When it comes to stability, the gig economy needs work, say experts in Davos
May 25, 2022 7:00 PM UTC
With more than a billion workers and counting, the gig economy is as varied as any segment of the workforce can be.
From executives who value flexibility above all to people making grocery deliveries to supplement their income in times of high inflation, residents of all nations are taking jobs that vary in hours, pay, skill and educational requirements—and a seemingly infinite number of other particulars. Some choose to make money this way while many others do it out of desperation, with all kinds of motivations in between.
But for all the differences in jobs and situations, most gig workers are in the same boat when it comes to standards of pay and government oversight; there are few, if any. While some countries, states, and cities have tried to impose regulations on this amorphous industry, there’s been little success in implementing any meaningful stability that helps the majority of these workers. Take California, for example, where a law that aimed to help independent contractors like Uber and Lyft drivers get more rights ended up limiting freelance journalists’ ability to get work.
- The complexities were evident during the Future of the Gig Economy panel at the World Economic Forum in Davos on Wednesday, where business leaders from around the world discussed workers’ rights and the tradeoffs of having jobs that don’t have traditional employer-employee setups. Moderated by Fortune Editor-in-Chief Alyson Shontell, the conversation focused mainly on the lack of regulation and stability these workers face.
- “When we look long term, it might be the case that they make good money, but the question is when they get into disability, who’s paying for that?” asked Karien van Gennip, minister of social affairs and employment for the Netherlands. “Do they actually have disability insurance? Are they building a pension? Are they making enough money to actually get a mortgage and buy a house? There are lots of disadvantages to it. What we see in the Netherlands is that most of those jobs actually, when you add it all up, don’t pay enough for people to make a decent life.”
- “The way that it’s currently structured, it’s good in the short term. It’s really nice when everything’s good,” said Eynat Guez, CEO and cofounder of workplace management company Papaya Global. “Take Ukraine as an example. 90% of the tech industry are actually working as independent contractors due to the fact that they have a very good tax regime in the country but they’re solely dependent on the willingness of the employer not to dismiss them. In reality, they are currently getting into a place where they have zero protection.”
As Sharan Burrow, general secretary of the International Trade Union Confederation, pointed out, the International Labour Organization has laid out a set of principles for all workers when it comes to their rights. These include protections for bargaining and joining a union, health and safety standards, and guidelines on adequate wages, but these are often lacking for those in the gig economy.
“If a business sets up on this [freelance] basis simply to avoid the employment relationship, then that’s as bad as the dehumanizing exploitation to our supply chains where you simply contract out layer upon layer until you have a hidden workforce,” she said. “94% of workers in our supply chain are hidden workforce. This is in addition to that, but it’s even worse because it’s on an informal basis where the bulk of those billion people don’t have a minimum wage, any form of rights, no rule of law, no social protection. We have to fix it and we can only do that by having a genuine dialogue that is in the interests of secure work.”
Niklas Östberg, cofounder and CEO of Delivery Hero, supports legislation that offers social security and benefits. But he said the majority of his million-plus independent workers don’t want to be formal employees of the company. Without that arrangement, he said they make more money and have the flexibility they value now more than long-term stability.
“What we should not do is disregard what the workers want,” Östberg said, underscoring many workers at Delivery Hero like being able to choose when they work. “If you have an employment relationship, you have to exactly know when they’re working. The good part is that when they are going to make the most money is aligned with us, because that’s when we need them the most.”
- While that’s all well and good for workers who prefer it that way, Burrow said the larger issues will only get worse the longer the gig economy is ignored by governments. “We’ve let this escape the normal regulation of the labor market,” Burrow said. “We need to say, ‘What are all the vested interests, including the work and the responsibility of the employer?’ and let’s make these formal working environments. Otherwise, there’s 60% of the world’s workers who are now informal with absolutely no guarantees. From a societal point of view, is that what you really want for your children and your grandchildren? I don’t think so.”
“It’s not impossible to solve. It’s simply a matter of will and if companies want to deny workers fundamental rights, we’ve got a problem,” she continued. “You can’t just freelance the entire labor market and pretend that people are going to have any kind of security in terms of pensions or in terms of medical benefits and so on, let alone broader social protection. It’s just not humane.”
While not disagreeing, Östberg added that regulation can’t be based on traditional forms of employment. “Technology has changed the way we want to work. What the younger generation wants has changed versus when we grew up,” he said. “Laws have to make sure that we listen to what people want and not what we think they want. And I agree, we have to make sure that it’s not what they want short term and then there’s negative consequences long term. That should not be the problem.”
For van Gennip, the answer to the big picture of the gig economy lies in compromise. “Employers saw these fixed labor agreements that are too fixed for their needs. People wanted more flexibility and that’s how a whole kind of second labor market came into existence,” she said. “There’s a saying that we use—we want to make the labor market, the fixed part, less fixed and the flex part less flex.”
“My question would be, is this way of working really decided by workers?” asked Burrow. “It’s really about how you ensure those people, like we have done for generations, get a fair contract price. Between governments and employers’ responsibility, they can earn a pension. They can get access to health if they’re injured or they’re sick — payments for the normal things you get with a work guarantee.
“It’s not impossible,” she continued. “Many countries are starting to and have done it but it is really going to have to take employers who put those principles together in good faith. They’re going to have to accept that they can’t simply allow the model of the work to benefit them at the exploitation of the employee.”