The gig economy is bad for jobs and Australia

Contributed by Joe Montero

There are those who talk up the so-called gig economy as new way to create work and flexibility in people’s lives. It is not. This is a means to create a cheap labour force.

It is a new way of organising work, continuing the old of practice of producing by piecework in a new form. Piecework has a long history, for example, in the clothing industry, where women and sometimes families are taken on to work at home, subsidising the cost and receiving little payment in return.  Instead of being paid for time spent at work, they are paid for the work they have done.

The difference between old style piecework and gig work is that instead of taking work home, there is an app through which, the worker can be called out to do the work and the practice is being spread to industries where it did not occur before.

By engaging  labour in this way, the employer can avoid pay full wages, deny benefits like holiday, sick and long service pay and the payment of superannuation contributions if the wage is kept below $450 per month.

Someone downloading the app and making themselves available for work through it, is not considered an employee, but becomes an independent contractor,   providing one’s own means to carry out the work, cover the operating costs and arrange the payment  tax as an operating business.

Since the Harvester ruling of 1909, the Australian employment system has relied on the concept that wages need to be based on what is costs to maintain an average household of two adults and two children. The awards system of the past and the enterprise agreement system of today are based on this, as is the existence of a minimum wage.

Evidence suggests Harvester decision handed down by Justice Higgins, accurately represented what the market naturally tends towards. Most of the time, attempts change this, have only affected small changes around the edges. The excepetion  is during economic downturn and a significant rise in unemployment.

At the same time, there exists a battery of legislation and procedures that have limited the fall in wages and conditions below what was recognised in the Harvester ruling. True. Governments have been whittling away at it and there has been some fall. Restrictions on the capacity of unions to push up wages and conditions have also been increasing. It remains that political opposition has so far stopped limited changes.

Dissatisfied with progress so far, major employer organisations are campaigning for more and at the same time encouraging members to take full advantage of loopholes that allow the exploitation of opportunities to  achieve the same result through the back door. This is what has been driving the huge increase in the casualisation of work and driving the rise of the gig economy.

On the face of it, the gig economy attempts to remove the connection between labour and time at work. This cannot done, because labour costs are what determine the value of labour and this is based on how long it takes to create a good or service.

The truth is that the gig economy is so profitable,  because profit is primarily made, not from the sale of goods and services, but by withholding a portion of the wage and by passing on a significant portion of the cost of operating the business to the “contractee” and society as a whole.

A good example is Uber. The company enjoys a huge rate of profit by investing very little, providing almost nothing and relying on cheap labour.  This is why it can offer rates that undercut traditional taxi services and capture the market. The driver provides the vehicle, pays for its maintenance, pays for insurance, work cover, fuel and other costs. On the success of this scheme, Uber is now starting to branch out into other areas, such a food delivery.

Uber is far from being the whole of the gig economy in Australia. According to the Association of Superannuation Funds of Australia (ASFA), there are about 100,000 people working in it and there is an expectation that the number will rise as more employers use this opportunity to cut back wages and conditions, unless the practice is stopped or restricted.

On 3 July this year, University of Technology Sydney future of work research director Dr Sarah Kaine, explained that companies using gig platforms like Uber, Deliveroo, Freelancer, AirTasker and Rideshare comes at a “cost to society”.

“You have employees who are entitled to the types of conditions that we have enjoyed for some decades, and then you’ll have those others.”

She went on to say:

“Because gig workers take the work as independent contractors — whether it’s a rideshare driver or a handyman, a dog walker or a care worker — they fall outside of existing labour law”.

“So they don’t have minimum wage provisions and they don’t have all of the other things that we associate with being an employee.

“It’s a growth in a different academy of workers that we don’t really cater for in our existing regulatory system.”

The rise of this form of cheap labour threatens existing jobs and conditions.

The employers’ representative body, the Australian Industry Group in a report released last year, described this type of work as, the biggest component of the category it calls freelance work and markets it as a great development towards what it calls, the “collaborative economy,” providing for a growing demand from employees for greater work flexibility.

But the ASFA undermines its own line of argument by suggesting that the gig economy is a means to overcome what it sees as “dysfunction” in the economy by imposing imposed by barriers to incrfeasing “labour flexibility”  and its manifestation in the form of the refusal of workers to take on lower wages and inferior conditions, in the fact of the existing level of unemployment and causalisation of work. By becoming involved in the gig economy employers can sidestep unions and collective agreements.

There is a certain honesty in this this admission, which puts the spotlight into what the gig economy is really all about.

By joining the gig economy, employers can evade organising and handing over PAYE tax to the government and  pay less tax overall. The black economy grows, because the contractor  do not earn enough to pay much tax, or they do not understand, or comply with their obligations as a business. Taxation revenue falls as a result and society pays with a subsequent cut in services. In a way, tax payers end up financing the gig economy.

From the viewpoint of employees and society, the rise of the gig economy is not a good thing and there is every reason to put a stop to it.









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