Is the Gig economy the modern day sweatshop?
In what is surely a momentous blow for the Gig economy in Europe, Uber has been stripped of its licence to operate in London. The company that has come to represent the ‘move fast break things’ culture of Silicon Valley perhaps more than any other, now looks set to lose one of its most lucrative cities along with 3.5 million users.
This is comeuppance for a company that has consistently demonstrated a flagrant lack of respect for the values we share in Europe.
According to London Mayor Sadiq Khan "all companies in London must play by the rules and adhere to the high standards we expect" echoing the regulator Transport for London "Uber's approach and conduct demonstrate a lack of corporate responsibility".
These are serious words and should not be taken lightly. They go to the heart of the gig economy: low pay, no social coverage and no corporate responsibility. While this might be acceptable in liberal economies like the US, most Europeans have a profound belief that companies play an important role in the European Social System: they are by law responsible for "their people".
Tech companies have flaunted this belief by claiming that "their people" are not really their employees, but rather independent contractors. Beyond morally reprehensible, we all know that this is a convenient way to cheap labour. It is in no way beneficial to "their people" and should encourage us all to question why those of us that can afford better would use such a service.
As a venture capital firm we’ve looked at a number of Gig economy companies across Europe. They all boast incredible growth but many of them have business models that are fundamentally flawed. If a company is reliant on not paying taxes or giving its workers the rights they have come to expect in modern and civilised society in order to make a profit, then it probably isn’t a great business.
Deliveroo is another great example. Consumers would rather not have to pay for their pizza to be delivered. So Deliveroo subsidises its services to keep its customers happy, which puts a pressure on the riders’ wages. While Deliveroo’s engineers work in a trendy office complete with indoor football pitch, its riders are calling strikes about inadequate pay and a lack of workers’ rights. This doesn’t seem right. And that’s because it isn’t.
The Taylor Review* highlighted that while flexibility in the workplace was important and had contributed to record high employment, it also found that flexibility arising from the gig economy was too often one-sided with ‘employers seeking to transfer all risk onto the shoulder of workers in ways that make people more insecure and makes their lives harder to manage’.
This was a well thought-through and progressive report by Matthew Taylor. It’s clear that the likes of Uber and Deliveroo will have to change their practices, which is a good thing. Time will tell whether their business models can survive.
With Uber now being stripped of its licence to operate in London, the city has just sent a warning shot that will be heard throughout Europe: We will no longer tolerate modern day sweatshops and while the Gig economy has merit, nothing is more precious to Europeans than their core social values.