The tug of war within the gig economy

News: This year, Uber lost a significant legal battle against its workers in the UK.

The U. K’s Supreme Court upheld a previous ruling by the employment tribunal that the 25 drivers who had brought a case against Uber are indeed employees and not contractors.

Consequently, Uber announced that it would start treating all its drivers in the UK as workers who are entitled to a minimum wage, holiday pay, and pension.

This incident holds significance for India, as the hostility between platform companies and gig workers in India have already begun.

What are the developments in other countries?

European Union: It recently introduced a draft that aims to make platform companies (Uber, Instacart, and Amazon) classify their gig workforce as ‘employees’ and provide them with additional benefits.

US: The Platform companies in California won a battle that would allow them to continue classifying their workers as contractors as opposed to employees.

What are the challenges/issues faced by Gig workers?

Firstly, there is no transparency on how and when incentive structures would be provided.

Secondly, there is no discussion on cost structures that would be sustainable in the long term. Currently, to grab market share, platform companies are reluctant to make customers pay the right fares. This unsustainable model forces platform companies to sustain by charging high commissions on the gig workers.

Thirdly, platform workers have little or no voice. Technology has tilted the power and bargaining scales strongly in favour of the platform companies.

Fourthly, Platforms in India have been plagued by even more fundamental issues like

– Frequent and random changes to the commission structure

– Delays in payments

– Deliberate miscommunication of earnings potential to attract gig workers

– Lack of access to basic amenities

Why platform companies are reluctant to assign employee status to Gig workers?

Low utilization of their workforce and high operating costs is the fundamental problem that platform companies would be faced with if their gig workers are classified as employees.

This will force them to employ far fewer gig workers on a full-time basis in order to optimize ‘utilization’. The power of the platform model lies in its ability to deliver a great customer experience along with high operating efficiency by relying on many gig workers. However, cutting down the workforce will end up killing the business model as it will reduce customer experience by increasing wait times and it would also increase the cost for drivers by increasing their idle run.

What is the way forward?

First, Platform companies need to publicly commit to ensure that every gig worker, irrespective of the number of hours put in every month, will be paid an equivalent living/minimum wages.

Second, other platform companies can learn from the Uber experience in the U.K. Uber has committed to provide the national living wage, paid holiday time equivalent to about 12% of driver’s earnings along with a pension plan.

Finally, the situation can be rectified if everyone who is a part of this dispute namely the platform companies, the gig workers, and the lawmakers take a pragmatic approach.

Source: This post is based on the article “THE TUG OF WAR WITHIN THE GIG ECONOMY” published in Livemint on 14^th Dec 2021.