Growing pains, labour pains for the gig economy

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This article was published 11/08/2018 (2799 days ago), so information in it may no longer be current.

Is this the beginning of the end of the gig economy?

Last month, a Winnipeg courier for food-delivery service SkipTheDishes filed a legal challenge in Manitoba’s Court of Queen’s Bench over allegations the company is denying its employees adequate wages and benefits by classifying them as independent contractors.

The courier and her lawyers are seeking a class-action designation to represent the interests of couriers in all eight provinces in which SkipTheDishes operates. Their suit argues that she is legally an employee of the company and, as such, should be getting wages and benefits like any other employee.

Although she does get to choose her hours, the sponsoring courier was hired, trained and supervised by SkipTheDishes. Instead of an hourly wage, the courier receives a fee for every order collected from a participating restaurant and delivered to a customer, plus tips. She alleges that after taking into account fuel and other car costs, she broke even.

The SkipTheDishes suit may be one of the first of its kind in Canada, but it is certainly not unique in a global context. Many of the iconic applications that drive the so-called gig economy are being subjected to nearly identical legal challenges in other countries around the world.

The term “gig economy” was initially coined to describe opportunities to obtain spot employment through digital platforms. The great promise of the gig economy was the opportunity to work only when you wanted, and only for as long as you wanted. It was promoted by early digital adopters as an easy, convenient path to extra income.

The reality of the gig economy has been much different. Around the world, there are rising concerns about the increasing number of people relying on temporary or gig employment, and whether employers are treating them fairly. This has spawned a flurry of legal skirmishes.

Most of the lawsuits — and detailed analysis of the impact of the gig economy — have taken place in the United States, where Uber and Lyft, the dominant players in the ride-hailing application market, have both been subject to similar suits by drivers seeking to be classified as employees rather than independent contractors. In those suits, the drivers have alleged that after paying their own costs, they are not receiving pay equal to the minimum wages required in the jurisdictions in which they work.

In March 2017, Lyft and its drivers in San Francisco reached a US$27-million, court-supervised settlement brought after complaints that as independent contractors, they were being denied reasonable wages. Although the settlement was hailed as a victory in the ongoing gig-economy war, the drivers agreed to remain as independent contractors. Similar suits against Uber are working their way through the courts in California and Massachusetts.

As the lawsuits unfold, economists are getting a firmer grip on the economic impact of the gig economy. Not surprisingly, it’s an ugly picture that dispels many of the high-ideal notions that the gig employers sell to their contractors.

A recent study commissioned by New York City’s Taxi & Limousine Commission found that those toiling in the ride-hailing industry were not, in most instances, part-time or temporary workers. The study estimated that two-thirds of ride-hailing drivers did so on a full-time basis. And more than 80 per cent bought cars expressly for the purpose of working for a ride-hailing application — something Uber and Lyft encouraged them to do — creating an added expense that has made it nearly impossible for those drivers to clear any net income after expenses.

How much do ride-hailing drivers actually make? In May, the Economic Policy Institute (EPI) released an analysis of Uber that provided one of the first truly detailed estimates of the real hourly wages being paid to drivers.

The EPI found that after taking into account commissions, fees and vehicle expenses — and adjusting for a modest package of health insurance and other benefits — Uber drivers earned on average the equivalent of US$9.21 per hour, which is below the minimum wage required in 13 of the 20 major urban markets in which Uber is currently operating. It was also less than the US$14.99 average hourly wage earned by the lowest-paid workers in service industry jobs.

This is hardly news to anyone who has flirted with gig-economy opportunities. In fact, the harsh reality of low pay and minimal benefits has dampened the growth of true gig employment; in most jurisdictions around the world, it has stalled or even fallen. That does not mean the impact of the gig economy is not still being felt.

Although spot employment obtained through a digital platform remains the backbone of the gig economy, many employers around the world are becoming increasingly comfortable with the idea of classifying their employees as independent contractors as opposed to full-time hires. The term “gigs” is now widely used in human resource lexicon to describe people who are hired to fill temporary employment needs.

The growth of what some countries call “irregular workers” has become an economic concern, as more working people navigate careers that do not afford them access to government employment benefits such as employment insurance, government retirement savings programs and maternity leave.

The impact of this trend is twofold: first, as fewer people pay into government benefit plans, the plans become less self-sustaining; and second, it leaves an increasing segment of the population without any safety net to cover them between jobs or when they want to leave the labour force to start a family. That potentially means a drop in economic activity.

This past spring, the European Union urged its member nations to adopt policies that ensure irregular workers have access to social security, unemployment and maternity benefits programs. Although gig employment in the U.S. is regularly pegged at about 10 per cent, the EU estimates that in one way or the other, about 40 per cent of citizens in member nations are involved to some degree in the irregular labour market.

In Canada, it is estimated by various sources that about 20 to 30 per cent of workers are involved in digital gig employment, or work as contractors and freelancers.

Some EU countries already allow irregular or gig workers access to government employment benefits. However, the United Kingdom, now on the precipice of leaving the EU, does not offer maternity benefits to irregular or gig workers, and only partial sick leave and unemployment benefits. Even though the U.K. may not remain in the EU, British Prime Minister Theresa May has promised to uphold comparable standards in labour law and the U.K. has launched its own review of the treatment of gig employees.

All this brings us back to Manitoba and the SkipTheDishes lawsuit. One of the more troubling aspects of this still-evolving story is the revelation that Manitoba’s Employment Standards branch is not tracking the concerns of gig-economy employees.

A spokesperson for the branch, which handles about 2,000 complaints from workers alleging unfair labour practices, said they are not collecting data on gig-economy workers. The situation is quite similar for the federal government, which does offer benefits to some contract workers, but only if they register to pay the employee share of premiums for things such as employment insurance. Huge grey areas exist for many of those working for gig platforms.

At some point, government is going to have to hold gig employers accountable to ensure they are paying their workers at levels that are equivalent to minimum wages, while also ensuring there is a reasonable way to access employment benefits. Failure to accomplish these two basic goals may cripple both employment benefits programs and the economy at some future but fast-approaching date.

dan.lett@freepress.mb.ca