Gig Economy Risk and Responsibility
Introduction
Historically, work was bounded geographically such that workers were linked to the work with labor being the most restricted factor of production in terms of geographical flexibility. However, this aspect has changed in the recent past with the introduction of the gig economy and increased use of the internet such that it has become possible for workers, bosses, and product end-users to get work from different parts of the globe without inflicting undesired effects on the operations. The gig economy is founded on temporary, flexible, and freelance jobs that entail connection with customers or clients through an online platform. This economy as explained by Graham, Hjorth, & Lehdonvirta (2017) benefits businesses, workers, and consumers by improving work adaptability to market needs while meeting the demands of a flexible lifestyle. However, although the gig economy has proven highly influential and effective, it has an array of shortcomings owing to the eradication of traditional economic relations that existed between businesses, clients, and workers.
Gig Economy
In the recent past, the gig economy has increased its significance owing to higher efficiency and cost reduction that have been facilitated by the application of advanced technologies. In the gig economy, most people occupy temporary or part-time occupations with higher flexibility compared to traditional economy. Employees in this workforce range from project-based workers, independent contractors, part-time hires, and freelancers. Among the growing gig-economy in this economy include Airbnb, Uber, Youtube, Fiverr, Upwork, Instacart, Roadie, and Thumbtack app, among others (Berger, Frey, Levin, & Danda, 2019). Among these gig economy apps, Uber has recorded tremendous growth in the past decade giving the employers and employees great opportunities that are non-existent in the traditional economy. With more than two million drivers, Uber company has provided many people – who own a driver’s license, insured car, and a clean driving record – the chance to work with high flexibility, convenience, and profitability through the use of the Uber app to provide transportation services. Recently, Uber developed Uber Works app with the aim of providing an easier and faster approach while offering higher insight on opportunities to enhance the experience of businesses and workers.
App-Based Gig Work
In the past decade, the development of app-based platforms has increased with a wide range of ride-sharing apps such as Uber and Lyft registering more than one million drivers. During the same period, apps such Lyft and Uber have recorded grown exponentially owing to the application of new technologies that work on first approximation technology that assigns drivers to the closest passengers without taking the passenger details into consideration. The growth evidenced in this economy has been facilitated by higher flexibility, convenience, and availability compared to the traditional workforce (Graham, Hjorth & Lehdonvirta, 2017). In spite of the growth, this workforce has been faced with unique challenges associated with the transfer of risks and responsibilities from the employer to the employee. This has caused the loss of power on the employees an aspect that has been facilitated by the monopoly power created in the gig platforms where a single party such as Uber has full control on their employees. As such, there is a need to eliminate market power on employers in the gig workers to ensure that marginal workers become indifferent between traditional employment and gig work.
Transfer of Risk and Responsibility
Although the gig-economy has contributed to tremendous opportunities that are unavailable in non-traditional employment arrangements, this economy is known for the aspect of transferring volatility, risk, and responsibility from the employer to the employee. As Graham, Hjorth, and Lehdonvirta (2017) explain, the gig-economy is known for transferring the risks involved in earnings from a risk-tolerant individual –the employer – to a person who is risk-averse. This industry is made up of independent workers whose earnings are more volatile compared to traditional workers, a variation that is facilitated by their choice – owing to higher profitability and flexibility – and often reflects on the flexibility that is associated with this industry. This sector is also associated with high risks that are often transferred to the employees while the financial rewards from the high flexibility accrue to the employers.
The employers in the gig economy often endeavor to manage the financial risks that are associated with the inability to guarantee constant income and demand by employing workers on contracts. This aspect is most evidenced in the Uber industry where most employees are employed on non-contractual terms. This is often done to provide additional flexibility to the employer by transferring the inherent uncertainty and payment expenses to the employee. The contractual arrangement has limited rights and protections coupled with the risk of caring responsibilities an inability to work as a result of sicknesses, all of which are often transferred to workers. This shift has been facilitated by technology with most of the online platforms providing a mechanism for employers to divide their work into distinct and smaller tasks on the basis of piece work.
The balance of risks in gig-economy between the employers and workers has increased insecurity for the workers, mostly for those on zero-hours contracts. A report by Trades Union Congress (TUC) shows that approximately 3.2 million workers occupy insecure jobs with those who have been denied basic employment rights having increased to approximately 1.5million. This report was created when the Uber industry is growing with any consideration for the employees in that they are often considered independent contractors who should run a business effectively without any provision for minimum wage, holiday time, or rights. These insecure jobs in the gig economy have increased with the employers benefiting from higher profits while the employees suffer risks and responsibilities causing them to face high poverty wages and weak rights of employment.
In the future, there is a need to change these conditions in order to accord gig economy workers basic protection, respect, and fair pay in addition to other privileges enjoyed by contractual workers. There is a need to improve conditions and wages for employees and ensure that they are entitled to basic employment rights. In order to foster this directive, the parties in charge should undertake independent reviews on modern working practices in order to ensure that employment rules are upheld such as to reflect improved working mechanisms.
Transfer of risks and responsibilities to the employee has been facilitated by non-existent employee rights, lack of protection, and aspect of powerlessness at work. In normal employment opportunities, Graham, Lehdonvirta, Wood, Barnard, Hjorth, & D Simon (2017) explains that the employer should take responsibility for the safety and health of workers since it is their duty to protect the safety, health, and welfare of employees and other people connected to the organization. Although it is expected that employers should make efforts to achieve this requirement, this is not evidenced in the gig-economy owing to the shift of risks that have caused increased insecurities to the employees. The transfer of risks and responsibilities has been facilitated by new technologies and the transfer of power from the employer to the employees.
Uber as an employer is responsible for directing most of the employment activities, despite the fact that employees are independent workers. For instance, Uber is responsible for directing the drivers where they can pick their passengers among other activities and are responsible for deactivating their accounts following consistent poor ratings from passengers. However, due to the fact that they are considered contractors, they are expected to ensure their own vehicles since their employer does not provide any provisions including health insurance, retirement benefits, or paid vacation, among others. As independent contractors, Uber drivers lack the means to file for unemployment compensation, and instead, they must take care of all the costs associated with Social Security payroll taxes. As a result of cost-shifting and transfer of risks and responsibilities, employees in the gig-economy tend to suffer additional costs associated with tax revenues and social costs, that together lead to low wages.
Although uber employees are considered independent contractors, there is a need for Uber to take its responsibility as an employer and provider the drivers with employee rights. According to Congress (2016), the employees are economically dependent on the employer since they are not working for themselves as in the case of an independent contractor. Although the necessary legislation has not been implemented in relation to the protection of employee rights, there is a need to allow Uber drivers to get healthcare benefits, insurance, and retirement benefits. The discussion should focus on the development of a new category that is between an employee and an independent contractor to accord them their rights, benefits, and responsibilities. Such changes will help to accommodate changes caused by new technologies to avoid undesired erosion of worker protection.
The gig-economy is known to benefit the consumer and the employer at the cost of workers through a shift of responsibilities and risk. Although the gig-economy is a resultant of innovation and new technologies, there is a need to implement new technologies without which the relationship between the employer and the employee will become exceedingly strenuous coupled with declining or stagnating wages for workers. Additionally, courts and policymakers should identify mechanisms to increase the stability of workers in the industry to avoid the growth of conflicts between the protection of workers and innovation.
Independent workers often suffer struggles that range from difficulty in identifying clients and a highly unpredictable income. While employees suffer from income volatility, the employer has a guaranteed income that is not subjected to inherent risks in the industry due to the ability of the employer to transfer the risks to the employees. This variability is an aspect that is mostly characteristic of independent workers compared to those in traditional jobs (Paakkari, A., Rautio, & Valasmo, 2019). Additionally, the gig-economy is at risk of the adverse effects as a result of macro shocks coupled with economic downturns that are more likely to exert pressure on the worker causing consequent pressure on the charges which reduces the available work. During extreme downturns, employees are likely to lose their jobs which could cause them to suffer long-term adverse consequences as a result of low wages and unemployment.
Another aspect that is often shifted by the employer in the gig-economy is the risk and responsibility of taxation. In traditional jobs, most employers often part of the Social Security tax while the other half is collected from the employee. In the gig-economy, the role of the employer is excepted as the employer transfers the responsibility to the employee who is expected to make the full payment. The independent workers are expected to make the full payment a situation that should be balanced by higher compensation in order to support the higher burden of taxes (Paakkari, Rautio, & Valasmo, 2019). Although it is efficient for independent workers to make the tax payments themselves, this has been proven inefficient in the Uber gig economy.
In the crafting of regulations, the organizations should understand that some of the gig-workers are fully committed while others are occasional workers such that it would be inefficient to charge a similar solution. Another aspect that should be considered is the need to ensure parity between traditional and independent workers in the gig economy by ensuring that their employers take their responsibility rather than transferring them which could be more expensive. In the same manner that traditional employment provides generous and consistent health coverage, employers in the gig-economy should care for their employees to protect them from purchasing insurance from the open market which can be time-consuming and expensive.
References
Berger, T., Frey, C. B., Levin, G., & Danda, S. R. (2019). Uber happy? Work and well-being in the ‘gig economy’. Economic Policy, 34(99), 429-477.
Congress, T. U. (2016). Living on the Edge: The rise of job insecurity in modern Britain. TUC [Trades Union Congress].
Graham, M., Hjorth, I., & Lehdonvirta, V. (2017). Digital labour and development: impacts of global digital labour platforms and the gig economy on worker livelihoods. Transfer: European Review of Labour and Research, 23(2), 135-162.
Graham, M., Lehdonvirta, V., Wood, A., Barnard, H., Hjorth, I., & D Simon, P. (2017). The risks and rewards of online gig work at the global margins.
Paakkari, A., Rautio, P., & Valasmo, V. (2019). Digital labour in school: Smartphones and their consequences in classrooms. Learning, Culture and Social Interaction, 21, 161-169.