The rise of the on-demand economy on both sides of the Atlantic has raised a host of questions regarding the nature of work, the status of workers and their relationship with employers.
In effect, while online platforms have both facilitated work and created new ways of working, they represent a challenge to the traditional employee-employer model.
Uber and flexible work
Krueger chose to focus on Uber to illustrate the situation. He highlighted that Uber’s low-cost service in the US, UberX (the equivalent of UberPop in France), which enables private drivers to taxi paying clients, has grown exponentially: the number of drivers shot up from a few thousand mid-2013 to close to 150 000 by year-end 2014.
Uber Black, which uses commercially-licensed drivers, is growing at a slower rate (it corresponds to the most common type of Uber service in France). But combined, the two represent almost 400 000 drivers in the US. “If you add Lyft drivers, another 100 000, that’s actually more drivers [in total] than there are taxi and limo drivers currently in the US,” said Krueger. “The number of Uber drivers has been more than doubling every six months – a remarkable growth rate.”
While an important European market for Uber, France, on the other hand, has about the same number of Uber drivers as Los Angeles. Paris, for its part, trails other cities such as London, New York and San Francisco in the number of drivers.
A defining factor of Uber in the US, he pointed out, is no less than 61% of drivers have another full-time or part-time job. This means the flexibility Uber offers its workers is crucial to their decision to work for the company. Krueger pointed out this is perhaps the crucial distinction between a salaried worker – an employee in the US* – and someone who works freelance.
“It appears the online economy in the US is mainly being used to supplement other income,” Krueger said.
Interestingly, Uber drivers in France tend to work longer hours and rarely have a second job.
A new status for a grey area
The flexibility seen in the US and to a lesser extent in France comes with a price: on-demand workers and other freelancers do not enjoy the legal protections and benefits that salaried employees do.
Today, these workers fall in a grey area in labour law, resulting in a fair amount of uncertainty in the job market in both North America and Europe. On the one hand, workers in the so-called gig economy resemble traditional employees in that they provide services to businesses that largely determine how much they earn. But at the same time they can choose whether or not they work and can do so for multiple businesses at a time.
To redress this situation, Krueger and Seth Harris, distinguished scholar, Cornell University, proposed in an October 2015 policy brief ** creating a new independent worker status in the US.
They argue a new status for independent workers would increase labour market efficiency and encourage innovation largely by getting rid of uncertainty for both workers and platforms. This would in turn reduce costly legal battles. According to Krueger, the primary goal is to “…protect the social compact that has developed in the US over the last century and extend it to this burgeoning sector of the economy.”
Bone of contention
Krueger and Harris propose extending the right to organize and civil rights protection to independent workers. Intermediaries (i.e. platforms) would be able to pool workers for the provision of benefits such as insurance and retirement accounts. They exclude overtime, minimum wage and unemployment insurance from benefits, although they maintain that in some cases it would be more efficient for intermediaries to provide workers’ compensation insurance. They also propose having the latter pay to support health insurance subsidies for independent workers.
Krueger ended his presentation by highlighting the contentious nature of the issue for both unions and employers. The former consider Uber drivers, for example, to be employees and don’t see a need for a third status. On the other hand, companies like Uber believe workers are independent contractors (i.e. freelance) and object to workers unionizing.
There were a number of reactions from the floor to Krueger’s presentation. The question of whether an Uber driver is really free not to take a client was raised. Moreover, if companies like Uber enjoy a monopoly, to what extent are workers independent?
An attendee questioned whether a new status was the right solution. Might it not be better to change the law for everyone rather than create a new category? Alluding to the independent job account (CPA) currently under proposal in France, the participant posited that it might be more effective and flexible to link benefits to the individual rather than the job status, as proposed by Krueger and Harris.
Krueger countered the new status would allow workers to associate to address grievances and would therefore be a good thing.
“In the short run, the new system [with a third category] would create more legal uncertainty,” he said. “On the other hand, if we have a category that accurately describes the nature of the work relationship, it would reduce uncertainty in the long run.”
“What we’re proposing will raise the level of protections for workers. Independent contractors will gain under this approach.”
*Under US labour law, workers are considered employees hired “at will”, i.e. they can be dismissed by an employer for any reason (unless deemed illegal), without the employer having to establish just cause and without warning. At the same time, the employee can quit with no reason or warning. Nevertheless, many employees having written contracts stipulating grounds for termination, benefits, responsibilities, etc. All other workers are qualified as independent contractors, defined as when the payer can only control the outcome of the work and not what will be done and how it will be done.
**“A Proposal for Modernizing Labor Laws for Twenty-First-Century Work: The ‘Independent Worker’”, The Hamilton Project, Brookings Institution, Washington, DC.