Tomorrow's Economy

Work and the ‘platform economy’: Lessons from Scandinavia, Germany and France

22 July 2016

Progressives must show greater leadership in responding to changes that have left voters feeling increasingly insecure at work

Florian Ranft

For progressives the narrative on the digital economy should be clear: they must embrace digital technology to boost growth, increase productivity and employment and change labour law and social protection rules where necessary. But taking a look across the European political landscape shows that in most countries the centre left mostly offers rhetoric, not reality, and often not even that. In particular, on the issues of labour law and social protection, one of the natural habitats of the left, there are hardly any answers on the table as to how some of the most dynamic and innovative but at the same time disruptive businesses can be integrated in Europe’s economic and social structure.

At the core stands the question of how progressives can reform industrial age labour regulation and social policies so that they do not stifle innovation but allow fair competition in modern economies. Finding answers to this question is crucial for the centre left for the decades to come. In order to challenge backward-looking and reactionary policies of conservatives they must strike a balance between the promises of technology and the protection of workers from new risks in the digital era.

Workforce in the platform economy

In this new era firms of the ‘platform economy’, such as Amazon, Ebay, Google, Facebook and Uber, to name a few, create online structures that enable users to connect and exchange services or goods for a variable or fixed price on the basis of rating systems. They open up new ways of integrating so-called ‘outsiders’ into the labour market, and greatly challenge how value and work is created. The increasing digitalisation of the labour market through platforms is expected to boost global GDP by $2.7tn by 2025, according to the McKinsey Global Institute. A recent study by Feps and the University of Hertfordshire shows that nearly 5 million ‘clickworkers’ in the UK have found work via such platforms. Almost one quarter of the respondents to this online survey said that they receive more than half of their income from work on platforms, 81 per cent of them being the breadwinners in their households. There are also more sceptical accounts that do not directly support the notion of a rapidly growing share of platform workers but do recognise shifts in patterns of self-employed work, at least in the US labour market.

This and other research suggest that platform workers may represent a growing part of the labour force in modern economies. This shift in how people work and find employment is taking place at a time when labour markets are becoming more flexible, causing a rise in atypical employment and severe polarisation. The fact is that platforms disrupt current social insurance system and welfare models in most European countries because they break with existing rules.

Scandinavian experience: three lessons

In Scandinavia the innovative and disruptive nature of the ride-hailing company Uber has brought the debate on work in the ‘platform economy’ to the forefront of politics. In contrast to the US and the UK the ride-hailing company Uber had a bumpy start in Scandinavia. In Sweden and Finland Uber drivers have been sentenced for breaking with existing taxi regulation, having been ordered to pay fines up to €12000. In Denmark six Uber drivers are currently being heard for similar allegations in court, with the verdict expected within weeks. As a result the company suspended its operations of its famous UberPop platform in Sweden and Finland and is awaiting further developments, while it could face the same prospect in Denmark, if the court case goes against the drivers.

With respect to the political reactions by governments and social partners in Scandinavia there are three lessons for progressives to learn.

First, the centre right has made deregulation its main priority. In practice this means pushing for pro-market and pro-technology reforms which aim at removing regulatory barriers for businesses, thereby greatly challenging the foundations of the Nordic model. In Finland the removal and reduction of state regulations has become the guiding principle of Juha Sipilä’s government which has made a strong case for a more competitive work force, flexible sectoral bargaining agreements and fewer regulations in the transport sector. Also the conservative-liberal government led by Lars Løkke Rasmussen in Denmark follows largely a pro-technology liberalisation agenda, including initiatives to reform the taxi sector and the announcement of a national reform programme on the sharing economy.

Second, social democratic parties and trade unions struggle to develop a coherent political agenda on technology related issues. They have shown a strong commitment to anti-social-dumping, essentially protecting the social welfare model. However, to a great extent these views conflict with their ambitions to harness modern technologies and update their economies. This has led to divisions within the Danish Social Democratic party over the questions of how to respond to the court cases against Uber drivers, and to voting against the setting-up of an ‘Uber task force’ in May. In Finland the Social Democratic party remains largely absent from the debate. As an example stands a new policy agenda by SDP chairman, Antti Rinne, including 10 ideas for [a modern] Finland which does not mention the potential benefits or impact of technology on labour or the economy as a whole. Only in Sweden is the centre-left government taking these matters more seriously. They have published a series of reports on the sharing economy. Nevertheless, the recommendation are not ambitious enough and vague, focusing mainly on skilling-up workers and improving the existing social framework.

Third, the topic has also offered rightwing populists a platform to exploit the conceptual weakness of the centrist parties. For the Danish People’s party controversies around Uber have offered a unique opportunity to make a strong case for those workers who feel left behind from globalisation and technology. They cooperate with trade unions taking a stance on stronger ‘traditional’ workers’ protection. Making a strong for ‘ordinary’ workers is also a strategy embraced by the True Finns. A taxi reform proposal, proposed by transport minister Anne Berner in April, provoked strong opposition from within the government itself by True Finns leader and deputy prime minister, Toni Soini. The reform proposal that would have opened up the highly-regulated Finnish taxi sector and paved the way for ‘Uberisation’ was withdrawn and it remains open as to whether it will be discussed in parliament.

Advancing the debate on the centre left

The debate on platform workers is yet to mature among centre-left parties and trade unions, challenging their assumption as to what being progressive means. This is also true for other European countries, such as Germany where the work on ‘Arbeit 4.0’ led by Andrea Nahles’ labour ministry has kicked off an insider debate that has not produced any visible policy output yet. Instead, policymakers might turn their heads to France where the debate on platform workers has accelerated in recent months. The much contested labour market reform pushed through by the government makes timid steps forward in terms of giving individuals new rights. For instance, it provides employees with the ‘right to disconnect’, allowing them to switch off their mobile devices in their free time. It also creates a new ‘individual activity account’ where everyone above 16 years will have access to his or her training rights regardless of their work status and situation. The IAA could develop into an online point-based system centralising different rights (care or volunteering leave, pension, unemployment, etc).

More interestingly, thought-leading organisations have produced a series of reports that centre on platform workers. These reports do not see the end of salaried work but stick to the view that an increasing number of people will work as independent or platform workers, at least during part of their career. These new working configurations make it necessary to assert authority over the legal grey zone in which platforms currently operate. At the moment digital business models may benefit from unlawful competition in labour where they can set a lower price than their competitors, often at the expense of worker’s rights or the society as a whole if social security insurances are in place.

At the centre of a France Stratégie report stands the quest to solve the regulatory challenge of platforms acting as labour market intermediaries. It highlights three options. The first option is an ad hoc adaption of existing statuses whereby platform workers would move up towards an employee status. This option would reinforce platform workers’ social protection – but it might also threaten platforms’ business model by increasing their social responsibility. A second option would be to create a new, hybrid status half way between employees and independent workers; and finally the creation of a single worker status for all. The latter, by far the most radical option, would mean that all workers have access to the same rights and training opportunities regardless of their status. Centre-left politicians and reformist trade unions, namely the CFDT, have expressed sympathy for the idea of simpler and universal rights, which have the potential of smoothing people’s career in an ever-increasing flexible work environment. However, it is too early to predict whether this vision will play a major role in the presidential elections next year.

The debate on platform workers in France might provide other progressive parties across Europe with a solid starting point. As people feel increasingly insecure about their future at work there is a great need for democratic discourse and control relating to sociotechnical changes. While conservatives and rightwing populists offer easy solutions to complex scenarios, either protecting vested interests or deregulating industries, the centre left must claim thought leadership on providing individuals with strong safety nets and empowering tools in a new work environment. There is a chance for progressives but they have to discuss it more rigorously and project themselves more resolutely into the future.

Photo credit:  JPstock / shutterstock