Clear employment status benefits all workers and worker cooperatives (Platform work scenario)

20 Meán Fómhair 2020

The research project ‘Future scenarios of platform work’ explores the economic, labour market and societal impacts of two types of platform work – platform-determined routine work and worker-initiated moderately skilled platform work – by 2030. As part of this project, 10 potential platform work scenarios were derived, and, from these, pointers were developed on what policy could do to make a desirable future happen and to avoid an undesirable one. Below is a description of 1 of the 10 platform work scenarios.

This scenario assumes that platform workers have gained a more powerful position in a recovering labour market where demand for labour exceeds supply, which enables them to prevail upon governments to clarify their employment status. It also assumes that governments oblige platforms to report information on tax and social security contributions to the authorities. Furthermore, to make the platform economy more attractive for clients, liability issues are clarified. As the platform economy expands, alternative platform-governance models gain ground, and those following a stakeholder-value model become competitive. The overall outcome is positive compared to other scenarios.

 

Scenario ID-card

Driver 

Hypothesis 

Technology 

Moderate adoption 

Labour market 

Recovery, labour demand dominates 

Consumer protection 

Platform liability 

Labour regulation 

Common approach to platform employment status according to platform work type 

Sector regulation 

General sector regulation applies to platforms (no specific platform regulation) 

Information obligations regarding tax and social insurance 

Platform information obligation regulated by EU, national enforcement 

Platform ownership and governance 

Market maturity of new platform-ownership models (stakeholder-value models) 

Platform business model 

Market diversification and expansion 

 

Identified opportunities and risks

Opportunities

Risks

  • Concentration of platform work in urban areas facilitates regulation and enforcement.
  • More widespread use and task diversity within platform work provides better access to services to the dominant client group – private individuals and households. This includes services where demand is likely to increase, such as care and personal services, but that are increasingly difficult to access due to lack of provision or high costs.
  • New platform business models oriented on stakeholder value rather than shareholder value contribute to better job quality and overall entrepreneurial activity. In the longer run, they raise clients’ expectations regarding the responsible behaviour of all platforms (WI).
  • Increasing demand for services mediated through platform work and advancements in enabling technologies (such as electric bikes and virtual reality) enhance labour market access for a larger group of the population (such as physically less fit or less-skilled individuals).
  • Increasing demand for services mediated through platform work, supported by clear consumer protection and employment status, improves overall job quality and working conditions, including social protection and representation (PD) or facilitates earning opportunities for those strategically using platform work (WI).
  • Consumer protection that holds platforms liable fosters demand among clients for platform-mediated services, and hence increases work opportunities, training opportunities and service quality (PD).
  • Consumer protection that holds platforms liable provides new business opportunities for the insurance sector.
  • Consumer protection that holds platforms liable, in combination with limited scope to pass on emerging costs and platforms being subject to general sectoral regulations, help to level the playing field between the platform and the traditional economies.
  • Reduced evasion of tax and social insurance contributions due to clarified employment status and information-reporting obligations for platforms results in better state income and fewer challenges for the welfare system (PD).
  • Concentration of platform work in urban areas hampers economic convergence of rural and urban areas due to diverging developments (with platform work crowding out certain sectors of the traditional economy in urban areas).
  • Concentration of platform work in urban areas increases the labour market polarisation that is already more severe in urban areas compared to rural areas.
  • Increasing platform work results in higher levels of labour market segmentation, with limited career options for workers, exacerbated skills mismatches and potential deskilling (PD).

Policy pointers

These policy pointers are related to this scenario. As the analysis concentrates on two specific types of platform work (on-location platform-determined routine work and on-location worker-initiated moderately skilled work) and because of the heterogeneity within platform work, the policy pointers cannot necessarily be generalised for all platform work.

 

Capitalising on opportunities inherent to platform work

  • Platform work offers opportunities, such as labour market integration of disadvantaged groups. Policymakers should actively consider these opportunities in their policies and instruments. Notably in economically challenging times, such as the aftermath of the Great Recession or the COVID-19 pandemic, employment forms that have low entry barriers can be beneficial for those hardest hit, such as the young or low skilled. The EU level could facilitate the exchange of approaches and lessons learned across Member States.
  • In this context, reviewing the EU rural development policy to encourage the growth of platform work in rural areas could also be considered, either through raising the awareness of the population and workforce or by incentivising platforms to offer their services there. Such an approach could serve a double objective: developing the rural labour market and enhancing service provision (thereby advancing societal goals, such as better provision of care services against the trend of demographic ageing).
  • For such an opportunity-based approach to work effectively, it is important to ensure that platform work acts as a stepping stone into standard employment for those who wish so, rather than resulting in labour market segmentation or crowding out of traditional jobs.
  • With sound framework conditions, platform work can also be used strategically to promote entrepreneurialism. Platform workers aspiring to work in a self-employed capacity can be supported to try it out, while those who are already genuinely self-employed can be supported to expand their economic activity. Capitalising on the networking element of the platform economy, fostering exchange and cooperation among workers, and encouraging stakeholder-value business models among platform providers would aid this endeavour.
  • The establishment of labour platforms applying a stakeholder-value business model can serve a double benefit of improving the working conditions of the affiliated workers and providing accessible and affordable services of public interest. EU funds and national governments could incentivise the establishment of such platform models (for example, as worker cooperatives) through start-up subsidies or procurement and outsourcing. Or they could run platforms themselves – for example, offering care or transport services in rural areas through community-owned platforms. This would need to be done in a way that it is not perceived as unjustified subsidisation of certain activities, causing social discontent and challenging public budgets.
  • Taking advantage of the data gathering inherent to the platform economy, tax and social security contribution evasion could be reduced if platforms – voluntarily or legally required – shared this information with relevant national authorities. A balance between such information provision and the data protection rights of platform users will need to be ensured. The experiences in this context of some Member States and the proposal for an EU-level ‘digital single window’, as proposed by the Commission’s high-level expert group on the impact of the digital transformation on EU labour markets, could be considered.

Fostering platform workers’ collective voice

  • Organising and representing platform workers is challenging. This is in part because many are acting as self-employed and hence have limited access to representative bodies. However, at least in some types of platform work, there is a need for some form of collective voice for self-employed workers due to the stronger negotiating position of platforms. One option would be to review the regulations stipulating workers’ entitlement for representation on the management board of the employer. While most Member States provide for employee representation at board level, there are partial limitations in terms of specific types of companies and thresholds of employment numbers. For platform business models that work with self-employed workers rather than employees, the feasibility of expanding the concept of worker to affiliated self-employed could be explored to give them a say in the governance of the platform.

Facilitating aims at EU level

  • While the mandate to tackle most of the above issues lies with Member States, the EU level could support national governments and social partners in the following ways:
  • Some issues could be regulated at EU level. Examples are data-related aspects (data protection and data use, including surveillance) or exploring the applicability (or adaptability) of EU-level regulations, such as the Directive 2008/104/EC on temporary agency work , to platform work.

Driving forces and their expected impact

The project identified eight key driving forces deemed to substantially influence the development of the two analysed types of platform work by 2030: technology, the labour market, consumer protection, labour regulation, sector regulation, information obligations relating to tax and social insurance authorities, platform ownership/governance, and platform business models. Based on assumed developments of these driving forces, 10 possible future scenarios were derived.

Technology

Technology develops at a moderate pace. 5G mobile technology is available only in the main cities, so that the Internet of Things (IoT) has developed only in these cities for predictive maintenance of buildings or large appliances or for tracking vehicles more systematically. Interconnectivity between technologies has improved but requires further development to arrive at a seamless connectivity and fully integrated solutions. Robotics, including artificial intelligence, develops for businesses. Households and private individuals tend to reject connected technologies to avoid companies’ intrusion into their privacy. Electric vehicles have reached a high level of market maturity, with widespread adoption of electric cars and bikes. Autonomous vehicles, in contrast, are still in a trial phase, with pilot projects in some areas, but they are not widely deployed.

Competencies and capacities to develop and implement algorithms, data storage and data analytics have developed and are widespread but have not yet reached their full potential in terms of both technological development and operational deployment in the economy and labour market. 3D printing has reached a substantial level of application in some manufacturing industries and some countries, driven in part by the need to reduce transport to protect the environment. The technology is not common in individual households. Virtual reality is often used for training purposes but not much elsewhere. Augmented reality and blockchain are still being tested, without wide deployment across sectors.

For platform work, a moderate pace of development results in a further concentration of its use in urban areas, while application in more rural areas remains limited. The limitations as regards interconnectivity, algorithms and data analytics hamper the appeal of platform-determined and worker-initiated platform work for business clients; hence, private individuals and households remain the main clientele.

On the demand side, no particular changes in dynamics occur, as the services provided are neither strongly fostered nor hindered by the technological developments. For example, the need for maintenance services is unchanged as replacement parts are not yet 3D-printed by households themselves.

On the supply side, the advances in electric bikes and virtual reality facilitate platform work for a larger group of workers: electric bikes enable less physically fit people to engage in platform-determined work, and virtual reality enriches skills development in worker-initiated platform work.

Labour market

There is continued economic recovery, linked to new business models and new products and services offered both in the traditional and the platform economies. Accordingly, labour demand exceeds supply, which is also due to demographic and societal developments. This enhances workers’ position in the labour market. Workers can choose among employment offers. Employment and working conditions improve as employers strive to secure their workforces. This also holds true for platform work. Both platforms and clients are incentivised to offer good conditions to get their service needs covered.

While the improvement of employment and working conditions benefits platform-determined workers especially, it more generally encourages entrepreneurialism. This is because there is less reluctance to engage in platform work, and more workers take the opportunity to use worker-initiated work strategically to try out self-employment, to learn, and to apply their skills and capacities in the economy (both the traditional and the platform economies). Such attitudes and competences further enhance positive economic development, Europe’s competitive situation and innovation potential.

Consumer protection

Across the EU, Member States have harmonised consumer protection. The regulation clearly establishes that clients can hold platforms liable in case of incidents. The platform might hold the workers responsible subsequently, but clients can never directly approach workers for indemnification. This clarity, in combination with the ‘stronger partner’ (the platforms) being held liable if needed, increases consumers’ willingness to become clients in the platform economy. This further enhances the demand for services mediated through online platforms and apps, and in turn the demand for platform workers.

Platforms will seek ways to minimise their risks. Passing them on to the workers, for example through higher fees, is not possible as there is competition for workers across platforms, and only those offering the best conditions will succeed. Accordingly, platforms buy new insurance products protecting them from such risks, thereby driving growth in the insurance sector. Additionally, they place more emphasis on training workers to ensure better service quality and reduce the risk of incidents for which they might be held liable.

Labour regulation

There is also harmonisation of labour regulation across Member States as regards the employment status of platform workers by platform work type, driven by governments’ intention to better protect workers. There is the rebuttable assumption that workers in platform-determined platform work are employees of the platform and those in worker-initiated platform work are self-employed service providers. Platforms and workers can challenge this default status by providing justification that a different status is applicable. For the majority of workers in platform-determined platform work, this improves their access to employment rights and the enforceability of those rights, which is likely to improve job quality and working conditions, including social protection and representation.

At the same time, the costs of doing business increase for those platforms previously working with self-employed workers. A share of these costs can be passed on to clients, due to the increasing demand for platform-mediated services, but not all. As a result, the perceived value attributed to platform work increases; it is no longer a substantially cheaper service than that provided by the traditional economy. This levels the playing field between the platform and the traditional economies.

Sector regulation

The balance of power between the two economies is also evened by the regulatory clarification that specific sector regulation in terms of market access, certification, standards and so on also applies to platforms if the tasks they facilitate compare to activities in the traditional economy. Accordingly, platforms and their workers are subject to the same requirements as actors in the traditional economy and cannot outcompete them based on lower costs due to avoiding certain investments.

 

Information obligations regarding tax and social insurance

Across the EU, platforms are subject to the same obligations to report information about tax and social insurance to the authorities, with enforcement regulated and carried out at national level. Workers and clients are informed about this fact and have to agree to the collection and use of their data before entering into business with the platform. As platform-determined workers by default are employees, the platforms have information obligations and transfer workers’ income tax and social insurance contributions to the relevant authorities. Evasion potential is low.

 

Platform ownership and governance

The increasing demand for platform-mediated services attracts new actors to enter the platform economy. They look for innovative business models to attract workers, as demand for labour is high and supply is decreasing. This fosters the growth of new platform business models that are oriented to create stakeholder value rather than shareholder value. This is facilitated as the platform economy becomes less attractive for shareholder-value-based business models, notably non-EU owned platforms, due the establishment of various areas of regulation.

Governments could provide services of public interest through such platform models, thereby creating employment and improving service provision, for example, in the areas of transport or care. This would be particularly useful in rural areas.

Platforms run as worker cooperatives are flourishing for worker-initiated platform work, so that workers can reap the benefits (for example, by investing the platform’s gains in joint training or marketing activities) rather than financing profit-oriented investors. Furthermore, this ‘networked self-employment’ might further foster entrepreneurial quality and cooperation due to enhanced exchange.

The remaining profit-oriented platforms improve their employment and working conditions to retain their workforce. This benefits platform-determined workers particularly, who tend to depend more on platforms than the worker-initiated workers.

Platform business model

Consumers become more familiar with services mediated through platforms, resulting in increased acceptance and higher competition with similar services in the traditional economy.

Workers find more tasks on offer through platforms, hence increasing the potential to earn income through platform work; at the same time, jobs in the traditional economy might decrease due to the competition from platforms.

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