Coronavirus, the gig economy, and what this means for the future of work
This pandemic shows the vulnerability of the gig economy and why the State really does matter
Just a few short weeks ago, it was possible in the United States to have a conversation about the future of work where the debate was between advocates and critics of technology-enabled fragmentation of employment structures. This debate, which could be summarised as: “the Uber model, good or bad?” now seems like a relic of another age.
Now as I write this blog, Silicon Valley is effectively closed. This is not a metaphor. San Mateo and Santa Clara counties, which include Silicon Valley, and four other neighbouring counties including the cities of San Francisco and Oakland have issued an order that no one is to leave their homes for anything other than essential purposes. There is a list of essential services — it does not include platform companies. It includes grocery stores, medical personnel and construction workers.
For participants in the traditional labour market, this is not good news. Unemployment insurance in the U.S. does not cover close to all unemployed workers, income replacement levels are mediocre (11th lowest in the OECD) and total spending on unemployment benefits in the U.S. is 4th lowest in the OECD (just ahead of the United Kingdom). Finally it continues to be true, despite the passage of Obamacare, that many benefits are dependent on employment.
But for workers in the gig economy; for Uber and Lyft drivers and TaskRabbit workers, as well as software writers and a wide range of other New Economy jobs, the sudden disappearance of economic activity is more than bad news, it’s a catastrophe. If they don’t work, they don’t get paid. They also simply can’t afford to get sick.
In the United States, platform workers are generally not eligible for unemployment insurance. And so, what the coronavirus pandemic exposes is that: rather than gig economy jobs feeling modern, these workers are much more like dock workers or a farm labourer in the 19th century, if they are too sick to work, they don’t get paid.
Perhaps nothing is more telling in this regard than the contrast between how Uber is treating workers they admit are their employees and how they are treating their drivers. Uber employees have paid sick days and are being told to work from home. While, drivers are offered unspecified financial support if they are actually sick but are clearly expected to keep driving until they get sick.
Throughout the San Francisco Bay, the centre of the greatest accumulation of technology-related wealth and expertise in the history of the world, hundreds of thousands of people are suddenly living in a kind of Dickensian fear, the fear of no work and nothing to fall back on as the economy contracts around them.
Last week, as it became clear that we were not going to contain the coronavirus in a handful of locations in the United States, something else became clear as well. That we had designed our economy, or had allowed it to be designed, as a kind of ideal incubator of an epidemic. Because we are an economy whose health insurance systems have all been redesigned to make sure the patient pays first dollar. In our privatised health care system most health insurance plans, including those offered through the Affordable Care Act (“Obamacare”) require workers to pay an amount in health care costs before the insurance coverage begins (“deductibles”) and to pay some of the cost of each health care treatment (“co-pays”). And we are an economy where a sizable percentage of the workforce doesn’t have paid sick days. So, millions are seriously incentivised not to seek medical treatment when they are not feeling well, and to go to work sick as long as they can.
On top of that, we have millions of undocumented workers, who live in constant fear of being deported often to life threatening circumstances in countries like El Salvador and Guatemala. And what sectors are workers without sick days and with weak health insurance concentrated? Food service, hospitality and retail.
That was how it was before the rise of technology-driven precarious work. And now, we have added to that base line an entire workforce of millions completely outside a formal employment relationship — with no paid sick days and often no one to demand them from. And no access to the workers compensation system if they are hurt on the job and no employer provided health insurance because the platform companies have tried every legal and political means to keep their workers classified as “independent contractors” rather than as employees.
And so, as a political economy we have sowed the wind and now we are reaping the whirlwind. Workers have neither the ability to stay home nor the incentive to seek treatment for minor illnesses like the flu. And on the other side of the ledger, employer lobbyists and employer-side think tanks like the Heritage Foundation are hard at work in Washington telling members of Congress they can’t pay for sick leave or their businesses will collapse.
The experience of the coronavirus epidemic should teach the lesson that digital technologies in the 21st century have made possible a new world of work that in reality has created a new world of insecurity and powerlessness akin to that created by the transition from agricultural labour to industrial labour in the 19th century (see the work of my IIPP colleague Carlota Perez).
This transition requires new institutions of solidarity — new forms of labour unions, and a renovation of the very idea of social insurance to address the need for fundamental security — security against illness, injury and unemployment — among a new generation of workers. In the absence of the development of these new forms of solidarity, it is hard to see how technological change will continue at its present rate or avoid crippling political opposition.
And this is where the role of the state is essential. This week, in the United States a bill was passed to mandate that private companies with less than 500 employees, provide 14 paid sick days to their employees. This bill does not cover all employees, let alone platform workers treated as “independent contractors” by their employers. But it is testimony to the fact that state intervention is essential to constructing systems of economic safety for workers, and that the advent of the digital economy has not changed that fact, if anything it has heightened its significance.
The coronavirus should teach us that the dreams of libertarian utopias promoted by techno-libertarians have no real answer to what is happening in the streets of Silicon Valley right now.
If we want a healthy, stable 21st century, where innovation can flourish and actually improve peoples’ lives, we need a robust, entrepreneurial state, one that can help build human solidarity by building institutions that both directly promote and shape innovation and, provide the underpinnings of safety that allow entrepreneurs and workers to take risks.