The gig economy and digital technology workers
The whole business model is predicated on driving down labour costs, replacing regulated employment practices (governed by employment laws) with unprotected workers - all in the name of making their service cheaper for the customer.
Reading about the Uber Files this week, and learning about their ethically questionable practices reminded me of a blog I wrote a few years back - What’s wrong with the gig economy - and that got me wondering what impact Covid has had on the gig style of engagement.
“by 2025, the (European) Commission expects some 43M people in the EU to be working through digital labor platforms" — up from around 28M now (Techcrunch).
Quick reminder about what the Gig Economy is
The BBC have a simple description in this article “a labour market characterised by the prevalence of short-term contracts or freelance work, as opposed to permanent jobs”.
In broad terms “gig economy” can refer to both freelancers and gig workers who take on gigs instead of, or in addition to, a permanent job (full or part-time) or instead of holding a long term contract for work — ie: individuals undertake a “job” or “gig” for a fixed fee at a set time. These jobs or gigs can be very short (minutes) or longer (days). A person can be carrying out many jobs or gigs on behalf of different companies on the same day.
Freelance work has existed for a long time, photographers, graphic designers and accountants are often engaged via this model. Engaged to do a set piece of work, for a rate with terms agreed by both parties. Here in NZ these are governed by a contract for services style of paperwork.
Where the gig model differs is the size, frequency and engagement. Many gigs are offered via a technology platform, can be bid on or for a set price - that price is set by the technology firm (eg: Uber or TaskRabbit) and there is usually no ability to negotiate terms and conditions.
Basically it’s the terms of engagement, ability to set rate and duration that differs from other employment frameworks.
So what’s wrong with it?
Subjectively the gig economy can be described as a positive evolution in our employment frameworks, the next natural step after contracting. Personally I have had a portfolio life for the last 10 years so on that level I can see the benefits.
It boils down to two issues facing both individuals and nations — exploitative employment practices, the gig economy often disempowers the worker; and tax avoidance / tax shifting opportunities for the global players involved.
Lets tackle the tax implications first
“The conservative estimate was that Uber avoided $6.4 million to $12.8m in company tax in 2020 in this country”
The quote is from an aptly titled article “Report Claims Uber avoided millions in NZ company tax”.
Multinationals shifting revenue offshore to avoid paying tax locally is a well documented issue. Progress is being made on the revenue shifting and taxation front.
My real interest in this topic is on the impact for the workforce though.
Challenging employment practices
When I last wrote about this Uber were dominating the headlines back in 2018, the whole business model is predicated on driving down labour costs, replacing regulated employment practices (governed by employment laws) with unprotected workers all in the name of making their service cheaper for the customer.
The gig model results in a workforce who are essentially self employed with limited to no worker safety mechanisms in place. To earn in a platform controlled market many gig workers are exploited into working excessive and anti-social hours. While the model creates more opportunities it also attracts more competition with gig workers bidding against each other - again in the name of driving the price to the bottom - to win a contract.
This style of innovation can be seen throughout history with strong parallels between gig models and various labour movements of old - which led to the industrial revolution. Closer to home in Australia (and NZ) the Waterside Workers Union was formed due to systems of hiring which severely disadvantaged the workers. This from wikipedia:
"From about 1900 to the 1940s, work on Melbourne wharves was obtained through the bull system of labour hire where workers would be hired on a daily basis at a pick-up point, and which was prone to corruption. (See Wailing Wall.) In Sydney, workers would walk from wharf to wharf in search of a job, often failing to find one. (See The Hungry Mile.)" Wikipedia
A colleague once said to me “We know from history that inequitable and exploitative systems like that do not last… dressing it up in digital clothes and calling it a hip name do not automatically make it ‘right’.”
Nations are increasingly introducing protections for gig workers, here in NZ the law is being tested through the courts with one recent ruling “gig economy workers … may be considered employees rather than contractors” upheld in the Supreme Court, with another against Uber specifically waiting a ruling.
Does any of this matter for the Digital Technology workforce?
Right now professional services - which includes digital technology workers - have three dominant employment models here in Aotearoa NZ - permanent, contract (short / longterm / freelance) and temp - these are recognised in employment law as different engagement mechanisms.
Contracting and freelance engagements are our primary mechanism for engaging a contingent workforce, the latter (freelancing) is slowly moving closer to a true “gig” model where freelancers hold multiple contracts with different customers.
There are already sites digital technology workers can pick up gigs from globally - Fivver, Freelancer, Upwork, People per hour - to name a few. I know nothing about these platforms, their terms, effectiveness etc. I have read some have scam jobs, bogus references and other flaws so do your homework before relying too heavily on them for your income.
Based on gig economy growth in 2020 there are predictions the gig economy will grow dramatically in this covid impacted world, there is limited data (that I could find) on the place of Professional Services within the overall stats. Some growth predictions include:
- According to this Mastercard paper the professional services slice of the gig economy in 2023 will be just $17.7B of a total $455B predicted.
- By 2027, estimates put the number of freelancers at 86.5 million.
- “The gig economy experienced 33% growth in 2020 and is expanding much faster than the U.S. economy as a whole.”
Finally - there are gig and freelance models that can work without exploitation so we need to encourage and embrace those. It would be fantastic to see platforms built by kiwi’s for kiwi’s so the profits (and taxes) stay here along with the protections of our ACC and employment laws.
That said Professional Services is not a growth area within the gig economy frame, so it looks like our contracting and freelance contracts model is here to stay a good while longer. Ngā mihi Vic
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