What’s the deal with the gig economy?

Sascha: [00:00:02] From Equity Mates Media. Welcome to The Dive. I'm your host, Sascha Kelly. You could argue in this last decade it's never been easier to make a buck. All you needed is a smartphone and the right app and you can moonlight taxiing people around, delivering pizzas, walking dogs. All thanks to companies like Uber, DoorDash and Wag that built marketplaces that facilitated work easily. It's called the gig economy, and this way of working is a two way street. While there's no commitment from the company, there's also no commitment from the worker. Just cash transacted for a job done. But just like dating, working under a no commitment structure is great in theory and a little bit more complicated in practise. And after a decade or so, we're starting to see the pressure mount. Regulators, unions and the gig economy. Workers themselves are pushing back and working to establish labour rights for insecure workers. And this week, Australia's Transport Workers Union has made a deal with gig economy giant DoorDash, the first sign that things might be about to change. It's Friday, the 13th of May. And today, I want to know, is the gig economy being reigned in? To do this, I'm joined by my colleague here at Equity Mates Darcy Cordell. Darcy, welcome to the dive.

Darcy: [00:01:26] Thank you, Sascha. 

Sascha: [00:01:27] We're talking about this because there's been a significant development this week. What's the story here? 

Audio clip: [00:01:31] The Transport Workers Union is calling for a national rethink. 

Darcy: [00:01:35] So as you've mentioned, the story is the deal between DoorDash and Australia's Transport Workers Union. We're pretty light on details at this stage. It's kind of a deal to make a deal, but basically they're going to introduce minimum rights and conditions for their delivery drivers. 

Sascha: [00:01:49] Well, that sounds great. 

Darcy: [00:01:51] It is in principle, but we're not quite sure what's going to happen yet. The union said that it recognised the flexible nature of gig work, but also agreed the need for enforceable industry wide standards set by an independent body. It's pretty significant because this is the first deal of its kind between an Australian union and a gig economy platform. 

Sascha: [00:02:10] I assume that while it's the first in Australia, there might have been other deals globally and around the world. Can you take me through them? 

Darcy: [00:02:18] Yeah, you're right. There have been others. In February this year, Uber announced a deal with Canada's United Food and Commercial Workers, one of the largest unions in Canada. Earlier this year, a French court held that 120,000 gig economy workers were employees rather than independent contractors. And this also followed a similar court decision in the U.K. after declaring gig economy workers, employees rather than contractors. Uber signed a deal with GMB, one of Britain's biggest unions. 

Audio clip: [00:02:48] Those are cheers that echoed through Silicon Valley as the highest court in the land ruled. Uber drivers must be treated as workers rather than self-employed. 

Darcy: [00:02:58] So we're seeing a shift around the world here after a decade of rising gig economy workers. We're seeing unions, regulators and lawmakers push for more labour rights for these workers. 

Sascha: [00:03:09] Okay. Just so we're on the same page, what exactly is the gig economy? Can we have a definition? 

Darcy: [00:03:15] For those unfamiliar with the term, I'm pretty confident they've used their services. 

Sascha: [00:03:20] Darcy, why don't you rattle a couple of them off for me? 

Darcy: [00:03:23] Heading off to the airport or the pub? Uber. Hungry for some food late at night? DoorDash or Uber eats. Can't be bothered to lift your own furniture when you're moving home? Airtasker or maybe even Gumtree.

Audio clip: [00:03:34] With Airtasker get more.

Sascha: [00:03:37] I've used that one when I moved in somewhere and I didn't want to make my couch. I just put it on Airtasker. This guy came and made it for me so much easier than having a boyfriend. 

Darcy: [00:03:47] It's so much easier also. So there are a few key characteristics. Workers are engaged on a task by task basis. There's no guarantee of continuous work. Work is performed by individual workers, but it can be commissioned by other individuals or business. So basically, these are two sided marketplace businesses. 

Sascha: [00:04:07] Okay. I think I understand. So basically, the company is a conduit between the two parties who want to exchange cash and services. 

Darcy: [00:04:14] Yeah, some other examples. Upwork and five. They connect skills with other people who need those skills. Wag connects people that need a dog. Walked with a dog walker and Instacart can connect those. Happy to go to the shops with others that need shopping done for them. 

Sascha: [00:04:30] Oh my gosh. I want that one. I hate shopping. That's amazing. I didn't know that existed. 

Darcy: [00:04:34] Instacart is massive in the US, but I don't think it's really reached Australian shores yet. 

Sascha: [00:04:39] Come on, when's that global economy? When you want it. 

Darcy: [00:04:42] But a key feature I need to mention, Sascha, is that these workers are independent contractors, not employers. So they're not protected by worker protection laws. For example, in Australia, a survey by the Transport Workers Union suggests that three out of every four food delivery drivers. Are actually paid below minimum wage. 

Audio clip: [00:05:01] I think people would be surprised to know that the guy who delivering yours, midnight sushi or whatever it is, like under the minimum wage. 

Sascha: [00:05:10] Darcy That's really quite frightening. You mentioned a whole bunch of companies and I've got this feeling that it might just be Sascha Bias because I use them a lot. Are they actually as big as I feel that they are? Like, how big is the gig economy? 

Darcy: [00:05:25] It's massive. Sascha And during COVID, it got a lot bigger. People wanted food delivered. They wanted online orders come to their door. And of course, so many people lost their jobs that they were looking for other work. A stat that blew my mind. 59 million American adults participated in the gig economy throughout 2020. That's about 36% of their entire workforce. 

Sascha: [00:05:47] 59 million. That is huge. 

Darcy: [00:05:50] It's absurd. It kind of blew my mind when I was writing that, but it's not quite as big around the world. 15% of working adults in England and Wales, the gig economy workers in the European Union, it's about 11% and here in Australia there are approximately 250,000 gig economy workers. 

Sascha: [00:06:08] And how big's our working economy again? 

Darcy: [00:06:11] Around 13 million. So it's not a massive percentage. But having said that, I do always say deliver over eight strivers all across the road.

Sascha: [00:06:19] I know, especially on their bikes in the rain. And I'm thinking, oh, you poor things. 

Darcy: [00:06:24] They're everywhere. I know. 

Sascha: [00:06:25] But what about the platforms themselves? Like globally? Who are the biggest players? 

Darcy: [00:06:30] We'll start with over. 

Audio clip: [00:06:31] I'm Dara Khosrowshahi, Uber's new CEO. 

Darcy: [00:06:34] Can you guess how many Uber drivers there are around the world? 

Sascha: [00:06:37] I'm terrible at guessing games, Darcy. I think I've said that, but I'm going to just go 1 million, a nice round number. 

Darcy: [00:06:44] A nice guess, but just under 4 million around the world. It's a lot of cars. 

Sascha: [00:06:49] That's also a lot of people like. That's a small country.

Darcy: [00:06:53] It's about a million shy of New Zealand's entire population. 

Sascha: [00:06:56] Wow. Okay. 

Darcy: [00:06:58] But Sascha, have you noticed that the price of Ubers are going up slightly? 

Sascha: [00:07:02] Yeah, actually, the other day, it was cheaper for me to get a cab, Halm, than it was to get an Uber. Yeah. 

Darcy: [00:07:06] When I first started using Uber's, it was so cheap for me to get around, but I can't help noticing the price jump too. According to Rakuten intelligence, the average cost of a ride with Uber has increased by 92% in the last three years. 

Sascha: [00:07:20] For the mathematically challenged. That's almost double, isn't it? 

Darcy: [00:07:23] And there's a few reasons for that. Basically there's not enough drivers, so demand is high. But Uber and Lyft, especially in the US, have an effective duopoly in the market. They've got about 95% of the market share of ridesharing. So we've talked about Uber. Let's move on to Uber Eats tonight.

Sascha: [00:07:42] I'll be eating a chicken shandy with chips and chicken salad. 

Darcy: [00:07:46] Did you know that they're expected to account for one third of the total restaurant delivery market by next year? 

Sascha: [00:07:52] Holy moly, how much is that? 

Darcy: [00:07:54] That's huge. They're going to bring in about $26 billion in sales and they've got over a million drivers worldwide. 

Sascha: [00:08:02] That's a massive Darcy. But I know Uber eats isn't as big globally as DoorDash is, which is small here, but massive in the States. What's their footprint look like?

Darcy: [00:08:12] Yeah, that's right. DoorDash is the largest food delivery company in the States. They've got over 50% of market share. 

Sascha: [00:08:18] Well, those are some big statistics. Like that's a lot of people walking and that's a lot of revenue that they're bringing in. So this must be a massive part of the economy, right? 

Darcy: [00:08:27] Darcy You're right, Sascha. They've actually reshaped the economy over and left, disrupting transport, Airbnb with travel DoorDash and operates with food delivery. But there is a really interesting point here. They're giant companies, but none of them actually make money. 

Sascha: [00:08:43] Look, Darcy, it's really embarrassing, but if I urban by urban history, you would see that I've given them a lot of money. So where is it going? 

Darcy: [00:08:52] They're making plenty of revenue, but not profit over. For example, made $17 billion through charging you for food or connecting you to a driver. But they spent more than that to run the business. And so overall, they lost $500 million last year. 

Sascha: [00:09:08] So they've made a massive impact on restructuring our attitude to work and our ability to make money and be connected. But they haven't actually made any money as a company and they've albeit some of them have been around for a decade. 

Darcy: [00:09:22] That point becomes really relevant when we're talking about the unionisation of the gig economy. A key part of this push for labour rights is to improve pay for the workers and job security. 

Sascha: [00:09:33] All right, Darcy. Sir, we've covered what the gig economy is, how big these companies are, and then the shocking fact that a lot of them don't make any money. So let's take a break and have a look at how this push for labour rights is happening around the world and what that's going to mean for these massive global players. Welcome back to the dive. I'm here with my colleague, Darcy Cordell, and we're discussing the gig economy and the push for labour rights. We've been talking about this story because of a landmark deal between the American food delivery platform DoorDash and the Australian Transport Workers Union. But crucially, this isn't a story in isolation. This is a trend that we're seeing globally.

Darcy: [00:10:20] Yeah, absolutely. Sascha, everywhere in the world, we're seeing a shift. 

Sascha: [00:10:23] Why don't we start in the U.S.? 

Darcy: [00:10:25] Sure. So the focus of the gig economy is California. Uber and Lyft have been pushing for what they call a third way of working, which would provide gig workers with limited benefits but prevent them from gaining employee status as they kind of wish. 

Audio clip: [00:10:40] What drivers don't get is paid time off, sick days or unemployment insurance. That could save these companies 20% on employee costs. 

Sascha: [00:10:49] So kind of like a hybrid model between not quite a gig economy contractor, but not a full time employee. It's going to be just a new Frankenstein model. 

Darcy: [00:11:00] Yeah, it's a compromise, effectively. Uber, Lyft and DoorDash spent more than $200 million on a ballot measure known as Prop 22. And this would allow the drivers to remain independent contractors, but would receive some limited benefits. 

Sascha: [00:11:16] For Uber, Lyft and other gig economy companies clinched a major win with the passage of Proposition 22. 

Darcy: [00:11:22] Prop 22 was approved back in November, but it's actually been overturned since by a California judge. It was deemed unconstitutional. Now, this is a pretty big setback for the companies, but a victory for Labour organisers and drivers who argue that they're not being treated fairly. Uber and Lyft have long said their drivers are independent contractors, which allows them to avoid the expenses of health insurance, unemployment insurance, sick leave and other benefits. 

Sascha: [00:11:50] Well, that sounds like an unfolding story that Darcy, one that we might have to revisit. Let's move to the U.K., where you told me that 15% of working adults in England and Wales are gig economy workers. So what's the push for labour rights there? 

Darcy: [00:12:04] In February last year, the British Supreme Court ruled that Uber drivers in the UK were employees rather than contractors. 

Sascha: [00:12:11] Today, outside the Supreme Court, Yaseen and James heard the decision they'd been waiting for.

Darcy: [00:12:15] And then in March, over agreed to guarantee 70,000 drivers a minimum hourly wage, holiday pay and pensions as well. And then in May, Uber signed a deal with GMB, one of Britain's biggest unions.

Sascha: [00:12:28] And you mentioned at the beginning of the episode that something's happening in France. Can you tell me about that? 

Darcy: [00:12:32] A series of French court rulings found that gig economy workers were employees and that these marketplace platforms were guilty of, quote, undeclared work. And also around the world, the mood is shifting. There have been court rulings in Canada, Belgium and the Netherlands between labour unions and there's gig economy platforms trying to define exactly what a gig economy worker is, whether they're self-employed or employees, depending on specific criteria. 

Sascha: [00:13:00] Well, Darcy, it just sounds like the writing's on the wall. It sounds like all these different countries around the world are all trying to define what the gig economy is. And are we just about to witness more legislation on these platforms, these gig economy platforms?

Darcy: [00:13:14] It looks like we're heading that way. But I need to mention Spain. 

Audio clip: [00:13:18] It's lunchtime in Madrid and global writer Julius Caesar is on the move. 

Darcy: [00:13:22] They were the first European country to significantly regulate the gig economy last year. 

Audio clip: [00:13:28] Now the Spanish government says it wants to protect the rights of the food delivery riders. So they've announced a plan that will make them employees of companies. 

Darcy: [00:13:36] So the Spanish Supreme Court ruled that riders were employees and required the delivery companies to directly hire their riders and improve transparency about the app's algorithms and working conditions, hiring and firing decisions. But it didn't work out as planned. A couple of companies just left the country. 

Sascha: [00:13:55] Rather than deal with these new regulations. 

Darcy: [00:13:58] Exactly. They thought, I'm getting out of here. And Deliveroo was one of them. Others have kind of ignored the instructions or worked to subvert them. On the day the law came into effect overnight, flat out fired 3000 workers so they didn't have to hire them. And now they hire through third party companies, so. 

Sascha: [00:14:16] They kind of subcontract to the contractors to get around it. 

Darcy: [00:14:19] Yeah, they're working out ways to get around it. Just eight. One of the major delivery platforms that did comply with the law then stopped hiring new riders. They had enough employees. So for many riders, it made this work harder to get while not really improving conditions or pay. 

Sascha: [00:14:36] Okay. So that didn't have the effect that I think the workers thought that they were going to get by fighting for these conditions. 

Darcy: [00:14:43] And it comes back to the fact that these companies are not profitable, as is if the gig economy workers were going to be employees, it would make these companies even less profitable. 

Sascha: [00:14:53] Labour costs are just so significant, aren't they? You're taking on the responsibility of someone's livelihood. So what does the future hold for the gig economy? Is this the end? Have we seen the peak? 

Darcy: [00:15:04] It's tough to make predictions, but we're definitely going to see more and more unions and workers push for greater regulation. Greater regulation leads to higher costs for these companies, and that could put some of them at risk. Or we might even say companies copy what Deliveroo did in Spain and just flee countries altogether. Because Deliveroo even said in their IPO, if there are law changes and increased regulation, this puts a direct threat on their business model and means they're not going to make as much money and they're already unprofitable. So this is a big risk. 

Sascha: [00:15:37] Darcy, a really complicated story that you brought to the dive today, but I think we're going to leave it there. Let us know your thoughts. Did this subject matter totally blow your mind? Are you also in shock that 59 million Americans relied on the gig economy in some form in 2020? Let us know. Send us an email. The dive at Equity Mates dot com. You'll find us on any of the channels on social media. We're going to be back in your feeds on Monday. In the meantime, thanks so much for joining me today, Darcy. 

Darcy: [00:16:06] Thanks, Sascha. 

Sascha: [00:16:07] Until next time