Technological dystopia (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.

The scenario assumes rapid progress in the development and deployment of sophisticated technologies. The labour market suffers from a disadvantageous economic situation that together with the intensified digitalisation results in labour supply exceeding labour demand. Platform work is characterised by a dominance of non-EU platforms that aim to increase their profits, and further expansion and market diversification is expected.

In terms of labour (including social protection) and sector and tax regulation, there is no harmonised approach across the EU on how to deal with platform work. Some of the Member States regulate some of the aspects, while for other aspects and in other Member States, a lack of clarity about which regulation to apply remains. This results in divergent approaches across the EU.

Overall, it is expected that while this scenario offers some interesting labour market opportunities, like increased earning opportunities (for example, in rural areas) and the potential to legalise undeclared work, it results in a further deterioration of working conditions particularly of those affiliated to platform-determined work.

Scenario ID-card

Driver 

Hypothesis 

Technology 

Fast adoption 

Labour market 

Labour supply exceeds demand 

Consumer protection 

Platform transparency (with legal capacity according to worker status) 

Labour regulation 

No common approach and no clear definition in Member States 

Sector regulation 

Unclear which sector regulation applies 

Information obligations regarding tax and social insurance 

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

Platform ownership and governance 

Dominance of non-EU shareholder-value model platforms 

Platform business model 

Market diversification and expansion 

Identified opportunities and risks

Opportunities

Risks

  • 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 which are increasingly difficult to access due to lack of provision or high costs.
  • Technological advancements provide a wider scale and scope for 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/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 improving working conditions for platform workers due to reputational effects.
  • Decreasing demand for ‘traditional’ platform work tasks due to automation results in improved competition in the platform economy; established platforms will be challenged, giving room for new market entrants which can result in a healthier platform economy, also fostering innovative approaches.
  • 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).
  • The 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 consumers’ security and hence their willingness to engage in platform work; this fosters 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.
  • More limited tax and social insurance contribution evasion due to some information obligations through platforms results in better state income and fewer challenges for the welfare system (PD).
  • Dominance of non-EU platforms challenges regulation and enforcement.
  • Increasing task diversity within platform work qualifies platforms to be classified as information society actors, challenging their regulation at sector level in Member States in certain domains (such as labour or social policy issues).
  • Dynamically changing business models challenges regulation of platforms through legislation, which tends to move slower.
  • Dominance of large non-EU platforms results in an oligopolistic market situation, hampering the market entry of new players, thereby endangering healthy competition and economic and labour market innovation.
  • Dominance of large non-EU platforms results in profits realised in the EU being spent in other world regions, thereby fostering these economies rather than the EU economy.
  • Lack of clarity regarding sector classification of platform work results in unfair competition between the platform and the traditional economy, with the latter crowded out, and deteriorating service quality and consumer protection.
  • As demand for platform work exceeds supply, the power of platforms (and clients) in relation to workers increases, and earning opportunities and working conditions will further deteriorate, resulting in a higher risk of an increased number of working poor (PD).
  • An increasing share of business clients drives down rates in platform work due to higher cost awareness.
  • The unregulated employment status of platform workers results in misclassification, and, in turn, limited access to employment rights, social protection and representation (PD).
  • Platform workers’ increased need to offer consumer protection as a competitive edge in an increasingly competitive platform-mediated peer-to-peer services sector with limited possibilities to pass on the emerging costs to clients reduces net earnings of workers.
  • 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 autonomous 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 the 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 and 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

In spite of demographic trends reducing the working age population, the European economy and labour market are characterised by a surplus of labour supply. This is driven by economic developments – a lagging recovery from labour market shocks like the long-term effect of the COVID-19 pandemic – combined with technological developments. Basic routine tasks are widely automated and require diminishing human input, both in the traditional and the platform economies. Technology has developed to make it affordable for companies to replace workers for some medium-skilled tasks. As a result, labour demand – except for high-skilled profiles – shrinks, and the supply of traditional employment for low-skilled, and partly also medium-skilled, workers is below demand. Accordingly, workers are increasingly looking for alternative employment and are willing (or forced) to accept it in spite of lower employment and job quality.

A downward spiral in employment and working conditions starts, with growing risk of an increase in the number of working poor and unemployed. Demand for platform work is increasing, while offers related to platform-determined and worker-initiated work are stable or decreasing. Such a development further enhances the clout of platforms (and their clients), as the supply of labour exceeds demand and workers are easily replaceable. The result is a further deterioration of the employment and working conditions of platform workers.

Consumer protection

EU-level regulation requires platforms to inform clients about the status of the worker (professional as opposed to 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 to clients to assign them tasks, in an effort to remain competitive in a market with a growing number of platform workers. The insurance sector will benefit from offering specific packages for platform workers. However, due to this enhanced competition, the additional costs arising from such insurance cannot be passed on to the client, burdening the earnings of the workers and risking an increased number of working poor.

Labour regulation

There is no legal clarification on the employment status of platform workers in the Member States or at EU level. This means that most EU platform workers are considered independent, self-employed workers or belong to a specific national employment status related to marginal or occasional work. If cases are brought before the courts, national courts decide on a case-by-case basis regarding platform workers’ classification as employee or self-employed. This results in different approaches across Member States and also within Member States across platforms and authorities (such as labour, tax and social protection authorities) as they might apply different criteria or different interpretations of the criteria.

This situation has a strong potential for disadvantageous outcomes regarding employment rights and entitlements (including social protection and representation), particularly for platform-determined work. This type of platform work resembles more a hierarchical employment relationship than a market-based one, which would more likely justify employee status.

Sector regulation

Due to the particular characteristics of platforms, it is unclear which sector regulation should apply. Platforms argue that they are information society companies, while businesses in the traditional economy offering comparable services argue that platforms should be considered to belong to that specific sector (for example, transport or construction). It is left to Member States to decide which sector regulations apply, and court cases on this issue emerge.

Unless it is clarified that platform-mediated services are subject to a specific sector regulation, platforms and their workers are not obliged to adhere to the requirements related to market access and business conduct of the traditional economy. This results in cheaper prices in the platform economy, fostering the demand for platform-mediated services at the expense of the traditional economy. Consequently, clients’ insecurity regarding service quality levels and liabilities rises, pushing up the importance of ratings. This, in turn, increases workers’ demands for transparency and objective criteria for ratings (to ensure fairness), redress options in case of perceived unfair treatment and the portability of ratings across platforms.

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 mechanisms of 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 limit state income loss due to taxes and social insurance contribution evasion.

Platform ownership and governance

The platform economy remains dominated by non-EU platforms that follow a shareholder-value model with the aim of profit maximisation. Due to the fast technological advancements, these large platforms have substantial data collection and processing capacities, allowing them to dynamically change their business models (as regards handling user relations). This, in combination with the above-mentioned unclarified legal issues, makes it challenging to impose EU or national legislation on the platforms. These, furthermore, find creative approaches to circumvent regulations that reduce their shareholders’ profits – which tend to be spent outside of Europe. Forms of self-regulation might be more promising if platforms see some benefit in it (for example, reputational advantages).

Due to the strong position of the existing platforms and their networking effect binding workers and clients to them (‘lock-in effect’), and the above-mentioned economic and labour market situation, the existing non-EU platforms can further increase their market share in Europe. It will be difficult for new, indigenous platforms to successfully start up and reach a competitive scale and scope. Such a situation is likely to further increase the market power of the existing platforms in relation to clients and especially workers. This challenges those engaged in platform-determined work further due to their greater dependency on the platform.

Platform business model

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

Platform-determined tasks expand beyond the delivery of food to the delivery of goods, including parcel and mail delivery; worker-initiated tasks are offered for additional types of household services, including care and personal services. The dynamically changing business models challenge the effectiveness of legislative regulations, as these tend to take some time to be drafted and implemented and hence might not ‘fit’ well as the platforms have developed further. Alternative regulatory approaches, such as collective agreements or soft law, might be required.

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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