By Jim Stanford
Economist and Director, Centre for Future Work
The Centre for Future Work is a labour economics research institute with offices in Vancouver and Canberra, Australia. It was founded in 2016. It conducts research into a wide range of labour market and labour policy topics, including the impacts of technology on the quantity and quality of work; trends in employment, wages, and working conditions; and policy proposals that would make work more stable, safe, and rewarding. All of the Centre’s research is available open access at https://centreforfuturework.ca/.
Dr. Jim Stanford is Economist and Founding Director of the Centre for Future Work. He has 30 years of professional experience in applied labour economics in academic, think tank, and trade union settings. He has contributed to previous policy development in British Columbia, presently including as a member of the Ministry of Forests’ Forestry Worker Supports and Community Resiliency Council, and the Minister of Finance’s Economic and Social Governance Advisory Committee.
Thank you for the opportunity to present our views to your consultation on the regulation of on-demand platform work in B.C.
The Growth of On-Demand Platform Work
On-demand work organized through online digital platforms is an extreme form of precarious employment. In this business model, workers perform specified tasks, directed by apps on their smart phones; resulting revenues are controlled by the firm which operates the platform. Workers (1) are responsible for providing required tools and a place of work – such as a car or a bicycle. They are compensated for each task on a piece work basis, while the platform appropriates a large share of revenues as its cut of the arrangement. This model of work first became widespread in passenger transportation (so-called “ride share”1 work through businesses like Uber and Lyft), and then spread quickly into other services (including food delivery, package delivery, odd jobs, and technology and computer services). Employers appreciate the advantages of this model in shifting costs and risks of production onto workers, and evading normal expenses and obligations of traditional employment (including minimum wages, health and pension benefits, workers compensation protection, and paid time off for illness or vacations). So the practice continues to spread into other sectors – including human and caring services, other delivery work,(2) trucking, and professional services (like media and legal services). The ability of employers to use this model is being challenged by legal, political, and trade union initiatives in many countries. But if their current practices are confirmed and legitimated, and if the model eventually proves financially successful (which is not clear at present, given large and cumulating losses of most platform businesses), then the on-demand platform employment model will likely continue to expand.
On-demand platform workers have no guarantees regarding their hourly or total income. Instead, work and income depend on consumer demand for their services, on how many other workers are waiting for assigned jobs, and on how the platform’s algorithms distribute work to various workers (a process that is opaque and controlled by the company). Workers are generally denied normal protections and entitlements usually associated with employment: such as a minimum wage, EI and CPP benefits, coverage under the workers compensation system, and non-wage benefits (like employer-linked health insurance, pensions, and paid time off for illness or holidays).
Many advantages accrue to the platform firms from this employment relationship. The app’s control over payment allows the company to reliably capture a large share of revenue from what would otherwise be a low-margin, highly decentralized activity. In the case of ride-share work, over 25 per cent of total revenue is captured by the platform in most markets. But the costs of capital equipment (for the vehicles) are borne by the drivers, who are also responsible for all ownership, maintenance, fuel, licensing, and insurance costs – as well as equipment and data charges for their smart phones. Drivers have no guarantee of the number of fares they receive, or their hourly income; they are not paid for waiting between fares, nor for driving to pick up a fare. Thus labour costs are significantly lower than in conventional taxi services; many studies have found that on a net basis (after expenses) many drivers earn less than legal minimum wages.(3) This allowed the platforms to initially undercut conventional competitors (such as taxis and in-house food delivery services), thus expanding their market rapidly. The platform’s capital investment is limited to establishing and operating the app and the dispatch system, marketing the service to customers, and managing (increasingly troublesome) regulatory and legal aspects of the business.(4)
It is clear that employers in many other industries are eager to explore the possibility of transforming employment relationships in similar ways: shifting cost and risk to producers, and evading the costs and obligations normally associated with employment (such as minimum wages, insurance, pensions, and social benefits). So how the B.C. government responds to the growth of this practice will have repercussions for workers in many other industries.
Official statistics on platform employment are rare, in part due to the lack of a precise definition of this work. Nevertheless, a growing body of research attests to its growing importance. A recent survey in Australia found that 7 per cent of the workforce had performed some on-demand work in the preceding 12 months.(5) A Statistics Canada study based on administrative data estimates that over 8 per cent of workers in 2016 performed digitally-mediated on-demand work that year.(6) Official U.S. data on “contingent” workers (those who do not expect their jobs to continue) suggests 4 per cent of all employed people are in temporary jobs, but that does not capture all platform workers.(7) U.S. Federal Reserve data suggests 5 per cent of adult Americans(8) in 2018 performed some work through online temporary or informal roles, not counting asset-selling platforms like eBay.(9) This report suggests that non-digital informal or on-demand roles (like dog-walking, child care, or selling products at flea markets) are still far more common than online roles. It is clear that on-demand platform work is growing in both size and scope, although still constitutes a small segment of all paid work.
The dearth of data regarding on-demand platform employment may be improved in coming years as statistical agencies adapt their survey methodologies to try to gather more information on this form of work. Just this month, Statistics Canada released pioneering data on on-demand platform employment, in a special supplement to its monthly Labour Force Survey.(10) The Statistics Canada report suggests that a total of 250,000 Canadians (or just over 1% of the national labour force) performed platform-based ride-share or delivery work at some point in the past 12 months. In December, just 58,000 workers (0.3% of employment) did that work as their main job. These statistics contrast with other research, and suggest that the scope of platform work is more modest than typically claimed by platform businesses. For example, Uber alone claims to single-handedly employ over 600,000 Canadians in its platform operations.(11) This is contradicted by the Statistics Canada data, which indicates that less than half that number worked any hours for any ride-share or delivery platform in the entire year.
Minimum Wage for ‘Engaged Time’
One proposal advanced by platform firms and some politicians has been a ‘minimum wage’ for platform workers. In Ontario, for example, the provincial government has promised that platform workers would be protected by the same minimum wage as other workers. This idea sounds promising, but big devils lurk in the details. In practice, the plan will have no impact on the realized incomes of platform workers. Anyone who hopes that this ‘minimum wage’ will lift platform workers’ incomes does not understand how the platform business model works.
The biggest problem is that this so-called minimum wage will only apply to time platform workers spend ‘engaged’ on an assignment: driving a passenger, delivering a meal, or
performing some other assigned task. But platform workers regularly spend a great deal of time (often over half of their work day) waiting for those assigned fares/tasks, or traveling back to central hubs after completing a task. This unpaid time would be excluded from this modified ‘minimum wage,’ with enormous effects. For example, if a platform worker spends half their work day waiting, then the ‘minimum wage’ only pays $7.50 per hour.
This idea of paying workers only for time they are ‘actively engaged’ on a specific task would have nefarious and destructive impacts if applied to other occupations. Retail clerks would be paid only when actively helping a customer. But what if it was a slow day? They could earn almost nothing. Firefighters could be paid only when they are called out on an emergency – not for the time they spend being ready to respond quickly and effectively. Cybersecurity experts would be paid only when their company’s website was under attack.
For centuries employers have tried to shift the cost and risk of fluctuations in their business onto workers, using a whole range of strategies: such as piece work compensation, on-demand hiring, labour hire services, and others. There is nothing new in the digital platform industry’s strategy to do exactly the same thing – other than the (ultimately trivial) fact that they use smart phones and websites to organize this practice, rather than other modes of communication. The claim by platforms that this is a fundamentally ‘new model’, driven by technology, that requires a ‘new regulatory context’, is a historical lie.
Even worse than not paying for waiting time, is the impact of the endogeneity of labour supply in the platform business model on the realized earnings of platform workers – and this is another gaping hole in this so-called ‘minimium wage.’ Companies like Uber depend on enough workers signing onto their app to keep a surplus pool of drivers available to quickly meet customer orders. It is to Uber’s benefit to have many workers waiting at any point in time: it reduces response times and boosts consumer satisfaction. And since the cost of that unpaid waiting time is borne by workers, Uber has no incentive to try to reduce waiting time (by matching labour supply with demand more efficiently). This is why platform delivery businesses (despite their so-called ‘high-tech’ reputation) are among the least productive industries in the whole economy: tens of thousands of workers spend millions of (unpaid) hours sitting around doing literally nothing.
Platform workers make a calculation about how much time they are likely to spend waiting, when they sign on to the app. That’s why they typically work inconvenient or anti-social hours (like evenings and weekends): not because they love the ‘flexibility’ of working weekends, but because that’s the only time they have a reasonable chance of making any money at all.
This endogenous labour supply response, so vital to the platform business model, will defeat the purported impact of a minimum wage for engaged time. Lifting the wage for ‘engaged’ time only, without limiting labour supply (or forcing the platforms to pay for waiting time), will spark a resulting increase in labour supply (that is, the number of workers signed on waiting) until the actual realized wage (including waiting time) falls so low that workers are then deterred once again from signing on. So long as enough desperate workers are willing to sign on for effective wages well below the true minimum wage (as occurs today, and will likely become more common if the economy enters a recession as many economists fear), this measure will therefore have no impact on realized earnings. This would be true even if the rate was higher than the legal minimum: like the 120% threshold jointly advocated by Uber and the UFCW.(12)
Another glaring problem with the proposal for a minimum wage for engaged time is how it will treat platform workers’ expenses (including vehicle, gas, insurance, phone, data, etc.). Generally accepted accounting principles require a business to fairly and fully account for these expenses. Doing so would add several dollars to the required payment to drivers, in order for them to realize net income (after expenses) equal to the legal minimum wage. Platform companies claim that since most of their drivers already had a car, they should be willing to work without fully accounting for the cost of that vehicle. At most, they would allow for relatively token expense margins to reflect only incremental depreciation or maintenance directly associated with an additional trip. No other business treats capital assets, depreciation, and maintenance this way. In fact, they’d be prosecuted by securities and accounting regulators if they tried. Why should platform workers be forced to pretend their capital equipment is largely ‘free’?
A genuine minimum age for platform workers must apply to all hours worked, not just to ‘engaged’ time. And it must provide for a reasonable allowance for the costs of equipment ownership and operation (including depreciation, maintenance, fuel, insurance, and phone and data charges), in line with benchmarks that are established in other industries and the tax system. But this standard of protection is not compatible with the platforms’ current system of algorithmic management, in which labour supply is treated as an endogenously adjusting variable (not something that has to be actively managed by the firm). Where platforms have been required to pay a genuine minimum wage (such as in New York City), the companies then need to undertake active management of labour supply (establishing limits for how many drivers are on-app at any time, so that realized driver revenues can then meet the minimum for all hours worked, not just engaged time). This may be inconvenient for the companies, but results in a much more efficient operation in economic terms (avoiding the deadweight waste of thousands of drivers idly waiting).
Portable Benefits for Platform Workers
Another proposal advanced by the platform businesses and its supporters to improve compensation for drivers is a ‘portable benefits’ package.(13) This proposal also serves a purely symbolic purpose, making it appear as if the platform companies are better compensating their workers. In practice, however, it would also have no net impact on realized compensation – just like the ‘minimum wage’ for engaged time, and for similar reasons.
In theory, the portable benefits plan would pay funds into drivers’ personal accounts to supposedly cover the cost of normal employment benefits (like supplementary health, pension, and insurance coverage). In some cases, the model is also portrayed as a way of financing participation in universal statutory programs – like the Canada Pension Plan or Employment Insurance. Self-employed workers can contribute to those programs on their own account (since they are not covered by employer contributions), so the proposed individual benefits accounts could cover the costs of platform workers who chose to do so. The funds have also been advanced as an alternative to statutory minimum sick pay: platform workers are not entitled to sick pay (since they are treated as contractors, rather than employees), but in event of illness they could always draw down their personal benefit accounts to compensate for lost income. In short, these fungible accounts are portrayed by the platforms as equivalent to the whole range of benefit and income support programs that other employers are legally obliged to pay into.
However, without effective regulation of the base pay received by drivers, and with no control over what those personal funds are actually spent on, these funds would have no value in actually providing benefit and insurance coverage to platform workers. First, platform businesses could easily offset any new cost associated with this ‘benefits’ program by unilaterally adjusting their revenue sharing formulae (as they are currently free to do anytime). Normal cash compensation to drivers would thus decline to offset the incremental cost of ‘benefit’ contributions. Moreover, there are no restrictions on how workers could spend the funds in their personal benefit accounts: they could draw on them for any expense (including normal living expenses). There is no guarantee at all they would actually be used for the ‘benefits’ promised by the platforms. They could thus be just as accurately called ‘beer and popcorn’ funds, as ‘benefit’ funds – but that would defeat the efforts by the platforms to pose as responsible employers. Moreover, without effective limits on labour supply, any improvement in genuine compensation that actually resulted from these funds (against the odds) will be defeated by the same adjustments in labour supply (and hence waiting time) that negate the realized impact of any minimum wage for ‘engaged’ time. In sum, this proposed ‘benefits’ plan is a mirage: it seems to put a few dollars per day into a driver’s left pocket, while taking it out of their right.
Most objectionable is that this portable ‘benefits’ plan would allow platforms to continue to free-ride on taxpayers. By denying normal employment-related benefits and levies (including EI, CPP, WorkSafe premiums, and the province’s employer health tax), the platforms shift that expected employer cost onto both its workers and to taxpayers – since the costs of those exclusions ultimately fall onto public programs. When Uber evades paying employer health tax, the rest of us pay more for medicare. When Uber evades CPP premiums, the rest of pay more for GIS benefits (which will ultimately be paid to low-income Uber drivers after they retire). When Uber evades WorkSafe premiums, the medical costs incurred by drivers injured on the job falls onto taxpayers. This ‘benefits’ program would only ratify this ongoing exploitation of both workers and taxpayers.
The Myth of Flexibility
A central claim in the narrative of platform businesses is that their employment model allows a unique degree of ‘flexibility’ which workers greatly value. This claim is very misleading, and must be placed in a broader economic context. The platforms claim that since workers can choose when to log on and log off their apps, they cannot be considered employees. They argue that ‘flexibility’ allows platform workers to combine their work with other activities (including studying, family responsibilities, or working other jobs). Finally, the argument is made – implicitly and explicitly – that imposing traditional expectations on platform businesses (like paying a minimum wage) would necessarily sacrifice that valued ‘flexibility’.
First, contrary to the companies’ claims, platform workers do not truly choose when to work. They can choose when to log onto the platforms. But they have no control over whether that effectively results in actual paying work. Platform workers spend large amounts of unpaid time waiting for assigned jobs. They do not control when they actually work, and they certainly do not control their income. All they directly control is when to join a long line-up of other desperate workers also waiting for job assignments.
Second, given the uncertainty of incomes associated with this role, workers’ ‘choices’ about when to work are ultimately controlled by conditions in the consumer market they are hired to service. Why do most platform workers ‘choose’ to work during busy periods (like lunch and evening meal times for food delivery workers, and rush hours and evenings for ride-share drivers)? Is it because they do not like having regular meals themselves, and so might as well work while others are eating? Of course not: the ‘choice’ about when to work is centrally determined by the expected availability of assigned jobs. This is why platform workers congregate on the platforms during particular times – not because that is when the work best suits their ‘work-life preferences.’
Third, the ‘choice’ of platform workers about when to work (including their right to ‘turn down’ jobs assigned to them through the app) is entirely shaped by the economic desperation which they experience. The new Statistics Canada data and other research confirms that the platform workforce consists largely of desperate, unprotected individuals who are excluded from other, more secure jobs – and often from government income support programs. In that context, do these workers truly ‘choose’ when to work? Not really: they work as many hours as they can, offset by the painful reality that at many times that ‘work’ translates into very little income. They ‘choose’ to work, in the same sense that a poor person ‘chooses’ to sleep under a bridge.
Finally, the assumption by the platform firms that this limited vision of ‘flexibility’ is fundamentally incompatible with reliable hourly incomes is false. There are many waged jobs (in casual, part-time, or even full-time arrangements) in which shift schedules are not fixed, and workers can exercise considerable or even complete discretion over when they work – yet they are still considered employees, and still entitled to basic protections (including minimum wage, paid leave, superannuation, and workers’ compensation). Many salaried workers have no set hours. Many part-time workers (in industries like retail, hospitality, warehouse, technical services, care work, and others) can choose what shifts to work or when to complete their assigned tasks, yet are still paid by the hour. Indeed, pressed by tightening regulations and public opinion, even many digital platforms are now adopting wage-based employment models in which workers can still choose which days or shifts to work.
In sum, the vaunted ‘flexibility’ which these companies claim as a prime motivation for its workers is not all it is cracked up to be. Workers do not actually choose when they work (the app assigns them tasks on an unpredictable and uncontrollable basis); their hours are fundamentally dependent on consumer demand; and there are practical ways in which ‘flexibility’ and choice can be maintained within a waged employment model.
The platforms’ claims about so-called ‘flexibility’ are often backed up by responses to highly misleading questions posed to workers in company-sponsored surveys. Every worker (other than a volunteer) works to earn an income. No-one would do a job that was ‘flexible’ if it offered no compensation. To suggest that ‘flexibility’ is somehow more important than reliable wages ignores the economic coercion facing platform workers, and misportrays answers to deliberately vague and misleading questions. Supportive results from company-sponsored surveys (which the platforms portray as endorsement of their employment practices) are neither surprising nor meaningful. If a more neutral question was asked – such as “Would you prefer to receive a certain, known hourly wage for the time you are logged onto to the app?” – the answers would be very different. These workers’ supposed acceptance of or support for the uncertainty inherent in their jobs is shaped by their limited opportunities to support themselves in more conventional, predictable positions.
Conclusion: Genuine Reforms to Protect Platform Workers
Misleading and manipulative proposals like a minimum wage for ‘engaged’ time and so-called ‘benefits’ funds would in fact make matters worse for platform workers, than the status quo. They confuse policy discussions about regulating platform work, and will leave many platform workers thinking they now have ‘protection’ (when they don’t). At the end of the day, however, after accounting for their operating costs and unpaid waitring time, they’ll still be left with well-below-minimum wages. Many will then give up in despair: this is why the turnover of platform workers is very high, often over 100% per year.
Indeed, platform workers voting with their feet, and leaving for better-paid, more secure jobs in other industries, may pose the biggest threat to the viability of platform delivery firms – more than the risk of regulation. As labour markets tightened after the COVID pandemic, platforms found it extremely difficult to recruit and retain enough drivers under their existing employment practices. Ride-share fares and wait times have soared in many cities because of lack of drivers. Platform businesses continue to generate large losses (even as operating volumes and revenues grow). Uber’s share price has fallen 60% from its historic high, and Lyft’s by over 80%. Venture investors were once willing to subsidize these companies’ huge and cumulating losses, in hopes of future stock-market gains. But given continuing losses, higher interest rates, constrained capital flows, and the platforms’ operational problems, future flows of new capital to subsidize continuing losses seem increasingly unlikely. It seems ill-advised, to say the least, for a provincial government to place much hope at all in this business model as a long-term source of employment opportunities.
The industry’s misleading proposals for a ‘minimum wage’ for engaged time, and portable ‘benefits’ plans, are ultimately an attempt to forestall genuine legislative and regulatory changes that are on the horizon. Platform workers have already confirmed (through labour board and court cases) that they have the right to unionize through normal channels, and achieve genuine collective bargaining rights. They don’t need a special ‘law’ or some new intermediate category of employment – just clarification that they are indeed workers (whether employees or dependent contractors), not independent businesses. Other cases already before labour boards and the courts are challenging the attempts of platforms to evade normal employment responsibilities and protections (such as severance rights). Platforms now advocate custom legislative loopholes (including manipulative promises about minimum wages and benefits plans) as a clear attempt to evade those coming judicial defeats. Governments must not facilitate this strategy. The platforms cannot be ratified in their use of labour practices that are fundamentally unfair, economically inefficient, and drag down standards in other industries.
In addition to rejecting the platforms’ call for special status, government should also take pro-active measures to strengthen protections and conditions for platform workers. An obvious first step is for provincial and federal governments to confirm that platform workers must be enrolled in normal statutory universal programs: including CPP, EI, WorkSafe, and the employer health tax. That on its own would immediately force the platform businesses to begin accounting for the time of its workers appropriately, and begin actively managing their labour supply in a more sustainable, efficient, and fair manner.
Government should also clarify that other minimum employment standards (including a genuine minimum wage; rights to statutory holidays, paid vacations, and sick pay; and normal rules on hours of work and overtime) apply to workers who clearly work at the behest and under the control of their platforms. It is straightforward to define reasonable tests of whether a worker is operating a genuinely independent undertaking, or whether they are in effect employees of a larger firm (regardless of what that firm calls them).
Contrary to its claims, the on-demand platform business model is neither fundamentally innovative nor ‘high-tech’. It has simply adapted centuries-old practices of contingent insecure on-demand labour (used in previous incarnations by the gangmaster and putting-out systems), by applying digital technologies and algorithmic management. The fundamental productivity of this industry is abysmal, dragged down by the deadweight waste of millions of hours of workers’ unpaid time (treated so cavalierly only because to the platforms, this time is costless). The technology of actual production is old-fashioned and often wasteful: using vehicles and bicycles to deliver passengers and small packages, often in an overlapping and fundamentally inefficient way.(14) The claim that platform workers are genuinely independent businesses in their own right is not remotely credible. Superficial promises to improve conditions for platform workers through seeming minimum wages or benefit plans (always contingent on government endorsing the continuing immunity of platforms from normal labour standards) will have no impact on the realized incomes of platform workers. Experience from other jurisdictions(15) confirms that the consumer benefits provided by this industry (such as convenient food delivery) can still be provided under regulatory systems that are equivalent to the obligations incurred by other employers – rather than subsidizing these inefficient, money-losing, and ultimately unviable business models with continued regulatory favours.
- “Ride share” is a misnomer derived from the assumption that workers are simply “sharing” their vehicles with paying passengers, and helped give rise to the equally misleading term “sharing economy” (which has mostly fallen out of use). This is not an accurate description of the nature of this work, which involves the use of worker-provided vehicles dedicated to this service when the worker is signed into the app. A more accurate term might be “ride sourcing.”
- An important recent application of the on-demand model is Amazon’s Flex service, which hires drivers on a piece work basis to deliver Amazon packages (rather than using waged employees); other employers in the delivery and logistics industry are imitating the practice (see Spencer Soper, “Fired by Bot at Amazon: ‘It’s You Against the Machine’”, Bloomberg News, June 28, 2021).
- For surveys of this research see Subsidising Billionaires: Simulating the Net Incomes of UberX Drivers in Australia, by Jim Stanford (Canberra: Centre for Future Work), 2018; and The Effects of Proposition 22 on Driver Earnings, by Ken Jacobs and Michael Reich (Berkeley: UC Berkeley Labor Centre), 2020.
- Despite these advantages, Uber has never made a positive profit; by end 2022, with its business damaged by the COVID-19 pandemic and facing increasingly intrusive regulations in many jurisdictions, its cumulative losses reached some $32 billion.
- Digital Platform Work in Australia: Prevalence, Nature and Impact, by Paula McDonald, et al. (Brisbane: Queensland University of Technology), 2019.
- Measuring the Gig Economy in Canada Using Administrative Data, Analytical Studies Branch Research Paper Series, by Sung-Hee Jeon, Huju Liu and Yuri Ostrovsky (Ottawa: Statistics Canada).
- “A Look at Contingent Workers,” by Karen Kosanovich, Spotlight on Statistics, Bureau of Labor Statistics (Washington: U.S. Department of Labor), 2018.
- Measured as a share of total employment (rather than as a share of the adult population), this implies that platform work accounts for 7-8 per cent of all employment.
- Report on the Economic Well-Being of U.S. Households in 2018 (New York: Board of Governors of the Federal Reserve System), 2019.
- See Statistics Canada, “Labour Force Survey, December 2022,” The Daily, January 6, 2023.
- See Tara Deschamps, “Uber public policy head wants Ontario to move ‘faster and further’ on gig economy,” The Globe and Mail, January 10, 2023.
- Paul Meinema and Andrew Macdonald, “Labour ministers should act now to protect app-based workers,” iPolitics, February 24, 2022.
- See Holly McKenzie-Sutter, “Ontario designing ‘portable benefits’ plan for workers who don’t have coverage,” National Post, February 3, 2022.
- The negative impact of ubiquitous ride-share services on the efficiency of urban transportation has been well- documented in research, making it all the more dubious for government to allow the continued subsidization of this practice through regulatory loopholes; see, for example, Mathew Tarduno, “The congestion costs of Uber and Lyft,” Journal of Urban Economics 122, 2021.
- For a summary of international regulatory initiatives to improve labour standards in platform work, see Andrew Stewart and Jim Stanford, “Giving Platform Workers a Say: Regulating for Voice in the Gig Economy,” in Adrian Wilkinson, Tony Dundon, Paula Mowbray and Sarah Brooks (eds.), Missing Voice? : Worker Voice and Social Dialogue in the Platform Economy (Cheltenham, UK: Edward Elgar, 2022), pp. 48-70.