Getting to grips with the gig economy

12 October 2016

Last week we learned that the Prime Minister has commissioned a “review of modern employment” which will consider whether existing employee rights are appropriate for new forms of work. Although much discussed, such jobs are currently only loosely defined. Variously described as the ‘gig’, ‘sharing’, ‘on-demand’, ‘platform’ or ‘collaborative’ economy, there is debate, for example, around whether they include non-financial service exchanges, or only paid work. Nevertheless, all descriptions share at least two things in common: that they allow freelance labour to be sold flexibly on online platforms; and that they are going to fundamentally change the global labour market.

At face value, however, it appears as though the cries of ‘revolution’ may be premature, particularly in the UK. A telephone survey by the European Commission in March, for example, found that only 30 per cent of UK residents have even heard of such collaborative platforms, higher only than Cyprus and Malta in the EU 28.

Usage amongst those who are aware of the gig economy is also lower than recent analyses might imply: of those who have heard of collaborative platforms, only 27 per cent have ever used them to purchase a service, representing only 8 per cent of all survey respondents from the UK. Crucially, the survey also found a low propensity to provide services in the UK: of those who indicated that they have used such platforms to buy a service, only around one-fifth have ever provided services. This is supported by research from McKinsey, whose study looking at the US and the EU-15 found that, of people they class as “independent workers”, only 6 per cent have used a digital platform to provide labour.

However, the relatively high ratio of service users to service providers implies that those who are providing services are doing so fairly frequently. In fact, no respondents indicated that they had only provided services once, and almost half claimed to provide services at least once a month. This is corroborated by an online survey conducted by the University of Hertfordshire, which found that, of the 11 per cent who had found work using collaborative platforms in the last year, nearly one-third said this represented their main source of income.

Moreover, despite it being difficult to accurately capture the size and growth trends of the UK’s gig economy (principally because traditional measures of GDP capture it poorly), the consensus is that it is growing.  Perhaps the most comprehensive market-sizing exercise has been undertaken by PwC, who estimate that collaborative platform revenue more than tripled across Europe between 2013 and 2015. The UK, along with France, they suggest, “lead the way” in the growth of collaborative platforms.

So whilst we have not quite seen an “explosion” of collaborative tech platforms fundamentally change the labour market, a significant and rapidly growing number of people are clearly relying on the gig economy for a considerable portion of their income.

This raises significant challenges as well as opportunities for policymakers. Attention, so far, has focused on the appropriateness of existing employment law and the implications of the gig economy for the social security system, as demonstrated by the Government’s review and the summer strikes. However, policymakers must also consider whether skills provision allows the potential of the gig economy to be harnessed, as well as the opportunities it presents for extending working lives and delivering a more efficient public-sector workforce. These questions, and others, will be explored further in forthcoming blogs in this series.

Ben Dobson, Researcher, Reform



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