The gig economy: the changing face of work

Saturday 28 October, 16:0017:15, Frobisher 1-3Battle for the Economy

When ‘sharing economy’ ventures such as Uber and AirBnB were launched, they were widely hailed as a service sector revolution: offering consumers low-cost alternatives to industries once considered a luxury while opening up new opportunities for individuals to earn income through flexible working or renting out everything from idle tools to parking spaces.

Yet with an estimated five million people now currently employed in the ‘gig’ economy, there has been growing disquiet about the legal protections for workers and the responsibility of multi-billion dollar firms as employers. The majority of such companies maintain they are technology platforms who facilitate self-employment, but a series of high-profile tribunals have seen the likes of Uber and Deliveroo forced to offer some concessions over holiday and sickness pay.

Critics see the gig economy as a more sophisticated manifestation of the low-paid, low-skilled shift work which has driven UK employment growth since the financial crisis or even as a return to the onerous conditions of ‘piecework’. Yet a report by the Resolution Foundation published in February 2017 notes that such flexible working is increasingly prevalent across well-paid, secure professions such as accountancy, management consultancy and teaching. The report argues that ‘tax advantages over employees, rather than new technology and the gig economy, are central to the rapid growth in self-employment’.

In response to this trend, the chancellor of the exchequer, Philip Hammond proposed to raise national insurance contributions for self-employed people, reducing this tax advantage. There has also been a crackdown on individuals working, in essence, as employees but being paid through limited companies that avoid national insurance altogether for both employer and employee, leaving a dent in government tax receipts running into billions.

One economic consequence may be a lowering of productivity, which has stagnated in the UK since the financial crisis. The gig economy may be disguising underemployment for many middle-class professionals. For other companies, hiring workers without holiday pay, pensions or other benefits, who are only paid for the work they do, may be a means of cutting costs or may be less risky than investing in machines or technology that could increase efficiency. Likewise, zero-hours contracts – that is, contracts with no fixed or guaranteed hours – have ballooned since the financial crisis from 143,000 to 900,000. Critics like the TUC view such contracts as ‘abuse’, with workers as ‘disposable labour’ who earn a third less than those on fixed hours. However, when McDonalds introduced a right to switch from zero-hours to fixed hours, only 20 per cent took up the offer, preferring to retain flexibility.

Is the rise of the gig economy a triumph for technology creating choice in employment, or a hi-tech mask for a struggling economy? Does the rapid success of gig economy companies suggest they’re benefitting from under-regulation, or is it their traditional rivals are over-regulated? Should policy-makers be more willing to intervene to protect workers’ rights at the expense of reducing their employment options? What happens to other traditional employment expectations – such as providing on-the-job skills and training – when hiring and firing becomes only a click away? Is the gig economy driving or reflecting changing expectations about what a job is?