GIG ECONOMY AND WORKER WELFARE_Josh Healy

February 2018

By Dr Josh Healy, Senior Research Fellow, The University of Melbourne

Proposition: The wages and conditions of Australian workers providing services in sectors affected by the rapid growth of digital on-demand subcontracting platforms will, on average, be expected to fall without further government intervention.

On-demand (or ‘gig-based’) working arrangements are moving rapidly into established industries. But, according to a new poll conducted by the Economic Society of Australia, economists are divided over whether this development is good or bad news for workers.

Recent technological advances have made it possible for an increasing variety of jobs to be found and performed via online platforms. The most prominent in Australia today are Uber (transport), Deliveroo (meal delivery), and Airtasker (odd jobs), but new examples in other sectors appear regularly.

A controversial aspect of platform work is its reliance on contract labour. The platforms insist that their drivers/couriers/Taskers are ‘freelancers’ rather than employees, which exempts them from many labour laws. This approach has drawn strong criticism from the labour movement.

The use of contract labour in the platform economy provides the impetus for the latest national poll conducted by the Economic Society of Australia. In February 2018, economists were asked about the likely impact of labour-contracting platforms on workers’ wages and conditions, with the following proposition:

The wages and conditions of Australian workers providing services in sectors affected by the rapid growth of digital on-demand subcontracting platforms will, on average, be expected to fall without further government intervention.

The 31 responses range across the spectrum of opinion; no clear majority position emerged. The unweighted responses skew towards disagreement with the proposition: 45 per cent disagree (10 per cent strongly) while 29 per cent agree (7 per cent strongly).

The balance shifts slightly toward agreement (up to 31 per cent) if responses are weighted by each individuals’ degree of confidence in their own views.

In either case, however, one in four respondents are uncertain whether the proposition is correct.

So, the first point to take from these results is that the ‘on-demand’ economy has not (yet) engendered a clear consensus view among economists about its implications for wages and working conditions.

Leaving aside for now those that are ‘uncertain’, we can see two broad perspectives in the responses.

On the one hand are more positive assessments. These responses stress the informational, matching and ‘market creation’ functions of the on-demand economy. Notably, this is the vision of platform work most often espoused by the technology companies, which has at least tacit support from key policy-makers and think-tanks. Its implication is that greater government intervention to regulate gig workers’ pay would be unnecessary or detrimental.

Tony Makin in his response acknowledges that platforms like Uber have caused ‘significant structural change’ but disagrees that governments should have a greater role in managing its consequences: “Governments are incapable of processing information like markets do, and intervention runs the risk of worsening overall working conditions and wages”.

Michael Knox rejects the presumption that platforms necessarily push down average wages. In major US cities, he says, Uber drivers are “better paid than ordinary taxi drivers”, because the company’s platform has stimulated customer demand and boosted drivers’ productivity.

James Morley distinguishes between stronger government regulation of wages and other conditions. Governments could, he suggests, introduce more stringent safety standards for platforms that rely on bicycle couriers, for instance, without intervening to set their pay.

A second, diametrically opposed set of views comes from those who agree with the basic premise of the poll statement. For these economists, on-demand platforms pose a more insidious threat to working conditions and call for a stronger regulatory response.

The perceived risk for workers in this perspective is two-fold: it is not only the erosion of mainstream labour protections, but also the ‘fragmentation’ of jobs into tasks, which, once detached from coherent roles, can readily be auctioned as stand-alone pieces in the online labour market.

Those who subscribe to this view of the on-demand economy have in mind not the images of newly-fulfilled consumers, but of workers scrambling for a decent income in what John Quiggin describes as a modern equivalent to the Depression-era ‘Hungry Mile’.

Lisa Cameron notes that platforms push various kinds of risk onto workers – personal safety, job insecurity, and income volatility. In doing so, they “undermine many of the hard fought for protections for workers”.

Harry Bloch anticipates: “continued erratic and substandard incomes’ for many gig workers”. He also voices the concern that contractors’ reduced wages will undermine conditions in a more general sense, creating a: “spillover into downward pressure on wages and working conditions [even] for workers who are treated as employees under current regulations”.

Gigi Foster, while uncertain about the poll proposition overall, notes that the exemption of some workers from collective standards “should be expected to put downward pressure on wages”.

It is difficult to definitively prefer one of these broad perspectives to the other, because both sets of possibilities co-exist. The on-demand economy comprises both extremes of worker experience – depending on which part we look at. It ranges from location-specific markets for personal services (such as Deliveroo, operating in small urban areas) to a plethora of online tasks (like Amazon Mechanical Turk, which accepts work from anywhere in the world). The breadth of what the ‘on-demand economy’ actually encompasses may explain why so many of the economists’ responses to the poll proposition were uncertain.

As Peter Abelson put it in his response: “This is a classic ‘it depends’ problem.”

More expansively, Alison Booth writes: “The answer surely depends on whether the workers’ services are complements or substitutes for the digital on-demand subcontracting platforms, and we are not given this information.”

Flavio Menezes notes two quite different trajectories of wage change that might manifest, depending on the skills composition of the on-demand economy, and concludes that “the average impact on wages from new digital platforms is ultimately an empirical question”.

These uncertainties highlight many gaps in our knowledge about the on-demand economy. Better information is needed about who does this work, and on what terms. This may call for modified labour force statistics that observe work at more frequent time intervals (to capture the short-term nature of gigs) and that look beyond each worker’s ‘main’ job (to include supplementary income-earners).

A longer-term project is to consider whether gig workers gain any transferable skills from platform work. This question is different from the one posed in the poll, but it is of great importance for assessing the platforms’ overall economic impact. If this type of work can enable otherwise inexperienced and ‘marginal’ workers to develop skills that are of lasting benefit, that would represent a major contribution to economic output and social welfare.

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