COVID-19 will force governments to show their hands on the gig economy
by Matthew Niblett on 06 May 2020
COVID-19 has shown us both how reliant we are on gig workers, and how vulnerable such workers are in major crises. After the crisis is over, policymakers will have to decide whether the gig economy and its ecosystem is something to be championed, or something to be managed via further regulations.
COVID-19 is undoubtedly a major event in global affairs, and one that will have a lasting impact on a number of industries. One sector which has seen much scrutiny is the gig economy, for two key reasons. Firstly, COVID-19 has increased attention on gig workers and demonstrated both how fragile this kind of work can be and how reliant we are on it. Secondly, it has led to gig workers calling vocally for more benefits and to gig economy companies agreeing major concessions which in many cases mirror employment benefits.
This matters because most national governments have so far failed to create a balanced and thought-out settlement for the gig economy. Nothing in Europe matches the kind of radical interventions we have seen in California where legislators passed a law which obliges companies to prove that their workers are self-employed, and treats them as employees if they are not, with all of the benefits that employment status entails.
However, the increased scrutiny on the gig economy due to COVID-19 is now likely to lead other governments to make greater interventions in the sector, whether that be towards boosting social protections and labour rights for gig workers, or towards championing the gig economy and the worker tech ecosystem which surrounds it.
Increased attention on the gig economy
COVID-19 has shone a spotlight on vulnerable groups in society, not least those in insecure work. One only need google the term “gig economy” to see the number of stories and op-eds analysing the impact that this crisis will have on the sector. The crisis has revealed both that our society is very dependent on this kind of work, for instance for food deliveries, and also how fragile it is.
For many gig workers, the COVID-19 lockdown means a massive reduction in paid work. Uber CEO Dara Khosrowshahi told investors in March that the company was facing revenue reductions of between 60 and 70% in certain cities, and that the company’s worst-case scenario predicted reductions in revenue of up to 80%. Research into the short-term letting sector has found that Airbnb bookings in some cities have fallen by up to 96%, thereby reducing workloads for many of the gig workers who operate around the sector, including cleaners and other support staff. TaskRabbit, a company which pairs workers willing to do specific tasks with buyers, has suspended its IKEA assembly business in the UK, France, and Spain. Reduced demand for the services which these companies provide results in reduced income for the gig workers who make the services possible.
This is compounded by the fact that gig work in a COVID lockdown carries a substantial health risk, given that the vast majority of gig work cannot be done from home. Those who can work, such as ride hailing drivers and delivery couriers, are much more at risk of becoming infected than the average citizen. This is an issue because, unlike regular workers, gig workers do not have access to benefits such as sick pay. If a gig economy worker becomes ill, they will not be paid if they stay at home, unlike regular employees. This creates incentives for workers who may be infected to continue working for fear that they will be unable to pay their bills if they do not.
Workers on strike and company concessions
Both gig economy workers and companies seem to appreciate that this is an important event in the future of the sector. On the one hand, there has been political mobilisation amongst gig economy workers. Workers at Amazon warehouses across the U.S. have gone on strike, claiming that the company has failed to provide enough face masks for workers, failed to implement regular temperature checks at warehouses, and has refused to give workers paid sick leave. Workers at grocery delivery firm Instacart have done the same.
Elsewhere, gig economy companies have stepped up to offer their workers tangible benefits to help offset some of the issues raised above. Hermes, one of the largest delivery companies operating in the UK, has announced that it will continue to pay delivery drivers if they are forced to self-isolate, despite not normally offering sick pay. Likewise Uber has announced that it will pay both ride hailing and delivery drivers if they are either advised to self-isolate by a medical professional, or if they are actually diagnosed with COVID-19.
The future of the gig economy: two scenarios
There is one crucial group of stakeholders which is yet to make a more decisive intervention in this space, and that is policymakers. To date, policymakers in Europe have generally allowed the courts to rule on issues around the gig economy and have avoided outright declarations of support either for or against the sector. However, COVID-19, by highlighting the important and fragility of the sector, could change that, in two main ways.
The first possible set of outcomes runs along the lines of California’s AB5 and the demands which gig workers are making during the crisis. Policymakers may decide that the COVID-19 crisis is proof that they must intervene legally to extend greater rights and social protections to gig economy workers. This could take many forms, including legally reclassifying most gig economy workers as employees, as is the case in California, or even designing new bespoke protections for temporary workers.
The COVID-19 crisis has also shown policymakers that modern societies and economies are highly reliant on gig work for a range of important services, and that some gig economy companies are willing to extend employee-like benefits to their workers in times of extreme stress. The crisis could therefore lead policymakers to fully embrace the gig economy in a way that they have not yet done, and to champion gig work as the future of work for many. This in turn could result in government endorsement of services which exist in the broader future of work ecosystem, including companies which provide portable benefits and services to gig workers.
These two outcomes are not mutually exclusive, and governments may respond in a manner that combines elements of the two approaches. In the short-term, governments are not likely to do much, so preoccupied will they be with reopening societies and restarting economies. However, the COVID-19 crisis means that the genie is out of the bottle and that, once the dust has settled, policymakers will need to make important decisions that could ultimately define the future of the gig economy.
Written by Matthew Niblett
Matthew provides monitoring and analysis to clients in energy, mobility, short-term accommodation, and the wider sharing economy. He coordinates two sector news summaries covering the bike sharing and on-demand transport sector for some of the leading players in the sector.