The EU stands up for gig economy workers

On Thursday, the European Parliament voted overwhelmingly to back a report calling for better worker protections in the on-demand economy, also known as the sharing economy. The resolution isn't binding but, potentially, the issue presents a bigger threat to companies such as Uber than the resistance of their more traditionalist rivals. Europe is not afraid to appear retrograde when it comes to worker benefits, and though that may drag it down economically, it's also what makes it a nice place to live and work in.

The sharing economy rapporteur Maria Joao Rodrigues called for "decisive steps towards legal certainty on what constitutes 'employment', also for work intermediated by digital platforms". She said open-ended contracts should remain the norm, and on-demand platforms should guarantee "certain core working hours" to all workers. In approving these demands, the European Parliament added its weight, and some specific demands, to the European Commission's push for more stringent regulation of the "gig economy". If the European Union moves to force the platform owners to recognise their workers as employees, this will upend their business models and, in some cases, make them indistinguishable from traditional companies.

A different line of attack against Uber and its ilk is now under consideration by the European Court of Justice: A taxi association in Spain argues that the United States unicorn is a transport company that should have applied for all the necessary licences before entering the Spanish market. But, even if the court rules against the US company, it won't create a high enough hurdle to drive it out of business in Europe because it won't ban it from hiring "independent contractors" at a fraction of the cost incurred by incumbents, who have regular employees. And, the verdict won't make any difference, say, to the takeaway couriers used by United Kingdom-based Deliveroo: It doesn't need a licence to deliver pizzas.

Mandated employment standards, however, could break these companies. After all, their true innovation isn't the rather straightforward and easily replicated tech behind them, but their ability to bypass labour standards and thus undercut competitors on price - perhaps even after the money they get from investors is used up, and they can no longer subsidise their services.

At this point, Uber and other similar innovators are even facing problems with their approach in the US, with its soft labour standards: Uber is finding it difficult to reach an acceptable settlement with drivers who want better terms, and some workers have been able to secure recognition as employees from regulators. In Europe, gig economy companies also face troubles. Last October, a London employment tribunal forced Uber to recognise two drivers as employees and guarantee them a minimum wage. The US firm appealed the ruling.

Deliveroo, for its part, has to deal with couriers' attempts to unionise - something that's relatively easy to do in Europe - and obtain full benefits, including paid vacations and a minimum wage.

Mandated employment standards could break these companies. After all, their true innovation isn't the rather straightforward and easily replicated tech behind them, but their ability to bypass labour standards and thus undercut competitors on price - perhaps even after the money they get from investors is used up, and they can no longer subsidise their services.

These are, however, minor setbacks compared with the possibility of Europewide regulations specifically targeting on-demand platforms. If they are adopted, companies that are too "advanced" to recognise their workers as employees will need to become more like the new crop of companies that provide temp workers - Swiss-based Mila or San Francisco-headquartered Wonolo, which legitimately employ the personnel they hire out. While these firms are still competitive because the industry they're disrupting is unforgivably low-tech and slow-moving, the taxi industry has largely made up its technological lag compared with Uber. For delivery services, the tech barrier is also low.

The EU is right to be worried. According to a paper last year by Ms Ilaria Maselli and her collaborators, written for the Centre for European Policy Studies, the share of contingent workers in the EU had risen to 32 per cent in 2014 from 27.4 per cent in 2002. While this has helped alleviate unemployment problems since the financial crisis, these are not the kind of jobs Europe needs.

Countries with high unemployment - 10 EU members have an unemployment rate above 8 per cent - could temporarily allow the growth of, what University of Hertfordshire professor Ursula Huws calls, "cybertariat". For other European nations, job quality - and the quality of life in general - is more important than adding to their number. There's no point in multiplying workers unhappy with their lot because of the precariousness of their position, the lack of a guaranteed income and a social safety net. Companies that can grow only on these terms are doing something wrong.

BLOOMBERG VIEW

A version of this article appeared in the print edition of The Straits Times on January 21, 2017, with the headline 'The EU stands up for gig economy workers'. Print Edition | Subscribe