\Startup Life Opinion/

Time for a new social contract for the gig economy

The gig economy isn't going anywhere. It's time for Europe to embrace that fact.

By Nicolas Colin

Europe has not been particularly welcoming of the gig economy and the tech companies that power it.

Uber has had to fight on many fronts across various European countries, including having its licence revoked twice in London, its prime European market. Deliveroo, despite being founded in Europe, hasn’t had it easier: in February its couriers were reclassified as employees in Paris. More recently, Barcelona-based Glovo has had to defend itself in Spanish courts and, in a setback for the delivery startup, Spain’s Supreme Court ruled that its riders are not self-employed.

Does it mean the gig economy has no place in Europe? Far from it. 

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On the demand side, customers crave the convenience of meals delivered to their homes and offices, and taxi rides that are just a smartphone-screen tap away. On the supply side, workers appreciate the opportunity to work in a flexible manner, even if the pay isn’t great. 

And then there’s the pandemic, which is only accelerating the rise of the gig economy. Less shopping and more working from home means more households using gig-economy platforms more frequently. And they’re unlikely to go back: according to McKinsey, “approximately 35-55% of existing [European] consumers intend to continue using delivery more in the future”.

In other words, Europe can’t just stop the gig economy: it’s simply too hard to fight both convenience and opportunities at the same time. So since it can’t get rid of the whole thing, shouldn’t Europe try to build institutions to make the gig economy more sustainable and inclusive?

A new social contract

That would be consistent with what Europe stands for in these transitioning times. We Europeans like to think that tech companies meet their match here in our tough regulators, whether it’s the Mayor of Paris, Transport for London, Spanish courts, or the European Commission. But Europe is far from being the only place where the gig economy faces regulatory obstacles. Even in California, the cradle of the current technological revolution, Uber and Lyft are battling for their survival by advocating the repeal of AB5, a law that forces them to reclassify workers as employees. 

“There are simply more people here who think that embracing technology is about enacting new rules rather than building new companies.”

Yet Europe does have one thing going for it, since there are simply more people here who think that embracing technology is about enacting new rules rather than building new companies. In that spirit, many European officials are ready to draft new legislation and build new institutions that provide for higher earnings and better benefits.

And if we in Europe are really so concerned with improving things on these fronts, shouldn’t we be using the gig economy as a testbed to invent a new social contract rather than vainly trying to make it fit into the obsolete categories of the past?

There are several reasons why this approach makes sense. First, those who study history know that every technological revolution brings about new social contracts — and that the nations that fail to design one that fits their local context end up lagging behind from an economic development perspective. (It’s better to be the US accelerating its growth with the New Deal than Argentina, which was once just as wealthy a country but then failed to build the necessary political and social institutions.)

“We simply can’t make Europe the most entrepreneurial continent in the world if we’re not ready to build new institutions to empower everyone.”

We simply can’t make Europe the most entrepreneurial continent in the world, the stated goal of the European Commission, if we’re not ready to build new institutions to empower everyone.

Second, we know that there’s not one social contract that meets everyone’s needs. In the 20th century, institutions such as labour law, collective bargaining, and the welfare state were shaped according to the needs of a minority of the workforce: those who worked on assembly lines, starting with the car industry. Yet having a social contract tailored for factory workers contributed to lifting up (almost) everyone else. The better conditions provided to those workers incited other employees to raise the bar for themselves as well, including in services.

It’s still not clear if the gig economy is today’s equivalent of those assembly lines. On the other hand, it’s 100% certain that sectors such as retail, hospitality, delivery and home services (all the industries in which the gig economy thrives) are the largest pool of future jobs in a world where almost everything else (factory work, office work, information work) could soon be automated — and in any case will be much less labour-intensive.

In addition, the challenges facing these workers are representative of the economy in the Entrepreneurial Age: having to make a living in dense and expensive cities; enjoying flexibility on a daily basis, yet also having ups and downs in revenue; using tech-driven platforms to better match demand and deliver a higher-value-add service to customers.

New century, new risks

It’s not that hard to figure out what that new social contract would look like. Basically, it would cover workers against the new risks of the day, like the impossibility of affording housing in urban areas when your revenue stream is derived from gig platforms (good luck reassuring a landlord with that!). It would provide access to capital when and where you need it, which wouldn’t necessarily be to buy a car (a thing of the past), but instead to learn new skills when it’s time to move on in your life. And it would help workers organise so that they defend their interests themselves, but with a different approach from that which was embraced in the coal mines of the 19th century or the car factories of the 20th.

“Isn’t it time Europe embraces it as the new social frontier and starts working on this brand new social contract?”

We’re not lacking frameworks designed to help policymakers on that front — from Hilary Cottam’s work on Welfare 5.0 to Matthew Taylor and his vision of “good work” to Chris Yiu and the new progressive agenda he’s been crafting at the Tony Blair Institute to my own work documented in my book Hedge. What we’re lacking is the widespread realisation that it is indeed possible, and the political will to act on it. 

Instead of fighting tooth and nail trying to stop the growth of the gig economy, isn’t it time Europe embraces it as the new social frontier and starts working on this brand new social contract?

Nicolas Colin works for investor The Family. He writes a regular column for Sifted.

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Tim
Tim

I’m not sure it’s right to imply that households or consumers ‘choose’ to use gig economy platforms. They choose a service and purchase it. It is the the platforms and tech companies behind them which are exploiting the workers here. (And I use ‘exploit’ on purpose, because there’s a clear power imbalance which means that any negotiation between worker and supplier at the moment is intrinsically unfair.) Personally I think the urge to regulate more is entirely appropriate here – I agree we need to look at the social contract, but there’s an underlying problem which does need regulation and… Read more »

Gareth
Gareth

There is almost always a power imbalance between workers and employer. Increased regulation kills industries and jobs.

There are also many examples of regulation making our lives worse (GDPR – do you like those little pop ups on EVERY site!?). Any regulation must be clearly thought out as to the impact on peoples livelihoods and balanced with the potential impact it will have.

The Americans are the best in the world for a reason and that is they do not regulate their start ups out of existence.

Fred Destin
Fred Destin

Power imbalance always exists, even in employment relationships, and it is most certainly the role of the regulator to define responsible guidelines that capital must operate under. Part of the problem here is that rules and regulations as they exist force a hard fork between employee / non-employee status. Similarly to areas like media (e.g. video sharing), the law is (understandably) behind the curve of both innovation and usage. So the first step is to re-think the framework (employment is not the right one) to reflect the “portability of work” (ie workers switching between platforms, moving to new platforms with… Read more »

Gareth
Gareth

A brilliant post Fred, although I can’t say I agree with it all 😉

You are right in that the new system would need to transition with the worker. Many gig workers work across multiple apps (i.e. Deliveroo, Stuart, Uber Eats) allowing them to make more money and optimise time.

How about this: the government takes responsibility for sick pay, holiday pay and pensions for these workers? Most of these gig workers are using lots of fuel which has a 70% duty on it and pay plenty of tax…

Liisa Hämeen-Anttila
Liisa Hämeen-Anttila

Yes, I totally agree that we should come up with a new social contract, or maybe add a new category to the old dicotomy of workers: The self-employed and the employees. While GIG-economy is here to stay in one form or another, the discussion have been going on for many years without a sound and internationally accepted solution. The basic legal problem behind the disputes, beside the dicotomy, is, who is responsible for the social protection of the workers? Usually health care and right to paid holiday are mentioned, but there are also questions like pension, family-leave, sick- leave and… Read more »

melonfarmer
melonfarmer

“On the supply side, workers appreciate the opportunity to work in a flexible manner”: that’s a rather convenient assumption. As with the previous “3rd way” column on here a week or so ago, the UK has been battling with “workers” who want to use personal services companies (because it’s a requirement to pay a company, not an individual for services), while also keeping the benefits of being an employee (pension, sick pay, holiday, maternity, bereavement leave etc.). The gig economy platforms need to decide for themselves: either the “worker” is completely flexible (in the original sense of allowing the worker… Read more »

Andrew Wilkin
Andrew Wilkin

Interesting that the picture is of JET courier, who is likely employed yet no mention of this in the article. Whatever you may think of Just Eat Takeaway or its founder, Jitse is committed to ensuring that they get employment rights, paid leave, sick pay, and also can be held accountable for behaviour.

Stan Ho
Stan Ho

” embracing technology is about enacting new rules rather than building new companies.” is a recipe for stagnation and downfall. Yes, regulate back horse buggies.