Regulate to innovate (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 favourable framework conditions, with a recovery of the economic and labour market situation in the EU and a positive innovation environment that drives fast development and adoption of sophisticated technologies. To maintain and further foster this trend, governments are inclined to regulate some policy fields relevant to platform work, with the intention of creating a level playing field with the traditional economy and making the platform economy more attractive as an employment form and business model for workers and clients. The platform economy remains dominated by large non-EU platforms that follow a shareholder-value business model (that is, they aim for profit maximisation) and continues to grow and diversify.

 

Scenario ID-card

Driver 

Hypothesis 

Technology 

Fast adoption 

Labour market 

Recovery, labour demand dominates 

Consumer protection 

Platform transparency (with legal capacity according to worker status) 

Labour regulation 

Common approach, minimum standards for all 

Sector regulation 

Specific trade regulation for platform (matching services) 

Information obligations regarding tax and social insurance 

Platform information guidance provided by EU, high level of national discretion for implementation and enforcement 

Platform ownership and governance 

Dominance of non-EU platforms with a shareholder-value model  

Platform business model 

Market diversification and expansion 

Identified opportunities and risks 

Opportunities

Risks

  • Transparent and clear sectoral attribution of platform work results in fair competition between platforms and between the platform and the traditional economies, ensures levels of service quality and consumer protection, and facilitates representation, social dialogue and collective bargaining.
  • Technological advancements increase the scale and scope of platform work beyond urban areas; this can contribute to economic and social convergence of rural and urban areas.
  • Technological advancements and task diversity within platform work make this employment form and business model more attractive for business clients; this can contribute to make production and service provision processes more efficient, and thereby foster the competitiveness and innovation capacity of the European economy.
  • An increasing share of business clients can contribute to improve working conditions for platform workers due to reputational effects.
  • The high demand for platform work compared to the limited labour supply improves employment and working conditions (PD).
  • Minimum labour standards for all improve the employment and working conditions of those platform workers who are genuine self-employed (WI).
  • Better employment standards and increasing demand for services provided by genuinely self-employed platform workers encourages the entrepreneurial spirit and capabilities of the country, advancing economic development, competition and innovation potential (WI).
  • Decreasing demand for ‘traditional’ platform work tasks due to automation improves competition in the platform economy; established platforms will be challenged, giving room for new market entrants, which results in a healthier platform economy that also promotes innovative approaches.
  • More widespread use and task diversity within platform work in combination with the new platform business models provides better access to services for private individuals and households. These include services where demand is likely to increase, such as care and personal services, but which are increasingly difficult to access due to lack of provision or high costs.
  • Increasing demand for services mediated through platform work and advancements in enabling technologies (such as electric bikes and virtual reality) enhances labour market access for a larger group of the population (such as physically less fit or less-skilled individuals).
  • Increasing importance of ratings and automated task assignment based on transparent and objective criteria or algorithms enhances labour market access for some groups typically subject to discrimination (PD).
  • Transparency on the status of platform workers as professional as opposed to non-professional provider increases the security level of consumers and hence their willingness to engage with the platform economy; this develops earning opportunities for workers.
  • Platform workers’ increased need to offer consumer protection to have a competitive edge in an increasingly competitive platform-mediated peer-to-peer services sector provides new business opportunities for the insurance sector.
  • Reduced evasion of tax and social insurance contributions due to the information-reporting obligations of platforms results in better state income and fewer challenges for the welfare system (PD).
  • Dominance of non-EU platforms challenges regulation and enforcement.
  • The fast technological development and the related increased deployment of digital solutions, including platform work, risks that some groups within the population (as consumers or service recipients) and workforce are left behind as they are not capable of using the new technologies.
  • The unclear employment status of platform workers poses some risk of misclassification, hence limited access to employment rights and entitlements, even if minimum labour standards are improved for all (PD).
  • An increasing share of business clients drives down rates in platform work due to higher cost awareness.
  • The increased importance of ratings based on opaque criteria or underdeveloped algorithms unduly hampers workers’ access to work, particularly if portability of ratings across platforms is limited and redress options are few (PD).

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 quickly, fostered in part by EU and national initiatives in the digital era. For example, EU, national and regional funding programmes supporting innovation, notably related to the development and deployment of technologies, are increased and efforts to make them accessible and effective for research and business are taken.

5G mobile technology, the Internet of Things (IoT), robotics, electronic and autonomic vehicles, 3D printing, and augmented and virtual reality have reached a level of technological and market maturity that allows for their widespread deployment in the economy and society. Interconnectivity between technologies as well as competencies and capacities to develop and implement algorithms, data storage and data analytics have developed and are widespread. This increases use of and demand for platform work, the clientele of which is now not only private individuals and households, but also a large share of businesses using platforms as a tool in their work organisation (outsourcing).

At the same time, demand for some services mediated through platforms decreases, including transport services that can be provided by autonomous vehicles (platform-determined work) and household services that can be done by robots or by the individuals themselves assisted by 3D-printed parts, augmented and virtual reality (worker-initiated work). From a supply-side perspective, 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 

The potential inherent to the fast technological development results in continued economic recovery, linked to new business models and the types of products and services offered in traditional and platform economies. Accordingly, labour demand exceeds supply, which is also due to demographic and societal developments. This enhances workers’ position in the labour market, and they 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.  

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

Consumer protection 

As platform work continues to grow and is recognised to take an increasingly influential role in the economy and labour market, regulators at EU and national levels increasingly commit to regulating platform work. The aim is to capitalise on the potential merits while safeguarding standards developed over previous decades in the traditional economy. 

Accordingly, EU-level regulation requires platforms to inform clients about the status of the worker (professional versus non-professional service provider) so that clients know who is liable in case of an incident. This enhanced transparency, and hence security, is expected to positively influence clients’ (private individuals and households) willingness to use platform work.  

Peer-to-peer providers will consider offering additional insurance as an incentive for clients to assign them tasks, in an effort to remain competitive in a market with a growing number of platform workers. The insurance sector benefits from offering specific packages for platform workers. Additional costs arising from such insurance are passed on to the client as demand exceeds supply, hence allowing workers to increase prices to cover emerging expenditure. 

Labour regulation 

While the employment status of platform workers (that is, whether they are employees or self-employed) remains unclear, the EU establishes a common approach of minimum labour standards for all, including social protection and access to representation. This means that platform workers benefit from the same minimum standards and protections as workers in the traditional economy, for example, related to accident, sickness, unemployment and pension insurance; payment at market prices; and health and safety. However, employment law tends to set higher standards and protections for employees. Hence, while the situation for self-employed improves, they continue to bear a higher level of responsibility for their own labour conditions. As it is likely that the majority of platform workers continue to be considered self-employed, this development is more beneficial for the worker-initiated type (whose workers tend more to be genuine self-employed) than for the platform-determined type (where the risk of misclassification of employment status is higher). 

The responsibility for ensuring the minimum labour standards rests with the platforms, adding to their administrative and financial burden. Platforms will seek ways to pass on this burden to the clients, for example by increasing matching fees. This increases competition among platforms – the ones offering the overall most attractive services to clients will benefit. This triggers innovation in the business models of platforms and a healthier market situation in the platform economy. 

Sector regulation 

Another regulatory clarification is that of the sector attribution of platforms, where a specific trade regulation for platforms is defined: ‘matching services’. This takes into account the particularities of this business model and employment form, as well as its competitive position regarding related sectors in the traditional economy – for example, temporary work agencies, transport (in the case of platform-determined work) and construction (in the case of worker-initiated work).  

This sector regulation sets clear standards for entering and doing business in the platform economy and considers its impact on the traditional economy and society. This not only helps to level the playing field for actors within the platform economy and between the platform and the traditional economies, but also avoids negative societal effects thanks to transparent and clear standards. Furthermore, the clear attribution of platforms to a specific sector fosters social dialogue and collective bargaining. Representation of platform workers becomes stronger, and effective negotiations between workers and platforms, or among their representatives, take place. 

Information obligations regarding tax and social insurance 

The EU builds a framework to clarify platforms’ obligations to report information on workers’ earnings, for tax and social protection purposes. Implementation is left to the discretion of Member States: they decide which platforms should declare, the type of information required and the mechanisms for declaration. Most likely, this leads to a diversity of approaches across Member States.  

From the perspective of the platforms, this is an incentive to be active in those Member States in which requirements are less burdensome. From a state and societal perspective, stricter information obligations can contribute to reducing undeclared work and to limiting state income loss due to evasion of taxes and social insurance contributions. At the same time, some countries opt to alleviate the administrative burden of platforms to attract new platform dynamics for competing with other countries. 

Platform ownership and governance 

The platform economy remains dominated by non-EU platforms that follow a shareholder-value model that aims to maximise profits. This makes it challenging to impose EU or national legislation on the platforms. These platforms, furthermore, find creative approaches to circumvent regulations that reduce their shareholders’ profits – which tend to be spent outside of Europe.  

However, the strong position of the existing platforms and their networking capability binding workers and clients to them (‘lock-in effect’) weakens due to the high demand and increasing task diversity. New, indigenous platforms have good potential to successfully start up and reach a competitive scale and scope. Such a situation is likely to improve the market position of workers.

 

Platform business model 

Encouraged by these developments, the platform economy expands further. In addition, online labour platforms will diversify their fields of activity to compensate for the loss in business for ‘traditional’ platform tasks, which are increasingly automated. 

Platform-determined tasks expand beyond food delivery to the delivery of goods, including parcel and mail delivery, while worker-initiated tasks are offered for additional types of household services, including care and personal services as they are more difficult to automate.  

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

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