Frank Field MP
Your MP for Birkenhead
don't read the menu options and go directly to the page content 

Inside the gig economy: the 'vulnerable human underbelly' of UK's labour market


24 August 2017
Guardian The modern working day has begun. Thousands of couriers have arrived at their local sub-depots, and spent the first hour sorting through mountains of parcels containing goods of all shapes and sizes, all bought online from some of Britain’s best-known brands. Every last one needs to be delivered by the end of the day. Some have a specific time attached, so there is not a second to lose.

Once each courier has loaded their share of parcels into their vehicle, they begin programming the day’s deliveries into a handheld device that will record their progress. While the device usually works, its periodic habit of malfunctioning can sometimes mean unwelcome delays.

In the working day of a courier, delays are commensurate with lower earnings. Put simply by one delivery person working with Hermes: “If we have to reboot the device […] we lose wages.” Only once all the day’s deliveries have been programmed are the couriers able to set off to deliver their first parcel of the day – and actually begin earning money.

At the same time on this typical day, fleets of private hire drivers are humming along the streets of Britain’s largest cities. Each of the drivers in these particular fleets are awaiting orders from Uber.

Those orders, which arrive via their smartphone, will contain details of the passengers they are to collect, and from where. Each passenger’s destination, however, will remain a mystery until they have been collected. And regardless of the considerable costs they might incur to fulfil that journey, the driver will have no say in the fare. Uber both sets the fare then takes a hefty rate of commission from it.

The driver knows that failure to accept these terms will result in an immediate loss of work: they will be blocked for a set period of time from accessing Uber’s online system that provides work.

In the absence of a cap on the number of private hire drivers, and despite Uber enacting an across-the-board cut in fares three years ago, the size of this fleet has expanded many times over since the turn of the decade. Today its sheer enormity means that, for some members of the fleet, orders are less frequent than they once were. One Uber driver commented to us with some exasperation: “If too many of us become private hire drivers, then there won’t be enough jobs for all of us.”

So an extra hour, at least, is spent on the road each day by an unknown number of drivers who are trying to make up the difference between what they used to earn, and what would otherwise be slim pickings because of an “over-supply” of drivers. Another interviewee told us that “more hours [are] leading to an increased level of anxiety and stress, a low level of communication with my family, and a gap in my personal and family life,” – particularly when more of those hours are spent driving the streets while awaiting orders.

Bogus self-employment?

There is a simple, troubling fact that unites the working patterns outlined above. In all cases, the couriers and drivers undertaking them have not yet been paid a penny.

Huge numbers of parcels have been sorted, loaded and programmed by each courier. Several gallons of petrol have already been used by each private hire driver. Yet the companies that benefit from this abundant supply of labour have not had to pay for it.

Couriers begin to earn money only once they have delivered their first parcel of the day, and drivers only once a first passenger has been allocated (no mean feat given the trends detailed above), picked up and then dropped off at their destination.

This is one of a series of eye-opening discoveries we made in three recent studies of the reverse face of Britain’s record-breaking labour market. It is here, in a sub-economy that is widely known as the gig economy, that we have encountered Britain’s vulnerable human underbelly: a large and growing number of workers who are exploited by companies that seek to become more competitive by keeping their labour costs artificially low and looking continually to lower them still further.

This group of workers is a diverse one. The couriers with whom we spoke are predominantly white, working-class men and women for whom delivering parcels to a mixture of rural and urban locations across the country has been a long-term occupation. A large proportion of the private hire drivers, meanwhile, are men from ethnic minority backgrounds, with English often spoken as a second language, who tend to live and work in bustling cities or towns. Almost all of the couriers and drivers who opened up to us about their home life have families to support.

The roots of the exploitation described to us by those workers lie in companies’ use of bogus self-employment. The companies themselves tend to talk about the freedom, independence, and flexibility with which self-employment is usually associated. But many of the couriers and drivers we have spoken with over the past year have had an alternative model of self-employment, and with it much financial insecurity, enforced upon them.

The model we have observed in certain parts of the gig economy carries none of the hallmarks of what most of us would think of as genuine self-employment. As a self-employed courier working with DPD set out to us, “The simple fact is this: if you work at the same depot every day, wear a DPD uniform, drive a DPD van, get given a DPD scanner, are told by DPD management what parcels to deliver at what rate, don’t work for anyone else, you should be protected by the government as being employed.”

At present, there is no such protection. Rather, we have noted how companies are able to use the guise of self-employment to dump a whole series of obligations and liabilities onto their workforce, while depriving them of protections enjoyed by the rest of working Britain.

As far as the gig economy is concerned, self-employment has become the only show in town for firms seeking to cut their labour costs. Even Parcelforce – a well-established company staffed largely by a core group of employees – has jumped aboard the race to the bottom, by pushing a share of its workforce into self-employment. One of those workers described to us what it is like to be caught up in this race: “[I am] treated as an employee (in fact worse) but with no holiday or sick pay, no security and no pension.” That’s not the worst of it.

We were knocked sideways by one particular practice that was reported to us by another Parcelforce courier: “We get no holidays, pension or sick pay and if we are off sick we get charged up to £400 a day for not turning up.” “Putting normal decent hardworking people in a corner, threatening their income to manipulate them”, was how one DPD courier described such practices.

The effect of these practices on some workers has been so powerful as to plunge their hourly rates of pay below the national minimum wage. We were given three clear examples of workers being deprived of this legal protection as a result of having self-employment imposed upon them.

First, and although Parcelforce insists that average annual earnings reach £39,400 after running costs, one self-employed courier reported to us: “I earn, on average, £900 a week; from this I have to take out £150 for van lease, £100 for fuel, £150 for VAT, £100 tax, £50 for insurance, leaving £350 for a 55-hour week … well below the minimum wage!’

Likewise, despite earning a gross figure of £2,100, one DPD driver found they were £700 worse off at the end of one particular month once all of their liabilities – including a fine for being too sick to drive – had been factored in.

Elsewhere, in the words of a Hermes courier, “Once the fuel and other costs are taken off, it leaves you well below the minimum wage.”

While Hermes told us when we were gathering evidence that it sets its “minimum standard to be the equivalent earning potential of £7.50 per hour as an average of the whole year, taking into account any expenses the couriers may accrue”, reports to us of sub-minimum rates of pay were not isolated: they were alarmingly frequent.

Let us not forget that these workers have families to feed, as well as bills to pay. Said one Uber driver: “[I am trying to make] ends meet as a parent, father of our children and the responsible person in the household. [In one recent week after expenses I earned] £4.86 per hour. [During the following week, after expenses, it was] £5 per hour.” We were told that some Hermes couriers often had to visit food banks, just to feed their families.

The companies themselves, meanwhile, have registered ever healthier financial returns. Hermes’ turnover almost doubled from £261m in 2011-12 to £442m in 2014-15. Uber doubled its UK revenue to £23m in 2015, while in the last three months of 2016 the company’s global revenue topped $2.9bn.

Pushed to the bottom

The contrast between sub-minimum rates of pay and the rude financial health of companies in the gig economy is one incredibly irksome symptom of inequality in Britain today. In the words of one DPD courier: “While profits soar, we as drivers get exploited, underpaid and taken for granted.”

It also poses fundamental questions over the future of our labour market: by whom should the rewards of work be reaped, and upon whom should the risks involved with that work fall? Moreover, where should the balance lie between the duties and protections bestowed upon each company and its workforce?

Let us take Uber as an example. The company currently has the right to increase its share of the private hire industry by flooding the market with drivers and cutting fares. Yet it has not been given the responsibility of allocating work to those drivers, let alone to do so in a fair or efficient way. Within such a casual labour market, operating without a wage floor or any other forms of protection, the competition for work has become unfair and unrealistic. Such conditions mean there will always be drivers whose earnings are pushed to the bottom and beyond.

 

Here we are introduced to a second symptom of inequality within the gig economy: the dual labour market. On the one hand, there are people drawing a supplementary income, who have the autonomy to fit “gig” work around other commitments, and are generally satisfied with their lot. Likewise, there are those who earn an adequate income from high-density routes that provide regular (enough) work.

 

On the other hand, the hundreds of people who made contact with us over the past year represent those who are totally dependent on gig work for their livelihood. Many of them put in long hours for low and diminishing earnings. Some have also endured treatment that can only be described as inhumane.

We were particularly appalled by two testimonies which demonstrate the inequitable distribution of risk in working Britain. In one case, two parents were receiving aggressive calls from Hermes demanding their immediate return to work – while they were at their dying little boy’s bedside. Another Hermes courier was penalised with a loss of work because he needed time to care for his wife in the final weeks of her losing battle against cancer. The company subsequently apologised, but the damage had already been done.

It is here that we begin to see how, because of the inhumane treatment dished out by some gig companies, there are workers at the bottom of the pile who are unable to undertake their basic duties as human beings. Among the examples of unsettled home lives we received were parents suddenly being unable to pick their children up from school, and others having to bring their sick children to work, due to the sheer financial necessity of meeting the strict demands placed upon them by gig companies.

Likewise, some couriers have had to turn up for work with broken bones, or been unable to attend family funerals or weddings. As self-employed individuals, of course, they should be able to choose their working patterns. But they have been told by gig companies that if they do so, they will be punished.

The backdrop to this precarious existence is gig companies’ ability to remove work from their self-employed staff at the drop of a hat. We recall the agony with which one courier reported: “When my mum passed away, I still had to work. When my husband had a heart attack and had two heart operations, I still had to do my parcels or lose my round.” Of the means with which companies threaten the removal of work, another courier informed us: “[We are] a commodity that can be disposed of at a whim after years of loyal service […] as a field manager said to me, ‘I can replace you with an Eastern European tomorrow, so like it or lump it’.”

Throughout our inquiries we have been asked on several occasions, why can’t those workers simply ditch these companies and begin working for somebody else?

The reason is simple: if an individual were to cease working with Uber, Hermes, or DPD, for example, they would be highly unlikely to gain work that fits their skills on better terms anywhere else. The business model we have described is now deeply embedded across the gig economy. As demoralised as they are, the workers we have spoken with do not have the financial luxury of being able to walk away from their job and risk not being able to find a better one elsewhere. They are totally dependent on the gig economy for work. It has been made almost impossible for them to challenge their precarious existence, let alone try to regain control over their lives.

The human cost

 

What has all of this taught us about the state of working Britain? Clearly, the subsidy which enables companies in the gig economy to provide goods and services more quickly and at lower prices has come in the form of artificially low labour costs.

 

The human cost of this subsidy is borne by a large and growing number of vulnerable workers. They have been submerged below what Sidney and Beatrice Webb would have called “the national minimum” – be this in the form of hourly earnings, fair working hours, or humane treatment in the workplace – which successive governments laid down to protect this very group from exploitation. The national minimum has been breached by rampantly exploitative companies’ enforcement upon workers of a rather unique and, in our view, bogus mode of self-employment.

The review’s recommendations, which were published a few weeks ago, could provide the basis of a radical reorganisation of the labour market, to the benefit of some of Britain’s most disadvantaged workers. Of particular interest is the review’s proposal to include within a broader class of “dependent contractors” – those workers who are currently exploited under the guise of self-employment. This move could even up the scales in the gig economy; not least by extending to those workers the protection of the national minimum wage and sick pay, for example.

One of the review’s most far-reaching proposals is for sector-based strategies that focus on improving productivity and earnings, taking into account the particular circumstances of each industry. We have been pressing the government to adopt this approach.

So, what does the future hold? Much will depend, of course, on how the government decides to respond to the Taylor Review of modern working practices. The prime minister commissioned this review last October on the back of our very first report on the gig economy.

How could the great powers in the private hire industry, for example, prevent the flooding of the market that has cut some drivers adrift? And how might deliveries be rerouted in the courier industry to ensure nobody is left out of pocket at the end of certain rounds? Overcoming such entrenched problems through sector-based strategies could begin to kick start a recovery in productivity – a prerequisite for higher earnings – of which the British economy is in such dire need.

One note of caution, though. There is a proposal within the review for workers who undertake “off-peak” activities to be pushed outside the legal protection of the national minimum wage. We disagree with this proposal for two reasons. First, the geography of some delivery rounds – those covering rural or suburban areas, for example – means that without the protection of a minimum wage, some couriers will always be confined to poverty pay. Second, some drivers struggling to make ends meet will always be making themselves available for work, whether on- or off-peak, out of sheer financial necessity. Is it fair for those drivers to be penalised by companies turning over huge sums of money? Should not the companies instead be required to regulate their supply of labour, or pay from their profits the minimum wage even at off-peak times?

That said, the review hands the government a vital opportunity to apply a basic layer of protection already afforded to much of working Britain, to those couriers and drivers with whose working days we opened this essay. Having acted so decisively on the evidence we first submitted to her – by both initiating an HMRC investigation and commissioning the review – it is now crucial that the prime minister moves quickly to apply this layer of protection.

Aside from the importance of the review, we have drawn a key lesson on how best to counter inequality in the modern labour market. It is the combination of political campaigning and trade union activism which, so far, has offered a most promising remedy to the poverty pay and exploitation of workers we have documented over the past year. There are three causes for optimism here.

First, in response to our Wild West Workplace report, Hermes has adjusted its pay bar so that couriers should now take home a minimum hourly rate of £8.50.

Second, the government has created an independent working party specifically to act on the findings of our Sweated Labour report on Uber – perhaps a first example of the sector-based strategies proposed in the review.

In addition, through its series of employment tribunal victories, the trade union movement has set off a powerful legal domino effect against the bogus self-employment which lies at the root of so many of those evils we have been studying.

These gains represent the beginning of the fightback to restore justice at the bottom of the labour market. The pursuit by political reformers, as well as trade unions, of further such gains which capitalise upon these early successes is crucial. After all, as one DPD driver commented to us: “In the year 2017 one would expect living and working conditions to have improved over the years and not regressed to those of Victorian times.”

  • Frank Field MP and Andrew Forsey continue to investigate the wellbeing of workers in the UK gig economy, and will be encouraging the government to respond to the Taylor Review with a legislative programme that protects those workers


back

Bookmark with:

website by Hudson Berkley Reinhart Ltd