Gig economy author and scholar Juliet Schor presented new research which refutes a key claim of platform companies: that an employment relationship and flexibility for the worker are incompatible.
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Platform workers can shift from independent contractor status to employee status and still retain flexibility, according to new, as yet unpublished research presented by gig economy scholar Juliet Schor in a key note address on Friday [10 September].
Schor, economist and sociology professor at Boston College in the US and author of ‘After the Gig’, was speaking at the ‘Reorganising Work’ virtual conference about gig workers and employment classification, a key issue in the European Commission’s ongoing work to develop a Directive on platform work.
Schor is currently working on a National Science Foundation project called ‘the Algorithmic Workplace’, and she cited data the project attained from its study of a nationwide package delivery platform based in California, Bring Your Package (name changed for purposes of anonymity).
BYP transitioned their ‘independent contractors’ into becoming employees in 2019, ahead of the introduction of California’s AB5 law coming into force (which was subsequently overturned following the Prop-22 referendum, a vote which has now been successfully challenged in court). The research took place from 2018 to 2020, and therefore covered the period before and after the transition to employment at the firm.
Schor told the conference that the “big finding” of the research was that “the scheduling system did not change after the shift to employment status, workers retained the same flexibility they had before hand, they were able to choose shifts that they preferred.”
She added: “The big takeaway here was that the company was able to shift these workers to employees and pretty much things stayed the same.”
A key argument of platform companies has been that shifting independent contractors to employees would destroy the flexibility to work the hours and times which suit the worker. Uber CEO Dara Khosrowshahi wrote in the New York Times before the Prop-22 referendum that the employment system “forces every worker to choose between being an employee with more benefits but less flexibility, or an independent contractor with more flexibility but almost no safety net.”
Schor’s research found that BYP had a heterogeneous distribution of hours worked among its workers, which is typical in the gig economy as a whole. Three main groups could be identified: full-time workers who tend to be a minority of the workforce but do the majority of hours; “stable part-timers”,who tend to be the largest group of workers, and “intermittent workers”, who don’t work many hours and usually just when consumer demand is high.
Although some changes could be identified between these groups after the shift from independent contractor to employment status, Schor found that the proportions between the three groups of worker and the total of hours worked “didn’t change dramatically under the new system”.
What did change was that the “stable part-time” and “intermittent” drivers saw an increase in their working hours worked, which the company had an incentive to encourage due to the higher per worker costs due to the fact it is now paying social protection benefits for the employees.
“Employment status does have an impact: when workers are transitioned into employees, they work longer hours, unless they [had previously been working full-time],” Schor stated.
BYP was unwilling to provide data on the costs of the shift to employment status for the company, but Schor said that they do know that costs increased, “somewhere between a minimum of 10% and up to maybe 30%”. Higher costs were partially offset by increased productivity and efficiency, she said.
Schor also found that BYP executives were happy with the outcome of the transition.
“Managers and executives at the company expressed satisfaction with the new arrangement, and productivity and labour control were better, and predictability increased, so the company had benefits from this new system,” she explained.
Schor stated that she believed the BYP transition could also be achieved in companies which do not currently use a scheduling system of work and operate on-demand, such as in food delivery and ride-hail, citing the ability of platforms to use big data for detailed predictions of demand.
What would be the macro-economic affects of the employment model being rolled out? Schor argued that while higher company costs would probably translate into higher prices for the consumer, “one thing we need to understand about the platform economy is that prices are going to rise no matter what.”
She explained that ride-hail platforms have been estimated to have set prices at about a 40% subsidy, and that these artificially low prices were due to companies like Uber pursuing a growth before profits strategy; by leveraging financial capital from investors, they seek to dominate the market, putting competitors (especially traditional taxi firms) out of business, with the aim of then raising the prices once a monopoly market position is secured.
“Middle class people have been getting an incredible deal,” Schor explained. “A private driver, someone to clean your house at a low rate, someone to bring your food; the prices for these services have been too low and they need to rise because they’ve been subsidised by investors, and they are going to rise.
“And that means these markets are going to shrink, so that the idea that the ride hail market or the food delivery market is as big as it has been during this period when investors are subsidising this phenomenal market growth is wrong.”
Schor said that shift may be in the process of happening right now, arguing that in the US “ride hail is in a kind of death spiral”.
“Drivers are not showing up because of Covid and because they can’t make money…customers can no longer rely on the service anymore. Uber is now more expensive than taxis, the industry that it destroyed. And it’s less reliable.”
She pointed to Uber’s continued inability to turn a profit (the company recorded a -38% profit margin for the first half of 2021) as evidence that the current model is unsustainable. Lyft, Uber’s competitor, recorded -49% profitability for the same period. And the situation is hardly much better in food delivery.
“Food delivery is really not a profitable business,” Schor said. “These companies went into it thinking technology could make it profitable and I think it’s pretty clear that’s not the case.”
Finally, Schor described Uber and Lyft as “bad faith actors”: “their claims about employment are false. Prop-22 was basically a scam: a lot of promises were made to workers that were not fulfilled. Their accounting is dodgy. And I think it’s unlikely they have a path to profitability at anything like their size today.”
EU Commission may regulate AI in platform workers directive
The Reorganising Work conference also heard from Ana Carla Pereira, European Commission Cabinet Expert for jobs and social rights Commissioner Nicolas Schmit, who is leading the Commission’s work on a platform workers directive.
She was asked about the European Commission’s draft Artificial Intelligence Act, which has been criticised by unions and labour lawyers for proposing a system of self-assessment for companies to regulate areas of AI consider to be high risk, which includes workers.
Pereira responded by saying it was a “sensitive question” in the Commission and that “the story is not over” in terms of addressing worker concerns about the use of AI, and that it could be done through the platform work directive.
“The Commission has put forward some questions around this topic in the second stage consultation of social partners on platform work, because we do acknowledge that there might be scope to provide an additional element in relation to algorithmic management that comes from a labour law or labour rights perspective,” she said.
Pereira was also asked about the Commission’s work on employment classification of platform workers, and she said it was a “very sensitive issue and a difficult one but one we need to address with courage”.
Pereira explained that in the second-stage consultation document the Commission “proposes at European level what we call a refutable presumption of employment relationship. This idea of reversing the burden of proof [from the worker to the employer] is intrinsic to that, so you are basically saying we presume an employment relationship and if there is a need to show otherwise it will be for the employer to ask for that work to be done.”
She added: “But we also need to acknowledge that such an approach might not cater for situations where there is a true non-dependency relationship, so this is some of the issues that we are dealing with.”
The Gig Economy Project exclusively reported last week that Commissioner Schmit and his Cabinet had held 10 meetings with platform companies to discuss the platform workers directive since the start of the year, and none with unions or other worker groups.
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