My finances, my projects, my life
June 18, 2024

The future of work – employment, private companies and the gig economy

  Compiled by myLIFE team myCOMPANY September 15, 2023 1090

The gig economy promised a revolution in the workplace. No longer tied to a single employer, workers would run their own mini-businesses. This was good for employers, who could operate a more flexible workplace, but also for workers, who could manage their work around their life, rather than vice versa. However, the reality has not lived up to the promise.

Initially, the gig economy was seen as a real success. Taxi and delivery drivers became freelancers, working on loose ad-hoc contracts with flexible hours. There was also an expansion of contracting arrangements, with professionals setting up private companies and offering their expertise to businesses on an occasional or short-term basis.

However, the lack of employment protection afforded to gig economy workers quickly became a political issue. Nervous governments have sought to clamp down, believing that in many cases, companies were exploiting workers rather than offering them freedom.

Employment rights

In 2021, the EU set out legislation to regulate platforms such as Uber and Deliveroo, with the aim of ensuring that self-employed workers using these platforms enjoyed the same basic employment rights as regular employees, including the right to paid holidays, termination benefits and adequate working conditions. Member states have until 2025 to adopt these rules into national law and bring them into effect.

Gig economy workers have also conducted their own campaigns for employment protection. In the United Kingdom, taxi drivers took Uber to court demanding holiday pay, adoption of a national minimum wage and the right to rest breaks. The case reached the Supreme Court, where Uber lost the five-year legal battle. The ruling has presented a major challenge to the group’s low-cost business model and it has been obliged to raise prices in response to a driver shortage.

Tax authorities have been nervous that they are failing to receive their proper share of employees’ income.

Tax authorities have also been nervous that they are failing to receive their proper share of employees’ income. Hiring an army of contract workers has enabled companies to avoid certain employment taxes and levies such as compulsory pension contributions. The UK authorities have clamped down on so-called disguised employment through IR35, a ruling that seeks to ensure that contractors pay the same income tax and national insurance contributions as a regular employee. This has proved a headache for both employees and employers and deterred any broader adoption of more flexible contract arrangements.

Apocalypse delayed

In the end, there has been no employment revolution. The number of self-employed people across the eurozone has remained relatively static, and even declined slightly in recent years, from 14.6% in 2011 to 13.3% in 2022. The Covid-19 pandemic appears to have reduced people’s appetite for self-employment even further, with many employers cushioning their employees from the impact through furlough schemes, while the self-employed were largely left struggling, although some countries including Luxembourg introduced schemes protect their income.

Currently, the proportion of self-employed people varies according to educational levels. Unsurprisingly, it is the farming sector that has the largest share of self-employed workers – more than 60% of farmworkers are currently self-employed. Only around 14.6% of professionals are self-employed, and the figure is 13.8% in services and sales.

The commercial application of artificial intelligence may ultimately prove far more disruptive to traditional working patterns than the gig economy.

However, there are indications that the world of work could change more significantly in the future. The commercial application of artificial intelligence may ultimately prove far more disruptive to traditional working patterns than the gig economy. McKinsey predicts that one in sixteen workers across eight of the world’s largest economies (China, France, Germany, India, Japan, Spain, the UK and United States) – equivalent to more than 100 million workers – may need to switch occupations by 2030.

Rise of the AI chatbot

The advent of the Microsoft-backed publicly accessible AI platform ChatGPT and competitors from other groups such as Google has sent a shiver through professions including the worlds of academia, journalism and law. If a robot can write articles, reports or legal documents, where does that leave those who are currently paid to do it?

The McKinsey report found that employment growth would be concentrated in higher skilled jobs, particularly those in healthcare, science, technology and engineering, as well as in other specialised sectors. The authors say: “The rise of e-commerce created demand for warehouse workers; investments in the green economy could increase the need for wind turbine technicians; ageing populations in many advanced economies will increase demand for nurses, home health aides and hearing-aid technicians; and teachers and training instructors will also continue to find work over the coming decade.”

However, medium- and lower-skilled jobs in areas such as food service, manufacturing and office support are vulnerable to disruption. Supermarkets are increasingly installing self-checkout lanes, while restaurants and hotels are starting to automate check-in and food orders. These are areas where digitalisation is already having a major impact.

Remote working gives many people the flexibility that the gig economy was supposed to offer, but within a regulated employment structure.

Remote working here to stay

The pandemic also for the first time gave substantial impetus to remote working, and today it is difficult to see that trend being reversed, despite the opposition of many old-school executives – some of them in industries driven by digital technology. Most companies have now adapted their workplaces and IT systems to accommodate remote working two or three days a week. This is also changing the nature of work and giving many people the flexibility that the gig economy was supposed to offer, but within a regulated employment structure.

For the time being, many aspects of the workplace revolutions remain theoretical or experimental rather than everyday reality. The gig economy may have proved less disruptive and far-reaching than expected, but AI and digitisation could bring far greater shifts in working patterns.

In this environment, there will be greater onus on workers to keep skills fresh, to save money for fallow periods and to retrain when necessary. The most agile companies are trying to ensure they have access to a flexible skills base, in which staff can operate across different teams. This is likely to mean more formal training and effective mentoring programmes.

There are bigger questions. If technology replaces a significant proportion of human labour, how should governments raise taxes? Should workers whose jobs have become obsolete be paid a minimum national wage? These are questions that future governments will be obliged to tackle as the labour market evolves.