The European Gig Economy

Source: Flickr

The Gig Economy

“Gig Economy” is among the most widely used terms in the business world today.

It generally defines a market that relies on short-term informal contracts according to which workers are paid, conditional on the accomplishment of a determined task or project, by a company, usually an online platform.

In the past decade, the gig economy has radically changed the way people are engaged at work and has brought a fundamental shift in how our economic system operates.

Factors such as the mass adoption of the internet and increasing penetration of smartphones as global trends have been fundamental in the spread of platform-based companies like deliveries, ridesharing apps and personal services such as beauty care and wellness. That trend can mainly be seen in developed countries such as Europe and the United States.

In their effort to understand the motivation behind the participation in such an economy, the McKinsey Global Institute interviewed 8.000 independent workers across Europe and the United States.

Questions focused on wages, income-generating activities and encompassed professional satisfaction and work aspirations.

They found that 20 to 30 percent of the working-age population engages in some form of independent work. Interestingly, in this portion of the working-age population there are 4 types of individuals. Those who choose to work independently and gig working constitute their primary income, namely free agents. Casual earners, who use it as supplemental income by choice. Reluctants, who unwillingly derive their primary income from such work and financially strapped, who do supplemental independent work out of necessity. The share of the working-age population engaged in independent work can be seen below.

Pros and Cons of the Gig Economy

While the Gig Economy has allowed millions of people to approach work in a completely new and empowering way, it does come with its downsides.

The advantages of working in the gig economy are related to flexibility. More specifically, there are low barriers to entry as regardless of skillset, anyone can easily find an occupation in the gig economy.

Another advantage is that it provides for adjustment of the work-life balance of individuals. That happens as the worker is given the opportunity to work at the time of his choice and hours are flexible as well. Interestingly enough, it gives the ability to work from anywhere in the world, allowing for better living standards, if one is flexible enough.

However, these advantages come with their downsides.

Gig workers usually trade flexibility for social security. Gig workers are vulnerable to longevity risks (outliving their savings for retirement), they are not usually covered by health insurance, are not entitled to paid holiday, are not allowed a sick leave and are not covered by any scheme for unemployment benefits.

What are the Main Issues with Gig Workers

Related to the disadvantages, there are many issues regarding the organisation of the Gig Economy.

Many scholars agree that the main issue of the Gig Economy, also true at a European level, is the inability to form a coherent and consistent legal framework to include gig workers.

The Dublin Foundation tried in 2018 to map differences in meaning and national context of the term “Gig Economy”. The term Gig Economy is mainly used in Anglo-Saxon countries as a reference to on-demand services and app-based occupations while in Denmark, Italy and the Netherlands it is more closely related to physical tasks.

In the following table, we see all the alternative terms used in different European countries.

Source: Eurofound

The concept of integrating gig workers in the legal framework, fine-tuning as well in case of integration, is agreed by the majority of European countries. However, in each country of the European Union, there is heterogeneity in terms of the debate perspective and the actors that get involved in it. For example, in France, Germany and the UK the debate involves both policymakers and platform workers, while in Austria and Italy the debate on the issues of the Gig Economy is mainly driven by academics. There are also countries, for example Poland, where no real debate is going on as other issues are considered as more pressing, without meaning however that the Gig Economy is not growing in these parts of the world.

The more prevalent platform work is and the stronger social partners are, like unions and employer organisations, the stronger the debate. A trend that has also been observed in many countries is the centralisation of the debate around specific platforms with food-delivery applications like Deliveroo and Foodora and ride-hailing applications like Uber receiving most of the attention.

The main players leading the debate for gig workers in Member States are trade unions. They concern themselves with working and employment conditions such as employment status, hourly wage and access to social protection. IG Metall, a German trade union, recently expressed its concerns regarding outsourcing to unprotected gig workers. Their argument focused on the imbalances it creates in the labour market. Other examples of Member States’ representation from unions can be seen in Estonia, Italy, Finland and Netherlands where they have requested legal clarifications on the employment status.

One could think that the main actor in integrating the gig workers in the legal and social protection framework should be the Government.

In the European context, it depends on the Member State we choose to analyse. For instance, in Finland digitalisation debates do not touch on employment while in Latvia, the administration closely follows the discussions at a European level. There are also cases where no debate is taking place like in Poland.

Important steps of governmental action have taken place in Belgium and Estonia where they have established specific tax regulations for platform work. The Estonian case is an interesting one. The Estonian Commission and Tax Board launched a pilot programme of collaboration with Uber, during which the profiles of the Uber drivers were analysed and their financial transactions monitored in order to pin down the right amount and way of contribution for them. The Uber drivers are having part of their income put on the side and have access to social protection, due to the collaboration of the public administration with the platform.

It should be mentioned that different countries focus on different topics to debate.

The following table summarises the debates prominent to some Member States.

Source: Eurofound

Potential Solutions

Understanding the different approaches adopted from each country, one might ask whether there should be any coordinated action at a European level and if so, what it would look like.

Scholars have advocated the following policy approaches to tackle the issues mentioned previously.

The first issue to tackle is the lack of a common definition for the platform economy but also the lack of awareness of the heterogeneity within each platform. Such an issue can be solved through a collaboration between platforms, social partners, Member States and the EU. The product of their collaboration will be the use of a common definition for platform work, that will also be accompanied by a shared typology of platform work.

The second issue that needs to be solved is the taxation of the gig workers. This issue arises mainly from monitoring issues as the scale of the gig economy is still unknown and its importance to the European labour market is practically unknown. Extended monitoring of its development can be achieved with the creation of European bodies, or the creation of a department inside European Bodies, that will be assigned with the role of estimating the transactions done inside the Gig Economy.

Regarding social protection, there is the need for mandatory registration of the gig workers in the current European Social Protection Systems, with the amount that they will be leaving aside being subtracted depending on the platform and regional characteristics.

Lastly, platform workers are not highly represented as can also be seen from the graph above. In order for that to happen, there must be the encouragement of cooperation between individuals in the Gig Economy to achieve creating a collective voice of gig workers while also applying a targeted approach for representation.