What are the battles and the changes arriving from the so-called disrupters such as Uber, Lift, and Airbnb? Maria Armoudian talks to Sarah Kaine who has been studying the so-called sharing economy and its effects.
Maria Armoudian: How are companies like Uber, Airbnb, and Lift changing the economy?
Sarah Kaine: All of the companies that you have named are really about changing how services are delivered, and the attractive thing about them is the immediacy. So in a world where we are used to things being immediate; we’re used to cutting through the middlemen and getting the things we want quite quickly. These types of services provide that. So with Uber you directly contact your driver, [and with] Airbnb you directly contact the providers of your accommodation. Not all of the companies are the same in terms of how they deliver their service. Some still rely on workers to deliver those services, [while] with others it’s not such an issue. So with Airbnb there is a different kind of regulatory set of concerns, rather than labour standards or labour issues. Not all participants in the sharing economy are the same, for a start, and often that is with perceived benefits to the consumers. The downside of that is that the disruptive [companies] often don’t regard and respect existing regulations, which have come about historically to protect either consumers, workers, or other participants in the economy. So there are both [upsides and downsides] to this idea of disrupting the traditional way we can choose goods and services.
MA: One of the aspects of this [development] is how we’re moving to an independent contractor society where people are working all the time, not getting to take holidays, not getting the kind of benefits they’re used to having when they worked for a company for a long time. The other side of this deals with how you regulate these things. We’ve had these regulatory structures that have been in place to protect consumers, people who would use the services, as well as workers. This new model has been working outside of these legal paradigms until more recently. You’ve been tracking some of the changes. Can you elaborate on what is happening here and how the battle has been ensuing?
SK: It started by talking about independent contracting and how these services are based on the idea of a flexible workforce that dip in [and] out of providing these services as it suits them. And there is something quite attractive about that for some people in that they can use excess resources [and] excess time to get some extra work and make some extra money. The problem with [this is that] increasingly people are relying on this kind of work as their main form of work and it takes us back to the pre-regulation of the labour market. So the time before we had minimum standards. And that is the danger of this kind of system. [It] erodes what has been built up for legitimate reasons. That is the first part of it. The second part, in terms of what has been happening, is that there has been a level of engagement between stakeholders, regulators, and these sharing economy type operators. The most obvious case has been that of Uber, [which] has quite deliberately and overtly said that it is prepared to circumvent pretty much any regulation that interrupts with how it wants to provide its service. There have been different responses from regulators around the world. So we know very recently the managers of Uber in France have been prosecuted over this kind of flagrant flouting of regulation, but in Australia, in some jurisdictions, we’ve had a tentative step towards including Uber into a regulatory framework. Now, that is okay to a degree, nut we’ve also seen people on the streets protesting against what they see as Uber’s means of operation. So it’s multi-layered. You have the formal regulation, which has been varied across the world, and then you have the enforced regulation, which is workers deciding whether or not they think what is happening is fair. And that is where we’ve seen protests by Uber drivers and by regular taxi drivers against what they see as unfair practices of Uber.
MA: You mentioned France, but you also have written about what is happened in Hong Kong, in South Korea, and in India. What has been happening in these countries?
SK: It has been a bit mixed. One interesting thing is that, in some of these countries, local competitors, often supported by the state or by other companies, have emerged to compete with Uber. So, while Uber was out front and attempting to break into markets and base their expansion strategy on that, their approach has not necessarily been without issues… [I]t has backfired to a degree that state governments have said, “Well, we’re not sure that this is the right way to go. What can we do to support competitors?” In China, there has been a local competitor. They haven’t had the traction that Uber has yet, but there has certainly been development of this competition in terms of ride sharing, which Uber may have predicted, but may not have predicted rolling out in the way that it has.
MA: I think South Korea was one [country] where you said there were thirty people charged with running an illegal taxi firm. I think you also mentioned that in Hong Kong these drivers were arrested for illegally hiring out their vehicle. And then we’ve got legal fights that happened in Los Angeles and Seattle. Can you tell us more about those?
SK: In Australia as well we’ve had, in various jurisdictions, Uber drivers prosecuted for not complying with regulations. It is often the drivers who are the ones that are prosecuted, because they are the ones that can be found actually flouting a law. So Uber isn’t necessarily the one that is in the firing line. Certainly, it has been Uber’s practice to cover fines and legal costs of drivers to date. Although in Australia, we’ve seen Uber say it will cover fines but hasn’t actually done so… Because of the way that Uber has been operating the regulatory issues are also multi-faceted: so there [are] tax issues; there are labour regulation issues; [and] there are safety issues. So, in terms of the legality or the potential areas of risk for Uber as a company, it is not just labour laws it’s coming up against and facing cases and prosecution about. It’s also areas to do with the safety of consumers in Australia, something which has been the subject of an ongoing Senate inquiry about tax evasion by big companies like Uber. And we have the more prominent cases… in California of drivers making the argument that they are not independent contractors, that they are in fact employees. That is an ongoing case that Uber has been challenging through the process. Again, Uber has taken a decision, and their CEO has been quite open about this, [that Uber] should take on any regulation, whether it’s labour law [or] whether it has to do with the safety of consumers, they are going to take it on. In some cases they’ve accepted some form of regulatory oversight, as in Australia, because the regulators have also moved. But their approach has been, and their strategy has been, “We will take on and challenge existing frameworks everywhere that we go, and the onus will be on other people and regulators and governments to make us do this. We will not voluntarily comply with anything that exists”.
MA: So they really almost model a Wild West type of work environment?
SK: It is the Wild West. And their argument is very much, “This is uncharted territory; this is the wild west; there is nothing here before us, therefore, we get to determine what happens”. The implications of that for organisations, for how we deal with corporates, is frightening. But because there is a sexy new app that is being developed it’s okay to say, “Well, nothing else applies to us”. We’ve come a long way in terms of how we deal with the corporate sector and appropriate regulation, but I think we’ve come a bit too far to accept that as an excuse from organisations, particularly large organisations that have the resources to comply.
MA: You mentioned that Uber has been hiring some pretty high-level people for its lobbying. Can you tell us about this?
SK: Yes. We started this conversation talking about the sharing economy, and I think it’s very important that we understand that the sharing economy covers a range of participants. So when we think “sharing economy”, we think of little micro-startups, neighbourhood startups working together, sharing resources, being environmental, and that kind of thing. Uber is a big multinational company, it seeks to minimize tax, it seeks to minimize legal obligations, and like other big organisations we’ve seen in other traditional industries, it seeks to influence and lobby decision makers. And in doing so, it has been quite strategic about employing very well-qualified lobbyist advocates. Public relations people including David Plouffe, who was very instrumental in Obama’s campaigns, and Rachel Whetstone, who was the former head of Google communication. So Uber is being very strategic about engaging with regulators to shape the environment that they would most like to see for themselves. I should say Uber is not Robinson Crusoe in this aspect, but it is behaving very much like an established traditional corporate player, not some kind of trendy cutting-edge small sharing economy participant.
MA: One case that you wrote about was the California Labour Commission decision that Uber was sham contracting. How do we distinguish what that means?
SK: In Australia we have quite a different set of labour laws than in the US. So we have a particular definition of what sham contracting means, but the same theory applies wherever you are. It’s a question of what kind of responsibility do you have to the person that you’re contracting to. So, with regards to Uber, does Uber have control over the work of the drivers? What is the degree of that control? Do the drivers have the capacity to engage in work for others as well? But a key aspect is control. If we think about Uber, they really performance manage their drivers quite stringently. There is the consumer rating of Uber drivers; where consumers who take an Uber car can rate their driver. Uber then determines whether that driver can keep driving for them based on those consumer results. So, effectively, we’re seeing quite a tight level of control between Uber, the drivers, and a performance management system akin to performance management systems you would see in other organisations. So one of the things that is looked at is, what types of levels of control does the company have over the employee? Are there things that tie that driver or that contractor to the company that makes it quite exclusive? And if we think about Uber, there is a particular app that is used and that is how work is distributed. So there are various measures. If these measures, depending on the jurisdiction, are found to exist so whether there’s control; whether there is fairly exclusive work arrangements, then it’s decided, “Well, that worker is an employee”. That is not truly independent. It’s at least dependent contracting and, at worst, it’s a sham contract.
MA: Your most recent piece pertained to labour unions. And in contrast to Uber, [or perhaps] in conjunction with Uber, you noted that there is a crisis among labour unions [with] so few people being members. But [you noted] that there is this parallel emergence among organising with Uber drivers. Let’s take a look there and how you have articulated possible scenarios of labour unions learning from working alongside and with Uber drivers. How do you see that?
SK: You have laid out some of the issues for those organisations seeking to represent workers in a sharing economy. Labour unions around the world in developed countries have been suffering declines among traditional areas of work, let alone areas which are much more difficult to get to. But what we’ve seen is a kind of grassroots, very organic resistance to some of the activities of Uber and other companies, organised by drivers and workers themselves, using techniques based on social media to form much more fluid collectives than we would be use to in the traditional labour movement. The argument that we are putting forward is that unions need to be a lot more alert to opportunities to work with these more fluid collectives of workers. Often, existing structures of labour unions don’t necessarily allow them to take advantage of [these collectives], or to work in coalition with these kinds of collectives, or to even be aware of them. So we are really advocating for unions to think about how they might be able to work [with these collectives]. It might be a much more temporary arrangement than we are used to, [more temporary] than someone signing up to a union for the term of their working life. So [unions might need to be] a lot more flexible about how they engage with workers on particular issues of importance to them. The other thing worth thinking about, take Uber as an example, [is that] there are a lot of Uber drivers. So even accessing a small percentage of those workers through engagement with social media and other ways [would] provide quite a basis of potential change, and potential power to change, organisations like Uber. So it’s almost a necessity for unions to figure out how they engaged, because of the scale of these workforces. And things are only going to get worse for them if they really can’t come to terms with that.
MA: One of the things that you wrote about in this context was how unions have been stuck in the past in terms of how they do things and the model they use. And should they update the model, they could end up reinvigorating the entire union movement. What are some of the ways that you see that they could update their model? You mentioned social media as an example. You [also] mentioned being more fluid.
SK: The first thing is I don’t think unions will ever replace face-to-face contact with workers. I think that is what gives them detail and understanding of what is happening with workers. I think we often think that the easy fix is if we just get a Facebook page as a union, if we just post some tweets, then that means that we are engaging in the social media space and there will somehow be some big organic uprising amongst our potential members, but I think unions have to become a lot more sophisticated about how they approach technology altogether. So thinking about getting people with expertise on web analytics, people who are actually monitoring what is happening out there on non-labour movement social media, engaging with it, trying to build those links with organisation, and with groupings of workers that already exist. So, developing a Facebook page, posting some tweets? Yeah, okay, that is one side of it. But I think it has to be a much deeper up-skilling of labour unions to understand the power of big data, where you can get in and see what people are doing on the net to see how they are engaging with different types of social media. So I think it might be supplementing what have been traditional labour movement strengths of face-to-face organising with people within unions who have the skills to understand the technology much more deeply than being able to post on social media. The other thing is unions have to be prepared [to] not just rely on labour laws and try to engage with the system that already exists. Like Uber is trying to pioneer its regulatory environment, unions and labour organisations have to think about how they shape the regulatory environment; what kinds of other legal avenues [and] regulatory avenues they might explore that [are not] in their traditional purview. And that includes the structure of organisations, including franchising [and] including not quite convoluted supply chain construction in modern organisations; meaning that you don’t have to figure out how they regulate, what pressure points are going to be, [and] how they leverage these new configurations of organisations and, consequently, of working relationships.
MA: You had written out a couple of scenarios about how you see this all playing out. Scenario one dealt with these individual lawsuits, class actions, aggressive regulation, and what might happen there. Scenario two was Uber adopting a risk mitigation strategy. Why don’t you expound on those two possible scenarios about how you see this turning out?
SK: The aggressive approach of Uber does not make business sense anymore. The business case for that is starting to fail because the costs are just too big [and] competition is increasing. In that case, Uber either gets knocked out from the regulators, the regulators say “This is not going to happen”, and so Uber either has to change or die. The second scenario is that Uber strategically looks around and sees what is happening; sees if it needs to be more pliable in some situations, and where it keeps adopting its Wild West strategy. We know that Uber is investing in self-driving cars. From a business perspective, that would seem to be a sensible option for Uber, and would circumvent a whole lot of these issues about regulating for labour standards, as well as bathing in a huge amount of money long term. I would suggest that second scenario where Uber strategically looks around [is more likely]. For example, in Australia there has been some movement on regulation where [they say], “We’ll comply with this lighter regulation, Australia’s not a big market. In the meantime, we’ll keep pursuing what we want to do in China, in India, in South America, in areas where we feel we can still pursue a much more aggressive Wild West strategy”. That seems to be what they’re doing, and I would imagine that is what they will continue to do unless there are some unpredicted shifts in those larger markets.
MA: It sounds like the Teamsters in Seattle have been doing some of the things that you have articulated that labour should be doing.
SK: Yes, exactly. I definitely don’t want to suggest that unions aren’t trying to engage in this space. The Teamsters have been promoting an app-based drivers’ association. So they are trying to engage in this space in a way that workers are happy and willing to engage. As with any organisation trying to play catch up, it’s a bit harder when you’re coming from behind. So the Teamsters have certainly been trying to engage in the same way that these workers, who are working for Uber and other ride-share organisations, are engaging with their employer. I think that is really the way forward. So far these are quite small scale, but they certainly show what you need to try to do. The difficulty in it is playing catch up after the event where the organisation has already had quite a lot of time to establish. But, certainly, what is happening in Seattle in their attempt to engage with workers shows the way that unions need to be looking.
Sarah Kaine is an Associate Professor of HRM and ER at the University of Technology, Sydney. She is the co-author of Managing Employee Performance and Reward: Concepts, Practices, Strategies.
This interview was originally aired on the Scholars’ Circle. Find more here.