workers in other sectors requiring higher levels of skill may lose out on employer-funded opportunities to enhance their skill-set. This has a long-term implication as well: as more workers join the Gig Economy in pursuit of short-term and ‘casual’ work opportunities, the country may witness stagnation in levels of vocational and technical skills. This is further compounded by the fact that career progression and a performance-based wage increment is hardly catered to. If a typical worker wants to earn more money for a ‘gig’, she will have to increase the number of tasks performed per project or increase the number of projects taken on-board in a given time. The labour market may witness a future where there are a lot of ‘casual’ workers who have been working on the same level of skill and the same pay for a long time with the Gig Economy companies remaining absolved of any responsibility to change this scenario.

The penetration of the Gig Economy threatens to have severe socio-political impact as well, especially with regards to the welfare of workers who are not part of this model but are still in the labour market. Snider (2018) presents a very strong point of view stating that the Gig Economy is a by-product of neoliberal economic policies that have sought to promote unregulated free-market capitalism. This perspective asserts that in such an economy the working-class are exploited to maximise shareholder profitability. Not only does such a model affect the ‘gig’ workers through the absence of what was once ‘the standard employment relationship’ (Fudge, 2017) but it also disrupts an existing labour market. An oft-cited example is that of the licensed taxi market. While Cramer and Krueger (2016) report that the capacity utilisation of Ubers was much higher in the US than licensed taxis (leading to the conclusion of higher market efficiency) the increased unregulated competition has had detrimental impact on the earnings of licensed taxi drivers. Uber drivers offer more competitive rates and convenience to customers and this reduces the demand for licensed taxi drivers. However, Uber does not generally take responsibility for the welfare of its contracted drivers nor for their actions. The improvement in market efficiency thus comes with compromises: the cumulative effect of lower earnings for licensed taxi drivers, the unprotected employment rights of Uber drivers and the exposure of customers to potentially un-trained and reckless drivers, all of which is not reflected in the existing market pricing. Ensuing court battles and protests such as the one in France (France 24, 2015) allude to the fact that such business models should be thoroughly evaluated and assessed from various angles before being allowed to enter existing markets. 

It remains to be seen whether the current structure of the Gig Economy is more likely to have negative impact on the UK labour market than a positive one in the long run. However, the short-term benefits to ‘casual’ workers using this platform may conceal more serious long-term effects that such a market, if unregulated, may have on the quality of work-life, the overall level of skill in the country and the rights of the working-class. The Gig Economy has shown its ability to provisionally improve market efficiency in some job sectors; one should not assume that it ensures equity as well.

References:

Cramer, J. and Krueger, A. (2016). Disruptive Change in the Taxi Business: The Case of Uber. American Economic Review, 106(5), pp.177-182.

Department for Business, Energy & Industrial Strategy (BEIS) (2018). THE CHARACTERISTICS OF THOSE IN THE GIG ECONOMY. [online] Available at: https://www.natcen.ac.uk/media/1543748/The-characteristics-of-those-in-the-gig-economy.pdf [Accessed 5 Dec. 2018].

Department for Business, Energy and Industrial Strategy (BEIS) (2018). The experiences of individuals in the gig economy. [online] Available at: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/679987/171107_The_experiences_of_those_in_the_gig_economy.pdf [Accessed 6 Dec. 2018].

France 24 (2015). FRANCE - Uber under threat as France upholds limits on unlicensed taxis. [online] SyndiGate Media Inc. Available at: https://link.galegroup.com.idpproxy.reading.ac.uk/apps/doc/A414590033/ITOF?u=rdg&sid=ITOF&xid=8cbea1a7 [Accessed 6 Dec. 2018].

Fudge, J. (2017). The future of the standard employment relationship: Labour law, new institutional economics and old power resource theory. Journal of Industrial Relations, 59(3), pp.374-392.

Ljungholm, D. (2018). EMPLOYEE–EMPLOYER RELATIONSHIPS IN THE GIG ECONOMY: HARMONIZING AND CONSOLIDATING LABOR REGULATIONS AND SAFETY NETS. Contemporary Readings in Law and Social Justice, 10(1), p.144.

Muntaner, C. (2018). Digital Platforms, Gig Economy, Precarious Employment, and the Invisible Hand of Social Class. International Journal of Health Services, 48(4), pp.597-600.

O'Connor, S. (2017). UK tries to tackle ‘gig economy’ conundrum. [online] The Financial Times Limited. Available at: https://search-proquest-com.idpproxy.reading.ac.uk/docview/1927676566?accountid=13460 [Accessed 6 Dec. 2018].

Office for National Statistics (2018). Trends in self-employment in the UK.

Snider, L. (2018). Enabling Exploitation: Law in the Gig Economy. Critical Criminology, 26(4), pp.563-577.