Finance Work The gig economy is taking us all for a ride

The gig economy is taking us all for a ride

gig economy minimum wage
The undoubted benefits of cheaper services will mean little if they undermine the long-held notion of a 'living wage'. Photo: Getty
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Over the silly season hundreds of thousands of Australians will have used peer-to-peer services such as Uber taxis, Airbnb accommodation, or ordered meals with Uber Eats, Deliveroo or Foodora.

They’re cheap, efficient, and are rapidly becoming a routine part of life – so much so that Uber Eats has just announced it will follow the lead of competitor Deliveroo in the UK market by launching a subscription model to encourage customers to make it an even bigger part of their lives.

Deliveroo UK offers customers a £7.99 ($14) subscription that, once taken up, means customers don’t have to pay £2.50 per order to get their favourite meals delivered.

That’s an attractive offer for frequent users, and takes advantage of the economic principle of ‘sunk costs’ – “I’ve paid for it so I might as well use it” – to get them using it even more.

But it also poses the obvious question of who is paying for the deliveries.

A business operating with numerous fixed costs – a building lease, insurance, equipment financing and so on – can afford to cut its prices if sales volumes rise, because those fixed costs are spread across more orders.

So in theory the ‘gig economy’ worker who actually drops off the meals can be remunerated as before, with the restaurant absorbing the delivery fees.

Whether that actually happens is another matter.

In the Australia market, jobs website Indeed has surveyed a small number of Deliveroo delivery riders and reports that their average income is $1342 per week, which is actually above the national average total weekly earnings ($1180) for all workers (men and women combined). Not bad.

However, there are important questions that need to be asked of all gig economy services: How many hours is a worker putting in, and hence what is their hourly rate?

Are superannuation payments being made? Are health and safety standards being met?

And what kind of security does the gig-style income provide for a worker who has to pay rent, access normal financial services and so on.

Those questions are at the heart of legal actions in Europe, the US and the UK as to whether the peer-to-peer, app-connected worker is an employee or a self-employed business person.

Increasingly, courts are coming down in favour of the former – essentially because there is more potential for abuse and exploitation between an app service provider and the worker than would be the case for a true self-employed business owner.

A tectonic shift

None of these questions will go away, because while the competition, innovation and better prices for consumers are great, the peer-to-peer revolution is rapidly undermining basic principles that the majority of voters, left and right, have accepted for decades.

It’s now 110 years since Australia’s first successful wage arbitration case, the Harvester judgement, set the precedent of the “living wage” for workers “with normal wants, and under normal conditions”.

The many incarnations of that process seen since – today represented by the rulings of the Fair Work Commission – were fought for politically, settled, and ultimately woven into the platforms of all major parties.

To think those hard-won foundations of Australian life will simply be discarded because a disruptive business model is spreading through the economy is to confuse ‘market forces’ with ‘democracy’.

At the moment many people are enjoying the benefits of the Uber-style services without making the connection that, left unchecked, they threaten to remove Australians from the unemployment statistics, only to add them to the ranks of the working poor – those whose “normal wants … under normal conditions” can’t be met by their wages.

And 2018 is the perfect year in which to hear political leaders in all the major parties spell out where they stand – not on the desirability of cheap taxi rides or affordable pizza, but on how they will protect the “living wage” of everyday Australians.

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