The platform economy: How to regulate working life when algorithms are the boss?

New technology is good, but the platforms must be developed in line with the labour market as a whole.

The digital platform economy or sharing economy is spreading under many names; the on-demand and gig economy to mention but a few. Forget all that, says Professor Jeremias Prassl, who perhaps it the man who has researched and written about the field the most. The name is not important.

“Heterogeneity,” he says, and repeats this often and willingly throughout his conversation with the Nordic Labour Journal.

Perhaps the most important thing to be aware of is the heterogeneity between the platforms, as well as workers’ experiences. There are big differences in how the platforms are organised, who the employers are, who works there, what kind of tasks are involved, how the work is distributed and to what degree all of this is decided by algorithms.

Algorithms is a word which is also catching the public imagination all of a sudden. Algorithms determine each step in how a task is solved, and often steers work on digital platforms. 

“There are two narratives about the platform economy,” says Jeremias Prassl. One is about how great the platform economy is. We are in the middle of a revolution where new technology pushes things forwards, creating new opportunities and new products at lower cost. Politicians need to stay away, because their meddling would stifle innovation.

“The other narrative is about how bad some platforms are. They can be a medieval way of treating people, where algorithms decide, pay is bad, there is much insecurity and there is no guarantee you will be able to work. Both narratives have elements of truth to them,” says Jeremias Prassl.

Most platforms have in common the fact that they deliver on-demand labour. That is why Prassl prefers the term ‘on-demand economy’ as this is at the core of the business model. The model is not new, but the technology is new. The digital intermediation is what sets the platform economy apart from for instance the way in which staffing agencies work.

ILO’s Future of work

The importance of the platform economy and new forms of work was the focus at the conference on the development of the Future of work in the Nordic countries. The conference, which gathered more than 100 delegates from politics, authorities, the social partners and research, was organised by the Fafo research foundation, on behalf of the Norwegian Ministry of Labour and Social Affairs and the Nordic Council of Ministers.

It was one of four annual Nordic conferences which will be leading up to the ILO’s 2019 centenary celebrations, where the theme will also be the Future of Work. The ILO has asked the Nordic countries to contribute with ideas ahead of the centenary for how to shape the future of work.

What is most striking when it comes to the future of work, is the technological developments and digitalisation, said State Secretary Christl Kvam at the Ministry of Labour and Social Affairs as she opened the conference. She pointed to the platform economy as one of the most relevant and interesting aspects of the ‘Future of Work’.

Christl Kvam was keen to look for opportunities, but also challenges linked to this development, including how to look after the human beings inside the platform economy. On a European level she pointed to the European Pillar of Social Rights as a framework, which can be developed and improved when it comes to social protection of individual in all types of employment.

She was also interested in how the digital platform economy can challenge the way the labour market is organised, as well as challenge the cooperation between the social partners.

“The Norwegian model is well organised and unemployment is relatively low. Coordinated wage negations and the tripartite cooperation are key principles.

“What happens if the social partners no longer represent those who work and those who offer work,” she asked rhetorically, and challenged the social partners to make themselves attractive to new players on the labour market.

 “The tripartite cooperation in the Nordic countries is stable, and the development of the platform economy is moderate. We must not take unnecessary action and create obstacles to development and innovation. On the other hand, we need to protect the important qualities in today’s working life and healthy, predictable working conditions,” said State Secretary Christl Kvam, and challenged the conference to discuss which changes and adjustments are needed.

Platforms a challenge for the partners

The social partners disagree on how much the digital platform economy creates a need for new labour market regulations. Employers want to be careful not to stifle innovation, and want a level playing field for platforms and other businesses.

 “We cannot compromise on taxes or security in the labour market,” said Kristin Skogen Lund, Director General at the Confederation of Norwegian Enterprise (NHO), and added:

“Both employers and employees agree that permanent contracts should be the norm. Technology can push us in the direction of more temporary and alternative links to the labour market, as we have seen in other countries. This could lower the threshold into the labour market. The sharing economy makes it possible for people to choose different ways  of entering the labour market, but if we see a tendency towards a looser link to the labour market we will have to take a closer look at that.”

But we are not there yet, she said:

“We must not use the fear of the sharing economy to regulate ourselves into a corner,” warned Kristin Skogen Lund.

Need for a competence reform

The new President of the Norwegian Confederation of Trade Unions (LO), Hans-Christian Gabrielsen, warned against hiding the sharing economy’s drawbacks.

“Tax, VAT, employers’ national insurance contribution – if we do not organise these businesses, we risk a group of players which are not of economic benefit to society.” 

This is dangerous in a welfare society funded by taxes. Gabrielsen also promoted a competence reform.

“If we are to develop our society further, competence policies must take centre stage going forward. We will not lower the price of labour, but increase the value of people. We must stay up to date professionally,” said Hans-Christian Gabrielsen, and proposed a system where expenses linked to skills development could be written off over a year, as is the case with investment today.

“A competence reform is one example of how the tripartite cooperation, between the parties and the authorities, can solve future challenges,” underlined the LO President.

Trade union membership a challenge

Several of the employees’ representatives at the conference highlighted the need to adapt the organisations to meet the new digital reality. The head of the Federation of Norwegian Professional Associations (Akademikerne), Kari Sollien, warned that new ways of working can be used as an excuse to weaken the terms in the labour market. She was particularly concerned about trade union membership levels.

 “One of the most important tasks is to make ourselves relevant to new employees. We see members fluctuating between being employers, employees or self employed. We must make sure that we are attractive to them when they are sole traders too. We must say clearly that it is possible to be a trade union member and a sole trader.”

Digital adjustments

The platforms have a moderate reach today and the labour market is limited, but the platforms can be scaled up very rapidly, as we have seen with Uber and Airbnb, underlined Fredrik Söderqvist from the Swedish Unionen trade union.

One of the big questions raised by him was the challenge of digitalising the organisations’ regulations.

“We have to translate our regulations to make them more digital, and we must make sure the platforms take a different responsibility. The social partners need to drive this forward.”

Meanwhile, the Vice President of the Danish LO, Nanna Højlund, wondered whether there is a basis for a shared Nordic way of thinking.

“We could entertain the idea, but it could be interesting if we had cooperation across the Nordic countries. Should we develop a joint Nordic model here too?”

“I am convinced that we have something to cooperate on across the Nordics. I believe in this,” said Kari Sollien.

“We have asked for an investigation into the terms like employer and employers and to promote people's rights regardless of their link to th labour market.

A separate Nordic model involving the social partners is something Jeremias Prassl finds very interesting.

“If the social partners can establish a Nordic approach, this could be something others could learn from too.”

Necessary changes

“The technology is new and has great potential, but the business model is old,” says Jeremias Prassl.

He says much of 18^th and 19^th century production was organised through powerful intermediaries. Ports, from Marseilles to Liverpool, have similarly been operating along the same type of structure. In the 1990s the staffing agencies arrived, which are constructed in the same triangular way; you have the staffing agency, the person doing the cleaning work for instance, and the company that needs a cleaner. It is the same basic model, but in the platform economy the intermediary between the customer and the person who will be performing the task has gone digital.

Two narratives

Jeremias Prassl believes it is necessary to regulate the platform economy, but that it has to be done in a careful manner and reminds us of the two narratives.

“One narrative is about how great the platforms are. They can be a way for people who otherwise would not be able to find work to enter the labour market. The flip side can be that wages can be extremely low. People working in the platform economy have no guarantee of finding work. For some this is an opportunity and flexibility, for others it means insecurity. We need to keep this in mind when we talk about regulating the platform economy.

Amazon CEO Jeff Bezos once famously referred to the digital provision of "Humans as service".

“This is very interesting,” says Prassl, who has taken the quote as the title of his new book.

“Nearly 100 years ago, in the ILO’s founding documents and then again in the declaration of Philadelphia, it was underlined that labour is not a commodity.”

It is necessary to regulate, but carefully.

“As a starting point, we should treat platforms as any other employer. We cannot make separate laws for the platform economy. We must make sure that what is work is treated as work, and we know which rules apply to work. All countries have legislation regulating the labour market.”

Three proposals

Prassl has three proposals for how the rules can be developed further.

• One is to have a minimum wage where you award flexibility and make it part of the employment contract. A guaranteed number of hours a week or month could form the basis of the minimum wage. Some want flexibility in order to increase their pay by 20 to 25 percent in exchange for a certain risk.
• Another proposal is portable ratings. Ratings can determine whether you get a job or not. On some platforms, workers put in free hours in order to get high ratings. If you can own your own rating and bring it with you from one platform to the next, it could become easier to shop around between platforms and to negotiate on work and pay. 
• The third proposal is for the social partners to create an organisation based on algorithms. This would mean the algorithms would no longer be boss, but trade union driven.

The overarching aim, says Jeremias Prassl, is to develop legislation which does not differentiate between platforms and other companies. The challenge is to achieve a necessary change in labour law while also dealing with the underlying challenges. This means not creating separate legislation linked to technology.

 “The technology is new, but the challenges are not,” says Jeremias Prassl. “A level playing field will help workers and consumers – and it will foster genuine innovation”.