What Is The Gig Economy?

27th December, 2016 by

One of the biggest economic underpinnings of sharing economy apps like Uber and Airbnb has been the phenomenon of the “gig economy”, or the increasing number of individuals who make a living outside of traditional employment.

Data shows that the gig economy has grown year on year apace with the rise of mobile technology, as many of the apps created in the past half decade or so facilitate making money in this way. However, much of this growth has been predicated on the thwarting of traditional employment laws. Mega companies like Uber, Deliveroo, TaskRabbit and others have been able to grow so quickly by treating their workers as “independent contractors”, which means these companies are exempt from providing the kinds of benefits and labour protections that are normally required for companies who hire lots of employees. While this may be in line with the autonomous, entrepreneurial, and unconventional attitude that many millennials have towards work, that doesn’t mean it’s entirely in line with the law.

A recent ruling in the UK has brought a lot of that rationale into question and has left many wondering about the future of the gig economy that powers many of the internet era’s most popular apps. In a landmark ruling in October, a UK employment court ruled that Uber drivers are not self-employed and thus are entitled to a “national living wage”. As The Guardian reported, the app “could now be open to claims from all of its 40,000 drivers in the UK, who are currently not entitled to holiday pay, pensions or other workers’ rights. Uber immediately said it would appeal against the ruling.”

This is significant for a few reasons. The first is that it happened to Uber, which is one of the largest operators in this space. Much of what has driven the success of companies like Airbnb and Uber is that they insist they are, in fact, technology companies, not accommodation providers or transport companies respectively. This allows them to scale quickly, reach new markets and territories more easily, and facilitate the kind of seamless and exponential growth we associate with the app economy without being bogged down in the details of the employment laws of every single country they operate in. But if that ability is taken away by the courts – and if employees begin to resist the idea that their efforts can be paid in such a piecemeal way – this growth strategy could be severely threatened.

The Guardian suggested as much when it wrote that “the Uber ruling could force a rethink of the gig economy business model, where companies use apps and the internet to match customers with workers. The firms do not employ the workers, but take commission from their earnings, and many have become huge global enterprises. Uber now operates around the world, with the company valued at more than £50bn.”

The question is if this employment tribunal ruling is a one-off event or will become a larger trend. If it’s the latter, we could see a shift in the mostly positive associations the so-called collaborative economy has enjoyed thus far. As the Financial Times pointed out recently, cracks are already beginning to show: “These platforms…neither promote nor facilitate sharing and collaboration: they are a handful of companies trying to make money by creating and controlling markets for our labour or our stuff.”

Thanks to its massive success and pioneering reputation in this space, Uber can be seen as something of a bellwether company for what happens next. Those who have a stake in the sharing economy continuing as is will be paying attention closely to what happens next.  

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