The potential of peer-to-peer platforms
How different platform-based business models have the power to disrupt industry, but could also harness this power to better serve workers as well as consumers
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By Brhmie Balaram, Josie Warden and Fabian Wallace-Stephens
@brhmie | @THREADproject | @fabian_ws
This article is part 3 of the RSA’s report ‘Good Gigs: A fairer future for the UK’s gig economy’
While the gig economy has come under scrutiny for labour practices, online platforms have the potential to empower workers through peer-to-peer exchange.
In this section, we explain how online platforms work, delving into how different platform-based business models have the power to disrupt industry. We make the point that this power can be harnessed to better serve workers as well as consumers. Without consciously wielding this power in workers’ interests, platforms could exacerbate inequality and further distort markets.
We would argue that the problem is not the gig economy — the problem is how some online platforms choose to operate. Platforms must make choices about how to achieve an optimal balance of supply and demand, how quickly to expand, and how to manage their relationship with workers. These choices can be very different, as we demonstrate through examples of platforms leveraging technology to empower workers.
Platforms as ‘disruptors’
Online platforms are essentially brokers between buyers and sellers. They aren’t products or services in and of themselves, but facilitate their exchange through creating a network that is accessed via an app or a website.
Beyond this basic premise, the business models of online platforms vary considerably.
Platforms are diverse, forming the basis of social media such as Facebook, Instagram and Twitter; enabling the streaming of music and media like Spotify, Netflix and YouTube; and expanding our minds through online education with Coursera and Udemy. Platforms like Craigslist and Gumtree encourage us to recycle our goods for extra cash; Kickstarter and Indiegogo offer a way for the crowd to fund new ideas and projects; and Apple’s App Store and Etsy serve as hubs for creative content, such as apps and crafts. As we focus on in this report, there is also the new generation of commercial sharing platforms like BlaBlaCar and LoveHomeSwap to take into account, and this is far from an exhaustive list.
It may seem as if these platforms simply enable a range of transactions, but they are strategies for disrupting industry in different ways. In essence, these platforms are challenging concentrated power in a number of industries, either through disaggregation or the democratisation of markets.
Disaggregation in industry
Disaggregation refers to platforms unbundling products or services that industries have traditionally sold as a package, so that individual components can be obtained. For example, platforms such as Apple’s iTunes and Spotify have been instrumental in disaggregating the music industry, enabling consumers to buy or listen to any song without acquiring entire albums. Similarly, Netflix, a streaming platform for films and television, offers viewers an opportunity to watch shows of interest without paying cable companies for a full network of channels.
Often if disaggregation is possible, power has been too concentrated within the industry. For example, when disaggregation was first emerging as a trend, it was observed that record companies had “feasted on buyers by forcing them to purchase things they didn’t want… a whole album to secure one favourite song” (‘Chronicle of the Newspaper Death Foretold’, Slate)
Democratisation of markets
Not all platforms disaggregate industry, but through enabling peer-to-peer exchange they can democratise markets by supporting more producers to participate. In this case, producers are the ones creating value through offering up their own content, goods, or services whether that’s a Twitter user alerting followers to a breaking news story, a designer with an app featured in Apple’s App Store, or an Uber driver making an airport pick-up.
Online platforms do not create value themselves; they are dependent on their users doing so.
The RSA calls this shift in the way that value is created ‘shared value creation’. We note that it is a key difference between the traditional economy and what is known as the ‘sharing economy’.
Ultimately, this is shifting power in the market. Industries that were concentrated and controlled by big business are now being dispersed by individuals. However, there are concerns about who is capturing the value being created, and thus wielding power in the market. Although platforms enable peer-to-peer exchange, they are also mediating, regulating, and potentially controlling key features of transactions. Platforms differ in their extent of mediation, or control, and this again comes down to choices that they make; for example, in terms of deciding their rate of commission, the ways in which they stimulate demand, or the degree to which they integrate workers as part of the business. Disruption becomes problematic when platforms begin to re-concentrate power.
The general trend towards a ‘winner-takes-all’ market
For platforms to be a viable business, they depend on the ‘network effect’. For every new user a platform adds, its usefulness improves for the existing network, and thus increases the value of the business overall. However, once a platform like Facebook is able to achieve significant scale, the size of the network effectively locks in its users and seals the company’s influence in the market.
We see this even when platforms disaggregate industry. Unbundling content may appear to tip the balance of power in favour of consumers as they pocket savings and make gains in choice. However, the goal isn’t necessarily to provide more value to the consumer; a company’s goal is to realise the greatest possible returns as a commercial business. Platforms may deliver a cheaper product through unbundling, but they are banking on becoming profitable by winning over a significant share of the market. Apple’s iTunes, for example, has been cited as a huge force for market lock-in given the billions of songs it holds in its proprietary format.
In the sharing economy, the RSA refers to this phenomenon as ‘crowdsourcing monopoly power’ because platforms depend on amassing a crowd for success; their value is derived from their network of users rather than producing a more easily replicable product or service. This may result in what we call ‘networked monopolies’. Although other platforms or companies could technically compete, it becomes difficult to offer users the same level of utility without being able to match the size of the network effect.
It is incredibly rare for monopolies to exist in the form defined by the term’s original meaning. Instead, our term networked monopoly is used to connote power in influencing the price, output and investment of an industry, as well as in limiting the entry of new competitors.
Unlike Facebook or Apple’s iTunes, the networked monopolies of the sharing economy comprise two different kinds of users — consumers, but also workers of the platform as in the case of many gig and on-demand platforms. Platforms in the gig economy thus have a different relationship (and arguably, obligation) to their users than other internet platforms because their interdependency is based on labour.
Yet, it isn’t a given that platforms will become networked monopolies simply because of the network effect. The RSA previously observed that for platforms to maintain their positions in the market they must empower the very users they depend on, usually to help fight against tighter regulations. Networked monopolies thus come down to choices that platforms make to intervene in the market and reinforce network effects. Uber, for example, heavily subsidises rides, so passengers have been paying as little as an estimated 41 percent of the actual cost of their trips.
By and large, the choices that companies make are skewed in favour of consumers over workers because cheap prices are often a determinant of market share. It may appear that the market is free and that competition is healthy because we as consumers have widespread choice and at little cost, but in a growing number of industries just a few companies are able to sustain the price wars. It is primarily through tempting us to buy more that these companies are able to expand their profit margins; a higher volume of sales can offset subsidies in price that generally come at the expense of workers. This describes a business model developed by platforms like Amazon, but that has long been prevailing in traditional industry as well.
Market concentration in the UK (and in the US for that matter) is arguably too high. Companies are dominating the share of production, and thus sales, in a number of industries, including retail in groceries and energy provision. The ‘Big Four’ (Asda, Morrisons, Sainsbury’s and Tesco) have over 70 percent of the market share in keeping our fridges and pantries stocked. Meanwhile, the ‘Big Six’ (British Gas, EDF Energy, npower, E.ON UK, Scottish Power, and SSE) supply energy to nearly 90 percent of homes and businesses in the UK (PDF, 1.6MB). There are similar oligopolies in the private hire industry, as well as in hospitality and tourism. Online platforms have stunned us so far by successfully challenging longstanding incumbents, but their model is often designed to corner the market. Ultimately, the choices they make reflect this and the wider trend of companies creating and competing in a winner-takes-all market.
At present, however, it’s difficult to know whether networked monopolies will endure because the sustainability of businesses in the gig economy has yet to be proven. Most have yet to turn a profit.
For instance, even if Uber’s long game is to automate its rides by rolling out self-driving cars that would mean radically transforming its business model. Although roughly half of an Uber ride’s cost goes towards paying the driver, the company benefits from an asset-light model; it’s not clear how its costs would change if it transitioned to owning and maintaining expensive vehicles. More importantly, it might use innovative technology, but it would be considered a traditional business — renting out products rather than facilitating peer-to-peer exchange as part of a network. Automation may mean that Uber actually becomes more vulnerable as a business. A platform’s competitive edge comes from its network, not from selling a product that can be easily reproduced (in this case, by other well-established car manufacturers). It makes sound business sense to treat gig workers well, as they are the underlying force of a strong network.
Starting up in the gig economy is a risky gamble, made riskier by playing fast and loose with workers’ rights. By encouraging and enabling platforms to make different choices we can improve the welfare of gig workers, as well as the odds of business sustainability. As some of the examples of newer platforms in the gig economy show us, peer-to-peer businesses have great potential to genuinely empower workers in the marketplace.
Transformational choices in the gig economy
Below, we’ve collated some examples of companies committed to empowering gig workers through choosing a different way of operating. We might think of these choices as ‘transformational’ because there is a concerted effort being made to show that through empowering workers they are valued and that platforms can serve their interests as well, which requires a shift in the entrepreneurial mindset.
1. Loconomics: An example of a platform co-op
In the US, the movement for ‘platform cooperativism’ is well underway. Platform cooperativism is a model of shared ownership, presented as an alternative way of organising workers in the gig economy. Under this model, users and workers co-govern platforms, setting the terms and conditions together.
In the spirit of the commons, Loconomics was founded as a worker-owned version of TaskRabbit. Collectivism is embedded in its structure: every worker has an equal vote in the election of the board and in other major decisions that affect their interests; workers share in profits through dividends based on their participation (i.e. time spent working), and in lieu of charging commission, workers pay a small monthly fee to cover the costs of marketing and operations (the fee goes towards capped salaries for those who help keep the app running behind the scenes).
While the movement is much further ahead in the US, the UK is also beginning to experiment with platform co-ops. GMB, a union in the UK, is currently developing a co-operative ridesharing app to be piloted in Leeds. The idea underpinning platform co-ops is that gig workers should be capturing more of the value that they’ve created themselves, and that they too should be making the choices governing their labour.
2. Juno/Gett: An example of a co-operative and commercial hybrid
Juno is a ridesharing platform that has been rolled out in New York to compete with the likes of Uber and Lyft, attracting rivals’ gig workers by positioning itself as ‘better for drivers’. Like Loconomics, workers see a greater return of the profits through the vehicle of equity ownership. Juno’s founders have set aside a pool of restricted stock for its drivers that is claimed to be equal to their own shares; thus, the more fares a driver picks up, the more of Juno’s shares she can earn. Juno is also offering drivers other forms of support, such as a 24-hour helpline to call, a phone and paid data. Consideration for drivers has been designed into the app, which allows for tips and the option to block problematic passengers.
Where Juno differs from Loconomics is on corporate governance. Drivers are distanced from the decision-making, which may reflect differences in how the two companies were funded. Loconomics does not need to be accountable to shareholders because it was initially financed out of pocket by co-founder Joshua Danielson; Juno, on the other hand, is venture-backed like most platforms in the gig economy, and thus needs to take its shareholders’ interests into consideration.
Although the hybrid model has its limitations when it comes to involving drivers in day-to-day operations, it is still has the potential to reorient businesses in the gig economy. For example, Uber’s head of North American operations, Rachel Holt, disclosed in an interview that Uber has been looking into giving stock options to its drivers and that they are watching Juno to learn whether such an offer will work. It was recently announced that Juno has been acquired by Gett, another ridesharing service in the gig economy. Gett has said it is committed to continuing “long term value sharing” with its drivers along the lines of Juno’s offer, although the details have not been worked out yet.
3. La’zooz: An example of a blockchain-based platform
Blockchain is often known as the technology underpinning bitcoin, the first digital cryptocurrency, but it is increasingly being applied in other ways. It enables genuine peer-to-peer exchange by decentralising, or disintermediating, platforms; in other words, it eliminates the middleman, which happens to be the company behind a platform. Through a ‘trusted ledger’, blockchain-based platforms create a public record of transactions and facilitate direct payments between workers and their customers. No commission is taken as the platform is collaboratively managed.
In the RSA’s report on the sharing economy in 2016, we discussed the emergence of La’Zooz, a blockchain-based platform that was attempting to take on Uber. Since our report, La’Zooz has refocused its ambitions, identifying a path forward in ‘realtime ridesharing’. Rather than relying on dedicated drivers, La’Zooz is appealing to commuters and other drivers passing by to pick up their peers along the way. It’s a modern way to carpool or hitchhike, so it does not directly compete with the likes of taxi services. The jury is still out on whether blockchain-based platforms may one day ‘disrupt the disruptors’.
The hype over blockchain has died down following some setbacks with the technology over the past year. It has potential to empower workers in the long run, but more investment and experimentation is needed. There are lingering questions, for example, about how blockchain-based platforms would develop the wider infrastructure of support for users that other platforms have established thus far. An opportunity is here for government, however — given the likely difficulties in regulating blockchain-based platforms, it may be that early involvement in developing blockchain’s varied uses will help government stave off headaches in future.
With all of the examples of alternative models and any to come, it must be stressed that a co-operative model alone will not assure success — simply being co-operative does not mean that the platform is necessarily the most efficient for consumers. Even if workers stand to benefit, platforms must build and sustain a critical mass of users to thrive, which, admittedly, requires making choices about more than the welfare of workers. In the final section, we address some of the systemic problems of capital, culture, and market distortions — all of which influence operational choices — as part of a series of recommendations designed to progress good work in the gig economy.
4. Transforming the labour market together
The gig economy may be high-growth, but it is still nascent. Adoption of the apps may have been swift, but it isn’t too late to shape the nature of these business models.
While the focus of our research is on what the gig economy is like for workers, it also speaks to wider trends in the marketplace. Conditions in the gig economy were not created in a vacuum. For example, companies have increasingly been tightening their grip around workers, whether that’s through using scheduling software or tracking technology to monitor the productivity of staff.
Moreover, if workers are topping up their income in such large numbers, it suggests that some are barely getting by in more traditional jobs. Even full-time employment can be riddled with problems, from chronic low pay to poor pathways for progression. There are also difficulties with enforcement of standards in the labour market, as recent cases of abuse at Asos and Sports Direct reveal. Trade unions report that it has become tougher to organise workers against exploitation as membership, which peaked in the 70s, is weak among young people and was last found be at only 13.9 percent in the private sector.
Businesses claim they would like to do more for workers, but are constrained in the operational choices they can make, limited by capital, culture, and market distortions. In the gig economy specifically, most platforms have been designed to scale and to achieve this they often require significant sums of money. Many turn to venture capital (VC), which then restricts how the business is governed as they are ultimately accountable to their shareholders. While equity crowdfunding is becoming popular, it is unlikely to yield the level of funding possible from VC and increasingly may be seen as complementing angel or VC investment. Some may counter that the primary objective of platforms shouldn’t be astronomical growth, but when the market is skewed in favour of winner-takes-all, businesses may feel compelled to compete on those terms. It has been argued that the market reflects a culture in which growth is glorified and disruption revered.
To truly transform the gig economy, more expansive change is needed in the marketplace. While we support efforts to clarify employment status, more can be done to challenge the status quo in terms of how businesses operate and are governed; how rights and benefits are administered to workers, and how business and civil society relate to one another.
Rethinking regulatory approaches
At the RSA, we encourage developing a different approach to regulation. Shared regulation builds on the concept of ‘self-regulation’ as articulated by the academics Molly Cohen and Arun Sundarajan. Under self-regulation, platforms aren’t viewed as entities to be regulated but rather as actors that are a key part of the regulatory framework; in other words, platforms should not be seen as the problem, but as part of the solution. However, under shared regulation, businesses are only one of many parties entrusted to be a part of the regulatory process. Users — both consumers and workers — are central in the participatory process of shared regulation, but community organisers, legal and administrative professionals (such as lawyers and insurers), investors, and designers are all involved. All of these stakeholders have played a part in the evolution of the gig economy, but there has yet to be any articulation of a shared goal between them.
Moving beyond self-regulation to a wider process of collaborative regulation would be in acknowledgment that, comparable to growing concentrations of economic power, we also have concentrations of political power within our democratic system. We are interested in how to disperse power and actively engage citizens in shaping fairer practices in the gig economy. The chart below, first designed when considering how to regulate the sharing economy, illustrates the different regulatory options available to us.
In the US, there have been strides made in forming new partnerships between businesses and institutions, such as trade unions and membership associations, widening the scope for workers to realise more rights and benefits. For example, Uber has partnered with the International Association of Machinists’ (IAM) Union to establish the Independent Drivers’ Guild, which seeks to improve the conditions of Uber drivers. It will involve the Freelancers’ Union (a membership association for freelancers) to further progress portable benefits, which are benefits, such as healthcare or pension plans, tied to a worker, rather than a company, and are thus retained even as workers move between platforms. These efforts at collaboration demonstrate that by attempting to innovate outside of the system as well as within, more radical change is possible.
The aim of our final recommendations is two-fold:
1. Begin building a new foundation of social and economic security that isn’t premised on traditional employment, but is based on good work for all.
2. Address systemic issues in the labour market, such as a lack of support for atypical workers or promising new business models.
The starting point should be committing to a new way of working together, or what we call shared regulation. In response to the changing labour market, the new government must steer innovation with workers in mind, setting out its vision for good work in collaboration with businesses and civil society. There is also a need to develop the wider infrastructure of the gig economy to better support workers, irrespective of their employment status, and to harness the potential of platforms through fostering the next generation of business models.
Ultimately, there is a larger question here about what kind of marketplace we want to enable in the UK.
The RSA’s recommendations
Developing the wider infrastructure of the gig economy
Recommendation 1: Government should collaborate with platforms, civil society, and workers on a ‘Charter for Good Work in the Gig Economy’
The new government should set out a vision for what good work is, collaborating with platforms, civil society, and workers themselves, to shape what this looks like specifically within the gig economy. Collaborating on this Charter will provide an opportunity to put shared regulation into practice as different stakeholders work towards a shared goal. It will serve as a starting point for committing to a new way of working together, as well as ensuring that work is fairer and more fulfilling as the gig economy grows.
Government could establish this Charter in partnership with representative bodies, such as Sharing Economy UK (SEUK), and organisations with an expertise in this area, like ACAS. There could be an open call for contributions to capture a full range of perspectives. Similar to the Scottish Government’s Fair Work Framework, a principles-based, rather than prescriptive, approach could be taken, but thought should be given to how these would translate on the ground.
Just as the current government has already signalled that we value technological innovation, a new government now needs to demonstrate with this Charter that we value workers as well. The point would be to help businesses understand what a good model of harnessing innovation in the interests of workers looks like. If traditional employment may no longer be the norm in the future, and particularly within the gig economy, there needs to be a commitment to providing workers with an alternative model of social and economic security.
Government may take the lead in distinguishing what good work looks like, but businesses and civil society are crucial in making good work a reality.
Recommendation 2: Government should invest in a dedicated service for gig workers
A dedicated statutory service could offer gig workers advice and general counsel about their employment rights, and information and guidance on the self-assessment process for taxes. While government should initially invest, it could be delivered through an organisation, such as a members’ association; the advantages of this would be enabling affordable insurance and pension packages based on economies of scale, administration of wider benefits, and the ability to pool members’ fees to invest in their best interests, such as in the development of WorkerTech.
The government’s own website (gov.uk) does not adequately clarify different legal statuses possible in the gig economy, let alone anticipate complex questions concerning how to work out which status may apply.
Technically, government could develop another online tool, but gig workers would realise additional benefits if a service could be resourced by government and tendered for by an organisation, such as a members’ association with national reach. The concern with a tool is that some may encounter difficulties with text online since legal terms aren’t easy to understand, or because English is a second language. But perhaps more importantly, members’ associations can find ways of easily connecting gig workers to one another, breaking down what is naturally siloed work. They can also support gig workers in other ways, for example, by insuring them or investing in technology (ie WorkerTech) that further empowers gig workers on the job.
Government should seek to pilot the service for a year, assessing whether it could be continued based on any uplift in taxes from gig work or through other commercial models.
Recommendation 3: The UK’s Financial Capability Board should expand its Strategy to strengthen financial savvy and security among gig workers.
Expanding the UK’s Financial Capability Strategy to include gig workers would be beneficial in terms of strengthening financial savvy and stability in a growing proportion of the workforce. Given how important a sense of a secure foundation is, there could also be more experimentation with ‘nudging’ to encourage saving for the long-term.
The UK’s Financial Capability Strategy is currently being delivered under the Money Advice Service, an independent service set by government. It strives to improve people’s ability to manage money well on a daily basis and also during periods of financial difficulty. However, the Strategy’s remit does not encompass non-standard or atypical work, such as self-employment, employment on a zero-hour contract, and gig work.
Considering that an increasing number of young people 16–30 years old are either already in or interested in gig work, it seems like a group that ought to be particularly supported.
Earnings from gig work can be prone to fluctuation and thus it can be difficult to set aside savings, particularly for the long-term.
We recommend that the Board overseeing delivery of the Strategy seek to work with the members of SEUK and other platforms to improve the financial capability of gig workers. Some platforms are already collaborating with partners rolling out innovative banking solutions for workers that may have wider benefit. Cogni, for example, provides gig workers with free Business Accounts to help them separate their personal and professional finances and tracks their spending to help them identify opportunities for savings.
‘Flexible safety nets’ could also nudge workers to accrue savings that they could either draw on in difficult periods, use to upskill, or to set up a pensions fund with matched contributions. Given that gig workers under the age of 22 will not be auto-enrolled by government in pensions, a flexible safety net might offer them an easy route to maintaining long-term financial security. These nets could be formed based on the US concept of ‘portable benefits’, which are funded through levies and administered through third-parties. In the UK, a taskforce could be set up to agree how the levy should be determined and the benefits administered.
Recommendation 4: SEUK, on behalf of platforms, and a civil society organisation should establish ‘Independent Peer Review Hearings’.
To ensure that gig workers have a fair appeals process and an opportunity to build community, Independent Peer Review Hearings would enable gig workers to challenge deactivation in front of a panel of their peers.
The idea for these hearings is based on the Drivers’ Panels recently set up as a result of the partnership between the International Association of Machinists’ (IAM) Union and Uber in the US. The partnership forged the Independent Drivers’ Guild, which introduced Drivers’ Panels to support a fairer appeals process and to build a sense of community among drivers. Panels create a new community service role for drivers, as well as a sense of connection between them. Drivers feel more invested in the platform because they feel they are being treated fairly.
Independent Peer Review Hearings could be set up to enable a more transparent process of addressing workers’ deactivation appeals. While there may be clear deactivation policies in place, hearings demonstrate to gig workers that the process is fair and accountable. Furthermore, in the UK, challenging unfair dismissal (essentially, deactivation) is only the right of employees, so even ‘workers’ in the gig economy would be in need of this unless reforms to the category are made.
Hearings would consist of panels comprised of a gig worker’s peers. Any gig worker can volunteer to serve on a panel, and the panel would only weigh in after a worker appealed against the platform’s initial decision.
The Independent Peer Review Hearings would aim to be industry-wide, rather than platform-specific, which is why a trade body like SEUK should spearhead the initiative in collaboration with a civil society organisation.
Encouraging sustainable business models to take shape
Recommendation 5: SEUK should work with platforms and relevant institutions to enhance training and development opportunities for gig workers.
All platforms should provide mutually beneficial training and development opportunities for workers, and some already do. However, it will require greater coordination of the sector by a trade body like SEUK to ensure that platforms are considering what progression looks like for gig workers and to devise a strategy that would support businesses to improve their offer. Institutions, such as trade unions or specialist organisations like CIPD, should be involved to provide independent and expert advice and input into the strategy.
In Section 2, we recommended that government specify that employment intermediaries are able to offer training and development opportunities, and to any category of worker. We now recommend that SEUK support platforms to take this further, collaborating with relevant institutions, such as trade unions or HR specialists like CIPD, to craft a sector-wide strategy that would consider how gig workers can upskill and possible pathways for progression.
As part of this, it would be helpful to take stock of what is already being provided, creating a public directory of training. Some platforms offer general, rather than platform-specific training, which is of wider benefit and will be useful in other work. For example, Uber offers courses in English language proficiency and financial capability, while Staff Heroes has a portal with options for different certifications in hospitality and tourism. All of the training is voluntary.
With a strategy in place and greater transparency, more investment in training could be stimulated.
Recommendation 6: Government should seed and support promising technology in the gig economy.
Government could seed and support promising technology in the gig economy through ringfencing a proportion of its new R&D fund and introducing a ‘regulatory sandbox’ for experimentation with blockchain technology, WorkerTech, and other technology that could better the labour market as a whole.
As we mentioned in our report, blockchain technology has a lot of potential, but early efforts do not come close to competing with the likes of more established platforms. Government should seek to support blockchain-based start-ups, particularly because funding can determine what the nature of corporate governance is (as the difference between Loconomics and Juno demonstrates, for example). There is also a window of opportunity here for government to gain insight into any issues with blockchain technology that might pose a regulatory problem in future.
Similarly, WorkerTech, which refers to technology intended to empower workers (ie through connecting typically siloed workers to one another), is showing promise. Again, this is mainly developing in the US, where platforms like CoWorker (enabling workers to build campaigns and petition for changes in their workplace) have been set up and are successful.
We recommend that government ringfence a proportion of its new £4.7bn R&D fund, assuming it is continued by the new government, to stimulate innovation in blockchain technology, WorkerTech, and other promising technology that could improve the lives of workers. It could do this through setting up a Challenge as part of the Industrial Strategy Challenge Fund (ISCF) for collaborative research between industry and academia. Following the current government’s review of patient capital funds, an incoming government could consider match-funding investments in this technology, channelling funds in a similar way to the British Business Bank but with a patient outlook.
A regulatory sandbox should also be set up, which will allow these start-ups to test innovative products, services, business models and delivery mechanisms in a live environment.
Recommendation 7: Government and Co-ops UK should help nurture platform co-ops that explicitly embed a social purpose into their mission, and government should consider supporting their growth by creating a fund to provide long-term equity investment.
New life is being breathed into co-operative models by companies like Loconomics and Juno. Co-operatives enable wider distribution of wealth among workers, but they also present an opportunity for platforms to create a sense of ‘stickiness’, or cultivate loyalty from workers in an increasingly transient labour market. Yet, co-operatives should also be nurtured to benefit communities as well as workers and platforms. As the platform co-op movement gains momentum, co-operatives should be encouraged to explicitly embed a social purpose into their mission, which would unlock alternatives to venture capital. It would also strengthen the case for an incoming government to support platform co-ops by introducing a new fund providing long-term equity investment.
Organisational innovation is as important as technological innovation, which is why the trend towards platform co-ops is significant. Workers can recapture some of the value they’ve created through a share of the wealth, or profits, and platforms potentially experience an uplift in productivity from more loyal, dedicated staff.
For example, some platforms noted that while they found it easy to attract workers, it was trickier to keep workers on the platform. This was particularly the case if transactions weren’t made on a one-off basis, but could instead be repeat bookings (meaning that once connected, the worker and the consumer needn’t continue transacting via the platform). Given the grey area of employment status in the gig economy, these companies are finding it challenging to create a sense of ‘stickiness’ on their platforms, or keep gig workers loyal to their platforms, without exercising excessive control. Adopting a co-operative model might ease this friction.
However, co-operatives could also rally more support from the communities they serve if they positioned themselves as part of the wider agenda to achieve inclusive growth. In doing so, they might qualify for financial consideration from a broader range of investors, such as Big Society Capital. Co-ops UK should thus support platform co-ops to embed a social purpose into their mission, much like a Community Benefit Society (‘BenCom’). This would also strengthen the case for government to support platform co-ops by introducing a new fund providing long-term equity investment.
Recommendation 8: Government should modernise the Competition Act in the UK.
In light of Brexit, there is an opportunity for the UK to revisit competition law and modernise the Competition Act of 1998. Concerns have been raised that industry in the UK is too concentrated and that this may mean innovation is stifled. To ensure a diversity of businesses, including in size, the UK needs to maintain a healthy and competitive market in which small businesses can equally thrive alongside established incumbents. Workers will better fare across the economy if inroads in the market are not made at their expense as companies try to achieve scale. Government should therefore consider widening the remit of the Competition Act to take into account workers’ interests alongside consumers’ interests.
As we discussed earlier, the market in the UK has become increasingly concentrated in a number of different industries, but businesses are not held to account because they still serve the best interests of consumers. Primarily, businesses are attempting to increase their market share through competing on price, but this has perverse effects across all industries in terms of influencing the way that companies operate and the choices they make. As a result, suppliers and workers are likely at a disadvantage. For example, we are sometimes made aware of labour abuses in an international factory, or of suppliers being squeezed in a bid to keep store prices low.
In our report on the sharing economy, we raised the issue of new forms of monopoly power emerging as platforms scaled. We cautioned that anti-trust law alone would not inspire change in the market, and while we still maintain this, we recommend modernising competition law to acknowledge the changes in the market and signify intent to address distortions.
Networked monopolies may not prove to be a concern, especially relative to other types of oligopoly or monopsony power currently wielded in traditional industry. However, government can only be certain if it interrogates this further. We recommend that the Competitions and Market Authority initiate an inquiry into whether market competition is robust, with the aim of modernising competition law so that workers’ interests are prioritised alongside consumers’ interests. A case could be made for also considering the interests of shareholders and taxpayers.
This would hopefully create a fairer playing field in the long run for start-ups, and lead to better conditions for workers in the gig economy and beyond.
Concluding remarks
The disruptive practices of a small number of companies in the gig economy have captured the public attention. But the gig economy, which itself falls under the umbrellas of the sharing economy and the ‘platform economy’, is a much bigger phenomenon. We need greater awareness among policymakers, commentators and the public of the diversity of this fast growing sector. Our own comprehensive research suggest that the gig economy could grow exponentially over coming years.
In the face of this potential there are a number of specific, short-term issues that need to be addressed through updating and clarifying the laws and regulations that are being applied (and misapplied) to gig work. As well as addressing these pressing matters, this report argues that we need to look at gig work through a wider lens, recognising that not only is the gig economy shaped by technological innovation, the working of the market and government policy but also by public expectations and aspirations. Unless we frame policy according to progressive values the danger is that human welfare will be compromised by technological possibility and market power.
This is why we urge that policy for the gig economy, and wider platform economy, is framed by a commitment to good work. By this we mean work which is fair and decent and with scope for personal fulfilment and career development. This goal provides direction and purpose in a debate that is complex and fast moving, as well as engaging with core concerns about eroding social and economic security as a result of technological innovation.
With good work as our aim we can see the immense possibilities provided by platforms to offer the workers of today and tomorrow not just tangible advantages like better remuneration and greater flexibility but a new more empowered relationship to work.
There can be a tendency to take a binary approach to regulation — permitting platforms free rein or restricting them by creating a hostile environment. There is a third way — shared regulation — and it requires a different way of working with business and civil society to steer innovation in workers, and ultimately society’s, best interests.
As we observed, this is an early test of how we respond to increasingly rapid changes in technology, and so it’s crucial that we get it right with the gig economy.
