The Gig Economy – and the Unions

I wrote this for the Irish Times on November 3rd.

“The black market was a way of getting around government controls”. So asserted Milton Friedman, a Nobel prizewinner in Economics. Last Friday, the Central London Employment Tribunal came to a somewhat similar conclusion regarding the behaviour of Uber, a ride-hailing app company. GMB, a trade union for private drivers, successfully took a test case on behalf of two Uber drivers. The union asserted that Uber was acting unlawfully in that its drivers were not self-employed but in effect employees.

Uber is not operating in the black economy, but in the contemporary “gig economy”. Gigs are temporary events: consumers request and pay for some short term service (such as an Uber ride or an Airbnb rental) via their smart phone with an intermediary (Uber or Airbnb). The intermediary fulfils the service by introducing the consumer to a willing contractor (an Uber driver) or temporarily available asset (an Airbnb property), taking a profit for the transaction.

In the case of the temporary hire of labour, the intermediary frequently insists on a ‘zero-hour’ arrangement, and thus no minimum wage. With Uber, a driver receives income only when assigned a ride. Furthermore, the contractor may only discover the precise nature of a job until after he or she has competed successfully against peers to win it. For example, couriers for Deliveroo find out to which domestic address a restaurant takeaway should actually be delivered, only once they have already committed to deliver the order.

The price for the transaction is frequently fixed by the intermediary. Uber sets prices for its rides, not its drivers. Deliveroo couriers and Uber drivers have complained that they must continually be alert for offers sporadically appearing on their smart phone app; then quickly accept the offer ahead of their peers; and only later discover the full nature of the task and the payment for it. Uncertain income, unpredictable work and lack of transparency are common complaints, as is a suspicion of exploitation. Treated as freelancers who decide what hours they want to make themselves available for gigs, they are also responsible for their own tax arrangements, insurance, pension, medical cover and so on.

To date there appears little public comment by the Irish trade union movement on the legality, impact or challenges to workers in the gig economy, nor to workers in the traditional economy whose jobs may be threatened by the new entrants in the gig economy. No doubt many are watching the GMB test case in London with interest, particularly as Uber is likely to challenge the ruling. But could unions themselves innovate to become players in the gig economy?

Few unions in Ireland offer their own smartphone app to their membership. Mandate was the first to do so in 2014, with a guide to employment and trade union law. Perhaps more unions could devise their own well designed app for their members, both to offer information and relevant news, and to help foster a community across their membership. But, for some unions, could there be an opportunity to enter the gig economy directly themselves by offering their own app to the public? Could union members freelance outside of their work day? Consumers want drivers to take them places. Parents and students look for grinds and advice from qualified teachers. People sometimes seek just informal advice from medical staff. Members of the public frequently struggle with accessing public services, dealing with the taxation system, and with understanding the steps and processes involved in obtaining permits and benefits. Many union members may be in a position to offer services or advice outside of their normal work day.

Unions have the potential to be at the forefront of changes brought by the gig economy, driving developments rather than reacting to innovation. In so doing they would clearly benefit their own membership as well as providing even better services to consumers.

The gig economy is still in its infancy and further innovation is certainly possible. Some pioneers, such as Uber, Airbnb, TaskRabbit, Deliveroo and others, have built reasonable if not substantial businesses by simple arbitrage of underused assets, and of temporary labour. But in almost every case, the innovation is modest. It simply appropriately matches a single interested consumer with a single willing supplier. Less frequently, a number of consumers are brought together for the same transaction from a single supplier. For example, uberPOOL enables two or more people to share an Uber ride to a common destination. But sometimes a consumer needs a service which is best matched by a team of suppliers, rather than a single individual. A band of suppliers could be temporarily assembled for example for a full spring clean, inside and outside; to organise a family celebration, or a tailored tour. After all, a gig usually involves more than just two individuals. Gig economy transactions could become more complex, but potentially more valuable as a result.

Another economist, Adam Smith observed that man is an animal that makes bargains, and that no other animal does this. The gig economy offers new ways to bargain and trade as an evolution of current practices, rather than necessarily as a threatening disruption to get around government controls.


About chrisjhorn
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