Questions and answers about coronavirus and the UK economy
Questions and answers about coronavirus and the UK economy

Update: How is the coronavirus crisis affecting gig economy workers?

Since the start of the crisis, opportunities for some gig economy workers have grown, especially in deliveries – but expansion has not been uniform. A recent court ruling that Uber drivers should not be classed as self-employed may further affect this part of the labour market.

The potential short- and long-term effects of the pandemic on the gig economy were discussed here in August 2020. Now, nearly a year after the first lockdown began, what more can we say? In particular, will the recent Supreme Court ruling on the status of Uber drivers influence the way that the gig economy responds to the crisis?

On 19 February 2021, the UK’s Supreme Court ruled that Uber drivers should be classed as workers, entitled to earn the minimum wage and to benefits such as holiday pay. The court backed an earlier employment tribunal, and rejected Uber’s claim that its drivers are self-employed.

This was the latest in a number of cases about the status of workers in the UK’s gig economy. These individuals provide a service through a platform or app, earning a fee for each ‘gig’ they complete in place of a regular wage.

The Supreme Court ruling has potential implications for other gig economy workers, not just Uber drivers, making it a good time to revisit questions about the effect of the pandemic on gig economy work in the UK.

How has the gig economy fared so far during the crisis?

Although data on the gig economy are still limited, we do now have more information about the short-term effects of the pandemic. In some respects, the gig economy has fared better than other sectors. Delivery companies in particular have done well. Orders through the takeaway platform Just Eat, for example, grew 58% between the last quarter of 2019 and the last quarter of 2020 and in December 2020 the company announced plans to hire 1,000 new couriers by March 2021.

In addition, workers in the gig economy were less likely to suffer the loss of income that other self-employed workers experienced. In a survey conducted in August 2020, more than a quarter reported having more work than usual (Blundell et al, 2020).

Other types of gig economy work have become scarcer. Bookings for Uber rides were 73% lower in the second quarter of 2020 compared with the same period the previous year. Despite the findings of the survey, there is anecdotal evidence that competition for ‘gigs’ on some platforms is increasing, as people who have lost other jobs turn to gig economy work (Fairwork Foundation, 2020). Signing up to a platform or app is often easy and barriers to entry are low, so it is unsurprising that the supply of gig workers would increase during an economic downturn.

Gig economy workers are generally low paid and may not be able to afford to stop working due to health concerns. More than three-quarters of gig economy workers were concerned about health risks at work during the pandemic, compared with less than a quarter of other self-employed workers (Blundell et al, 2020). This is likely to be because of the type of jobs done by gig economy workers. For example, many work as taxi drivers, one of the occupations with the highest rate of Covid-19-related deaths (Office for National Statistics, ONS, 2020).

In our previous article, we noted that gig economy workers are not eligible for the government’s furlough scheme or for sick pay if they fall ill, and they may not be covered by the Self Employment Income Support Scheme. This concern proved well-founded: although many platforms have introduced some form of sick pay since March 2020, most have not offered any compensation for lost income. Any sick pay offered is generally limited, for example, the ride hailing platform Bolt offered its drivers £100 a week sick pay, less than two-thirds of the minimum wage for a 40-hour working week (Fairwork Foundation, 2020).

In summary, the evidence suggests that the past 12 months have generally been very difficult for gig economy workers, even though a minority do report increased income.

What more can we say about the long-term prospects for the gig economy?

In the previous article, we explained that the pandemic could have a long-term effect on demand for gig economy work. There are some signs that this is indeed happening in some sectors. For example, the food delivery firm Deliveroo has begun trials with supermarkets Waitrose and Aldi. If consumers continue to do more of their food shopping online after the pandemic, we expect to see a long-term growth in the number of gig economy couriers, replacing more secure jobs in supermarkets.

Last summer, the demand for digital gig economy work seemed to be increasing quickly, and we noted that this could continue if firms began contracting work that was previously done by employees to gig economy workers. But the early indications are that this has not happened yet.

Figure 1 shows that digital gig economy work has increased during the three lockdowns in the UK, but fell during the summer and early autumn of 2020 when restrictions were eased. This could be a seasonal effect, or because furloughed or unemployed individuals worked in the gig economy during lockdowns but returned to their original jobs when they could.

Ultimately, it is still too early to say much about the long-term effect of the pandemic. More research will be needed over the next few years and better data collection will be required.

Figure 1: Digital gig economy work in 2020

Source: iLabour Project.
Note: Two week rolling average, indexed to 1 on 01/01/2020.

How could the Supreme Court ruling affect the gig economy?

The Supreme Court ruling has the potential to change the way that some gig economy platforms operate in the long term. The court considered two main questions:

  • First, it ruled that Uber drivers are not self-employed contractors but are workers entitled to the minimum wage and holiday pay.
  • Second, it decided that any time that a driver spends logged on to the app is ‘working time’ and should be paid.

The court’s reasoning was based on the fact that when drivers are logged on to the app their behaviour is tightly controlled, with Uber dictating the routes, fares and communication with passengers. Drivers are therefore unable to act as entrepreneurs in the way someone who is truly self-employed could.

Other workers for similar platforms could bring similar cases, and this could lead to an increase in pay for some gig economy workers. But it could make it harder to find work in the gig economy. Apps might limit the number of drivers who can log on at the same time, in order to avoid paying them when they are not driving customers.

An important part of the court’s reasoning was that although the drivers had signed a contract agreeing that they were self-employed, this clause of their contract had no effect because of their unequal bargaining position. Put simply, the court ruled that platforms such as Uber cannot require workers to sign away their entitlement to employment rights.

This could be an important protection for gig economy workers as it could stop companies exploiting any increase in the supply of people who cannot find traditional jobs and seek work in the gig economy. The food delivery firm Just Eat has already offered to move couriers to zero-hours contracts, paying them an hourly wage and entitling them to sick pay, parental leave and holiday pay. If Just Eat is able to recruit more couriers than other apps as a result, others could be forced to follow suit.

It is important to note that, although the court’s reasoning could apply to workers for other platforms (especially taxi drivers or couriers), there are many gig economy workers in other industries. In particular, many work in the IT sector (information technology), providing services such as website design. The ruling seems unlikely to apply to these workers who have much more independence than Uber drivers and so its effects will be somewhat limited.

Where can I find out more?

Who are experts on this question?

Author: Rachel Scarfe
Editors’ note: This is an update of an Economics Observatory article originally published on 23 August 2020 (previous version available here).
Photo by Humphrey Muleba on Unsplash
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