In February this year, the UK Supreme Court concluded that a group of Uber drivers were not self-employed, as the company had claimed, but rather had ‘worker’ status that entitles them to the minimum wage and holiday pay. This was the latest in a series of legal decisions in the UK and elsewhere posing a challenge to the digital platform business model. It was followed in March by Deliveroo’s flotation on the UK stock market, considered to be a disappointing launch because some major institutional investors had decided to opt out of buying shares. They cited concern about long-term prospects for the company’s similar business model.
These events in the UK have echoes in many other countries. Concerns about the gig employment model have focused on digital platforms such as Uber and Deliveroo, but the model is far more prevalent. There are no systematic figures on the number of people experiencing this kind of contingent arrangement, as official surveys do not ask the question that matters for the courts: to what extent does an individual have control over their working pattern? But looking at the available evidence covering zero-hours contracts, solo self employment, and questions about whether workers can control their hours, we estimate that about a quarter of the UK workforce is affected. For example, as well as mini-cab drivers and couriers, many people working in hairdressers, gyms, hospitality, retail and social care have to accept such arrangements.
The Uber judgment focuses attention on those at the margin of self-employment who lack control over the basic terms of their product offering and customer base. It has long been recognised that the self-employed are an exceptionally diverse group and that particular care should be taken to distinguish between “opportunity” and “necessity” entrepreneurship: those actively choosing self-employment to take advantage of a business opportunity or to take advantage of the flexibility it affords, have higher life satisfaction and more stable economic outcomes than those who are forced into self-employment because of a lack of better options. On balance, the available evidence suggests many gig economy workers do not have better choices available.
A flexible labour market does have advantages – when it is two-sided flexibility, and the individual can exercise control over their working times. The current system of one-sided flexibility, for the platform or the employer, means that considerable economic risk has been shifted to individuals far less well able to bear it. This has adverse broader economic effects, reducing productivity and putting additional strain on the social safety net when individuals run into hard times.
The policy implications of the successive court judgments and doubts about the gig employment model are therefore wide-ranging. The group of people affected is quite varied, and some appreciate the flexibility. However, for a large number of people, their incomes are low and precarious; they have no incentive or ability to invest in either additional training or equipment (thus reducing the economy’s productivity overall); they are not auto-enrolled in pensions and have little ability to save for hard times or retirement and will be more likely to need benefits or experience poverty.
In addition, as individuals they are generally not liable to pay taxes such as VAT or corporation tax as they earn less than the thresholds, so the model reduces the UK’s tax base. There are implications for competition policy too: there is growing concern about big platforms’ or gig employers’ ‘monopsony’ power in local labour markets – that is, the extent to which they are the only work option available to many people.
Concern about the spread of contingent employment arrangements is not new. The UK Government in 2017 (under Theresa May) commissioned the Taylor Review which recommended a range of policy changes. These have not yet been implemented. But change is needed. At a minimum existing labour law needs to be enforced – groups of individuals should not have to go to court for the law to be observed. Policymakers need to consider the implications, however, for the tax base, and for skills and productivity. If major investors can see the gig model is unsustainable, it is time to think about the wider policy framework.
Read policy brief: Uber and beyond: Policy implications for the UK
About the author
Professor Diane Coyle, Bennett Professor of Public Policy
Professor Coyle co-directs the Institute with Professor Kenny. She is heading research under the progress and productivity themes. Learn more
About the author
Professor Abi Adams-Prassl
Professor Abi Adams-Prassl is a Senior Research Fellow in Economics at the University of Oxford. Her work on labour economics and econometrics has been published in the leading peer-reviewed outlets in Economics, Law, and Human-Computer Interaction. She has been awarded a number of grants and prizes for her research including an ERC Starting Grant, a UKRI COVID Research Grant on Inequality & Employment Progression, and an ESRC Future Research Leader Award for work on atypical employment & the gig-economy.
About the author
Professor Jeremias Adams-Prassl
Jeremias Adams-Prassl is Professor of Law at Magdalen College, and Deputy Director of the Institute of European and Comparative Law in the University of Oxford. He studied law at Oxford, Paris, and Harvard Law School, and is particularly interested in the future of work and innovation. Jeremias is the author of numerous articles and books, including most recently Humans as a Service: the Promise and Perils of Work in the Gig Economy (OUP) and The Charter of Fundamental Rights in the Member States (ed, with M Bobek), and regularly consults on these questions for private and public sector organisations as well as the social partners. From April 2021, he will lead a five-year research project on Algorithms at Work, funded by the European Research Council and a 2020 Leverhulme Prize.