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The Gig Economy Faces a Crackdown

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In 2004, Dynamex Operations West, a California-based courier company, suddenly reclassified its permanent full-time employees as independent contractors, depriving them of entitlements such as minimum wages, overtime, paid sick days and workers compensation. The reclassified drivers had to use their own vehicles and pay for all expenses including petrol, tolls and insurance to earn a contracted delivery fee that amounted to a wage cut.

Two drivers fought back. A putative class action began in 2005 that last year prompted California’s supreme court to make it harder to classify workers as independent contractors. To categorise staff as such, a company must show a person is “free from (its) control”, works “outside” its core operations and has an “independently established trade, occupation or business”. In September, the Democrat-controlled government of California wrote these tests into law under Assembly Bill 5.

AB5, as it is known, which exempts many types of independent contractors, is of significance because a dispute within a traditional business is serving as a means to attack the employment model of the ‘gig economy’ companies that didn’t exist when the Dynamex dispute began. These are the online labour marketplaces pioneered by ‘ride hailer’ Uber Technologies that match people to short-term jobs, or ‘gigs’.

Due to companies such as TaskRabbit (like Airtasker in Australia) that auctions handymen, Freelancer.com that hires out creative talent and Uber and Lyft that sell rides via app, about 6.9% of the US workforce is now classed as independent contractors – many of whom are gig workers – while about 7% of Australian workers find gigs through digital platforms.

To admirers, the giganomics labour model lets people operate remotely, set flexible hours, work for multiple employers and promote their services via ratings. Many gig workers are no doubt happy with their earnings and conditions and the broader opportunities they have to find work. But to critics, the gig model is a form of ‘feudalism’, a ‘poverty trap’ that weakens worker rights and conditions and undercuts wages, thus further tilts the labour market in capital’s favour. Another criticism is that the gig labour model allows platforms to skirt regulatory controls when they move beyond the tech industry – think how app-based companies have upset transportation by bypassing regulations.

For all its happy customers and no doubt many willing and well-paid workers, giganomics is vulnerable politically because it comes with five social costs. The first is that giganomics can harm established competitors in non-tech industries that are bound by regulations that gig companies can ignore. The second is the gig economy can hurt government finances through lost taxes (especially payroll taxes) and higher welfare payments to struggling gig workers – California estimates the cost to be US$7 billion a year. Third, the spread of gigging is blamed for reducing worker income and making it more insecure. Stemming from that are the fourth and fifth costs; lower and less-stable income weakens the consumption that drives economies and deepens the inequality centred on stagnant wages and record profits that is roiling politics across the developed world.

These drawbacks are prompting a regulatory and worker-based backlash against the gig economy that might only be getting started. More US states are preparing laws similar to AB5 and California and other states are looking at ways to help independent contractors unionise and bargain collectively. The result could be some solution whereby gig workers are afforded better pay and some protections while keeping their flexibility. At the same time, the scrutiny of the gig economy could broaden into a push back against contracting and outsourcing more generally to ensure the rising number of workers who lack permanent full-time employment status enjoy a fairer and more secure share of today’s riches.

To be sure, the gig labour market is here to stay – Australia has an estimated 100 platforms offering work and that number will no doubt grow. In some ways, it’s unfair that gig companies such as the ride hailers are targets because they are fixing flaws in regulated markets (such as the lack of taxis at peak times due to licence restrictions). Efforts to tame the model could flounder. In the US, a key federal body recently ruled that gig workers are independent contractors who can’t unionise, which means the legislative fight against the gig economy must be at state level – and the push against gigging is largely restricted to states where the Democrats are in power. Car-booking companies could succeed in overturning California’s law (even though they say it doesn’t apply to them because they are tech platforms where people auction rides, not taxi companies) because it could boost their labour bills by 30%. AB5 is being questioned by many independent contractors who don’t want to be covered by the law. A jump in jobless rates would impede efforts to help workers. No sure-fire proof exists that gigging has suppressed wages share in output, or even that app-based companies have increased the percentage of independent contractors in the US workforce.

But the zeitgeist focused on inequality says otherwise. Giganomics is disruptive enough to promote a counterattack, especially when many allege that gigging tilts the labour market further against workers at a time when profits are at record levels.

Evasive model

Bill Phillips (1914-1970) was a New Zealander who in 1958 came across more than a century’s worth of data on UK unemployment rates and wages growth that allowed him to test his hunch that economic growth influences inflation. The result of his “wet weekend’s work” was a plotted relationship that formed the first half of a U that showed an inverse relationship between unemployment and wages growth.

What subsequent economists referred to as the Phillips Curve proved a useful framework because it displays the short-term trade-off between economic growth and inflation that policymakers must make. Until now, it seems.

The analysis appears redundant because in many countries wages growth is low even at full employment. Wages growth in the US, for instance, has stayed mostly below a 3% annual pace even though the US jobless rate has fallen from 10% in 2009 to a 50-year low of 3.5% this year.

Wages growth is contained these days largely because politics tilted right during the past four decades, to exacerbate capitalism’s natural bias to reward capital over labour. Backed by government, businesses fought unions and forced workers onto individual contracts. Temporary and contract work rose as a result as did unpaid overtime. Over time, labour’s share of GDP fell to 43% of output in 2017 from a post-World War II peak of 52% in 1969. (Labour’s record low share of GDP was 42% in 2011.)

Critics of the gig model say tech platforms exacerbated wage-lowering practices. A US study in 2018 found Uber drivers only earn an income of U$9.21 an hour after costs, below California’s minimum wage of US$12 an hour for a company of Uber’s size (26 employees or more) – other studies show many gig workers on similar low pay.

In an age of growing angst about inequality centres on low wages growth, the gig economy is likely to attract more scrutiny. In the US, Congress is examining ‘transportation network companies’ and states beyond California are looking at the gig economy model more generally. Illinois, New York, Oregon and Washington states have indicated they might introduce AB5-like laws while Democratic presidential candidates have promised to do this at a federal level. California’s Democratic Governor Gavin Newsom is marshalling to help independent contractors unionise, bargain collectively, earn more and have more say over conditions to overturn “the hollowing out of our middle class that has been 40 years in the making”. There’s political gain in such steps. San Francisco voters, in a 68%-to-32% result, in November approved a congestion tax on shared rides. In Europe, to empower gig workers, the EU is thinking of changing competition laws that prevent the self-employed from collectively setting prices.

If momentum against the gig economy were to build, flexible labour practices might be introduced to protect gig workers that would diffuse the labour model’s controversial aspects. At the same time, the campaign could broaden into a fight against the casualisation of the workforce beyond app-land, to reverse what companies such as Dynamex have done over recent decades.

Published by Michael Collins, Investment Specialist, Magellan Group

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Amazon looks for gig workers to pick up and deliver orders at Whole Foods

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Photo (c) Andrei Stanescu – Getty Images

With the gig economy continuing to grow but the COVID-19 pandemic cutting into wages, gig workers looking for work might want to pay Whole Foods a visit. Amazon is now recruiting contract workers to both shop for and deliver groceries for Whole Foods Market customers who order their groceries online.

According to a Bloomberg report, drivers can easily sign up for the Shop and Deliver program by simply reviewing an online tutorial about how Whole Foods products are picked, packed, and handled, as well as scoring a passing grade on a quiz.

Until now, Whole Foods relied on its own employees to assemble online orders, but the program model is akin to Amazon Flex, an initiative the company rolled out several years ago that relies on independent contractors to deliver packages. 

Inherent issues

From its catbird seat, various grocery industry watchers raised questions about Amazon’s move. 

“By entrusting gig workers to put orders together for Whole Foods customers, Amazon is potentially increasing the risk that items could be damaged, spoiled or delivered late that is inherent in grocery e-commerce,” GroceryDive’s Sam Silverstein wrote.

Another question raised was that while delivery service is an easy thing to learn, in-store tasks like picking aren’t.

“Delivery from A to B is a beautiful on-demand task because it’s very straightforward, very repeatable and you don’t need a lot of training, [but] tasks in stores are often much more complicated,” Jordan Berke, a former Walmart executive and e-commerce expert who runs Tomorrow Retail Consulting, told GroceryDive.

“A person that comes to your store once a day or once every two days to pick two orders is always learning, while a person that picks 50 orders five days a week” has a better opportunity to become familiar with the lay of the land inside a grocery store, and is more likely to know where items are located and how they should be handled.

Potential good news for consumers

Online grocery shopping is growing in leaps and bounds. The segment is expected to grow from about $38 million in 2018 to nearly $60 billion by 2023. Amazon and Walmart are in a pretty secure place for the moment — and keep upping the ante — but more and more companies are trying to elbow their way in like Uber and DoorDash. The upside for consumers is that companies are constantly trying to find ways to keep prices as low as possible. 

“They’re always going to look for ways to keep their cost of service as low as possible, and always look for ways to be super responsive in fulfilling customer demand,” Tom Furphy, former Amazon vice president of consumables and Amazon Fresh, told GroceryDive. 

“Those are three constants that will always exist as long as Amazon’s around, and they will absolutely look to deliver on that in the grocery environment.



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Iberdrola and GIG in 3.3GW offshore wind push in Japan

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Iberdrola has acquired local developer Acacia Renewables and entered into a joint venture with Macquarie’s Green Investment Group (GIG) to develop its 3.3GW offshore wind portfolio.

Prior to the acquisition, Acacia was Macquarie Capital’s Japanese renewable energy platform, according to its website.

Acacia’s portfolio includes two projects with a combined capacity of 1.2GW at a more advanced stage, and a further four with a combined capacity of 2.1GW.

Spanish energy giant Iberdrola and the GIG aim to enter the first 1.2GW batch of wind farms – located off the south-west coast of Japan – in upcoming auctions announced by the Japanese government.

These first two projects could be commissioned by 2028, Iberdrola claimed.

The company said it has set its sights on Japan as a “new growth platform” in renewables, and offshore wind in particularly.

Iberdrola has stakes in operational offshore wind farms worldwide with a combined capacity of just over 1GW, while GIG has backed operational offshore wind projects with a combined capacity of just under 1.3GW, according to Windpower Intelligence, the research and data division of Windpower Monthly

The two companies will both take charge of developing Acacia’s projects.

Acacia had issued public notices of Environmental Impact Assessments for the six sites. These are wind farms called Satsuma, Nanao Shika, Fukui Konpira, Shiroishi Kosugo, Fukui Konpira and Tono.

There is currently just over 40MW of operational wind power capacity installed in Japanese waters, according to Windpower Intelligence.

However, a growing number of developers are targeting the nascent market ahead of offshore wind tenders, which are expected to be opened shortly.

Last week, Equinor, Jera and J-Power joined a long list of partnerships targeting the Japanese offshore wind market, despite the nation’s apparent slow uptake of the technology.

In 2019, the Japan Wind Power Association said that the lengthy process for environmental impact assessment was having an impact on the development of offshore wind.

One of the main obstacles for wind developers in Japan comes from opposition from local fishing communities.

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In Season Of Strikes For Gig Workers, Now Swiggy Delivery Execs In Noida Rebel

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After strikes in Chennai and Hyderabad in the last 30 days, Swiggy’s delivery executives in Noida have gone on strike to protest against low wages

The delivery workers are demanding a minimum payout of INR 35 per order and restoration of monthly incentives, among other demands

Similar demands were also raised by Swiggy’s delivery partners in Hyderabad, who went on an indefinite strike last week

With similar demands as their counterparts in Chennai and Hyderabad, delivery executives with Indian foodtech unicorn Swiggy in Noida, on Thursday (September 17), went on a strike to protest against low wages. 

The strike comes just days after Swiggy’s delivery partners went on an indefinite strike in Hyderabad to protest against the low wages and to press their demands. 

In Noida, the protesting delivery workers are demanding a minimum payout per order of INR 35, a minimum payout of INR 20 per batched order (when the driver has to make more than one delivery in a single trip), and a payout at the rate of INR 10 per km after the worker has travelled more than 5 km for making a delivery, among other things.

The delivery partners in Noida, affiliated with the All India Gig Workers Union (AIGWU), have also demanded the reinstatement of monthly incentives of up to INR 3,000 for full-time work and INR 2,000 for part-time work. 

Further, the delivery partners are also demanding extra wages for deliveries made while it rains, or in nights, as also, compensation for waiting time at restaurants, while the order is being prepared. 

“Swiggy delivery workers are taking extraordinary risks by delivering food and essentials to people during this pandemic. The company cannot reward us by cutting our payouts and incentives. Our demands should be met at the earliest,” reads the letter stating the demands of AIGWU for Swiggy’s delivery workers, addressed to Swiggy’s CEO Sriharsha Majety. 

The demands of the delivery workers in Noida are similar to the demands of the workers in Hyderabad, who, earlier this week, launched an indefinite strike to protest against Swiggy paying low wages to the delivery workers. 

The workers in Hyderabad have alleged that during the lockdown, their minimum payout per order reduced from INR 35 to INR 15, while the company also removed monthly incentives to the tune of INR 5,000. 

When asked about the protest of delivery workers in Hyderabad earlier this week, a Swiggy spokesperson told Inc42, “Most delivery partners in Hyderabad make over INR 45 per order, with the highest performing partners making over INR 75 per order. This INR 15 is only one of the many components of the service fee.”

“Naturally, no active delivery partners in Hyderabad have made only INR 15 per order in the last four weeks. It is important to note that the service fee per order is based on multiple factors to adequately compensate our partners including distance travelled, waiting time, customer experience, shift completion and incentives. Regular competitive benchmarking shows that these are at par, if not higher than the industry standards,” Spokesperson added.

In what has been a season of strikes for gig workers, last month, Swiggy’s delivery executives in Chennai had gone on strike to press for their demands. A few days after the strike in Chennai, Swiggy told NDTV that the company had had a positive dialogue with the protesting delivery partners and was back to serving the entire city of Chennai with its fleet of workers.

Meanwhile, the Indian government’s new draft social security code is said to have recognised gig workers, and will mandate gig economy companies to contribute to a social security fund for gig and platform workers, reported Business Standard. Approved by the Union Cabinet last week, the code, which will have several other benefits outlined for gig workers, will come up in the Parliament’s ongoing monsoon session.



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