Making a living in the gig economy
‘Don’t let making a living prevent you from making a life’ is a famous quote by former American basketball coach and motivational speaker John Wooden. However, judging by the crises that have rocked the global economy in recent years –and that have caused steep inflation and rising energy bills– living comfortably is hard to come by these days. This is especially true for people that have to deal with an unnerving lack of a safety net, zero hour contracts, long working hours and sometimes precarious working conditions. In short, workers of the so-called ‘gig economy’.
The term gig economy was first introduced during the 2008/2009 recession to describe highly skilled workers providing their services to a variety of companies and projects, primarily through digital platforms.[i] According to Valerio De Stefano, professor of labour law at York University in Toronto, Canada, another aspect of the gig economy is ‘work on demand via apps’, where working activities such as housekeeping and transport are channeled through apps and where minimum standards in terms of service and workforce management are often the norm.[ii] An important feature of this trend is a shift from the traditional workplace and nine-to-five jobs towards a technology-driven rise of ‘freelancing’ with workers becoming self-employed entrepreneurs instead of mere employees.[iii]
None have embraced the zeitgeist of the gig economy so vehemently as Germany’s Samwer brothers, founders and directors of start-up incubator Rocket Internet. Their company has made a name for itself through its controversial business model, which initially consisted of copying successful ventures and turbocharging them into leaner, meaner clones of the original. This was the case with Alando, an online auction site which was eventually snapped up by Ebay for an estimated $43 million dollars.
The Samwer brothers next turned their attention to the food delivery business by investing a whopping €500 million in Delivery Hero, an online food ordering service that soon vied with delivery giants Takeaway.com for the title of Germany’s largest online platform for food delivery services.
The core of the company is formed by an online platform where customers can place their orders via a mobile app. Delivery Hero established partnerships with over 1.5m restaurants and local stores that pay a monthly subscription fee in order to feature on the platform. For providing the actual service to the customers Delivery Hero relied on a fleet of more than 30,000 riders who deliver food to customers in around 30 minutes on motorbikes, scooters, and bicycles.
During the pandemic however, a perfect storm of stiff competition from the likes of Gorillas and Flink paired with a chronic shortage of riders meant that clouds were gathering for the Samwer brothers and their app-based business model. An injection of hundreds of millions of euros was necessary in order to stave off the chagrin of unhappy customers and keep the company afloat.
“If our rider costs [go] up and the customers are not willing to pay for it … that is by far the single largest risk for the food delivery segment,” said Niklas Östberg, Delivery Hero’s chief executive in early 2022.[iv] Attempts to increase profit margins by further squeezing workforce costs did not meet success. In September 2022, Delivery Hero’s Spanish subsidiary Glovo was ordered to pay €79 million for breaching labour laws by classifying riders as self-employed instead of contracted employees.
In the Netherlands there has also been a collision between gig economy companies on one hand and the law on the other. In what turned out to be a similar case to that of Glovo, the Dutch Supreme Court stated in 2021 that the riders of food delivery service Deliveroo were contracted employees, entitled to benefits such as social security and participation in pension schemes.[v]
Critics were quick to point out that this was not the watershed moment many had hoped for, as not all platform workers were automatically designated as employees, but the tone was set. District courts handling labour cases are now less inclined to side with employers and base their decisions on individual contracts. A year after the Supreme Court’s decision, Deliveroo has ceased all their activities in the Netherlands, citing disappointing growth figures as the reason for their departure.
It could be argued that adapting to the gig economy is inevitable. Rapid technological developments mean that companies can succeed in providing more efficient services to their customers than ever before, and change the 21stcentury workplace. In addition to this, the structure of our contemporary society also forces us to think differently about work. One aspect of this is the aging population in western societies. In Switzerland for example, the ratio of workers to pensioners today is 3 to 1, compared to 7 to 1 in 1990.[vi] This population structure makes the current manner of financing the pension system untenable in the long run. Here, the flexibility of the gig economy can serve as a solution for people of retirement age that want to keep being a part of the workforce.
This is the case in Denmark, a country where 23% of people over 67 years of age are still active in the workplace.[vii]Many of them view working as a way of staying in touch with the rest of society and keeping mentally and physically fit. For others however, the rising cost of living means that their pensions alone are simply not enough to live off. Turning to the gig economy in order to make ends meet is a sheer necessity for some of them. Unfortunately, older people are at a particular disadvantage working in the gig economy. Research shows that they often have longer trips, work in less lucrative areas and avoid high-demand times. This affects their earning power in the gig economy, where compensation based on productivity is the norm.[viii]
But the biggest challenge in the gig economy is preventing employers from using sham self-employment in order to circumvent labour and social security regulations.[ix] According to Lucy van den Berg, assistant professor of labour law at the Vrije Universiteit in Amsterdam, the main problem with managing these undesirable effects is an efficient control of the rules. There is for example no regulating body overseeing the enforcement of labour laws in the Netherlands. The court case against Deliveroo on behalf of their workers was initiated by FNV, the largest Dutch trade union, safeguarding the interests of workers where legislators have failed.[x]
Van den Berg sees this court case as a wake-up call to society. In order to prevent a race to the bottom, the human aspect in labour relations should be emphasized and hard-won workers’ rights protected. She argues that if a technology and efficiency-focused gig economy company claims to be innovative but at the same time cannot exist without exploiting the rights of their workers, the quality of their product just isn’t good enough.
[i] Vallas & Schor, p. 274.
[ii] De Stefano 2016, p. 2.
[iii] Peetz 2019, p. 162.
[v] Hoge Raad (= Dutch Supreme Court) March 24th 2023, ECLI:NL:HR:2023:443.
[vi] Vincent Subilia in: ‘Travail, les salariés prennent la main ?’ (documentary), TV5Monde Nov. 1st 2023.
[vii] Travail, les salariés prennent la main ?’ (documentary), TV5Monde Nov. 1st 2023.
[viii] Cody Cook, Rebecca Diamond & Paul Oyer, ‘Older Workers and the Gig Economy’, American Economic Association, 109 (2019): 372-376.
[ix] Valerio De Stefano, ‘The Rise of the ‘Just-in-Time Workforce: On-Demand Work, Crowd Work and Labour Protection in the ‘Gig-Economy’, Comparative Labor Law & Policy Journal 2682602/10 (2015): 1-51.
[x] Van Rosmalen 2023, p. 108.
Marlon studied English Language and Culture, with an MA in Youth Literature and in International Education. She thinks Children’s books are a great combination between her love for literature and illustration. With a preference for realism, but a growing interest for more 2D styles, she likes learning to illustrate digitally/digitalize drawings, as well as making lino prints, painting, and engraving. In her free time she likes to knit and read, dance and swim, or make music with her band. You can follow her @marlongiliane.