Commentary,  Gig Economy,  Labour Standards,  Productivity

To Improve Productivity, Stop Paying People Nothing to Do Nothing

There’s been a lot of discussion in Canada lately about productivity. The productivity statistics have been disappointing since the end of COVID lockdowns. This is partly due to the continuing aftershocks of the pandemic, including big changes in the occupational makeup of employment, working from home, and other adjustments. 

But the problem also reflects the degradation of job quality in many sectors of the economy. Too many jobs are precarious, irregular, poorly paid – with no opportunity for workers to improve skills, gain experience, and then be rewarded for their productivity. In the extreme, in the rapidly-growing gig economy, workers spend much of their day literally doing nothing – and getting paid nothing for it, too.

In this commentary, originally published in the Toronto Star, Centre for Future Work Director Jim Stanford argues that requiring platform businesses to pay their workers at least minimum wage for all hours worked, would not just be fair: it would also be a powerful spur to better productivity.

Gig Economy Unfair Work Practices Undermining Canada’s Productivity

By Jim Stanford

Many economists, myself included, worry about Canada’s weak productivity growth since the COVID pandemic. The Bank of Canada’s Deputy Governor even called it a national “emergency.”

That’s a bit alarmist. Most industrial countries have recorded strange drops in productivity since the pandemic – the aftereffects of enormous disruptions in employment and labour supply. Measurement problems (arising from emergency wage subsidies and the spread of working from home) cast some doubt on the statistics. And there are early signs productivity is finally normalizing.

Nevertheless, we certainly need better productivity to underpin faster economic growth and higher incomes. It would also help cool off inflation. There are many ways to tackle the problem. But one of the most obvious is to stop a growing practice whereby hundreds of thousands of workers literally spend hours of each day doing nothing – and get paid nothing for it.

Work through digital platforms (such as ride-hail and food delivery) has expanded dramatically. Statistics Canada recently reported that 927,000 people worked through digital platforms in 2023, 3.3% of working-age Canadians. Some do it as their main job, some as a ‘side hustle’.

Consumers like the convenience and low cost. For newcomers and others who struggle to find better jobs, it’s a way to earn at least something. 70% of ride share and food delivery workers are racialized, and most are young.

But the wages are low and unpredictable – and for much of their day, platform workers literally get paid nothing. Because the platforms treat workers as so-called ‘contractors’, not waged employees, they evade normal responsibilities: like minimum wage, workers’ compensation, EI, and CPP.

Workers are directed and paid by the platforms. They do not control prices. They don’t know in advance what they will be paid. They cover their own costs (including car, gas, data, and insurance). Most relevant for Canada’s productivity, they aren’t paid while waiting for their next job, or travelling to pick up a meal or a passenger.

City of Toronto data indicates ride share workers typically spend half their total working time waiting, unpaid, for jobs, or travelling to them. Waiting times are likely worse in food delivery. The number of platform workers is far greater than can be efficiently supported by the available work – yet desperate workers stick with it in hopes of earning enough to eat. Eventually, most give up: gig worker turnover is enormous, often over 100% per year.

Since waiting is seemingly ‘free’, the platforms have no incentive to reduce it. In fact, they prefer an excess of available workers, since it speeds response times for customers. And their algorithmic pricing strategies push down pay even further if drivers are desperate enough to work for less.

Apart from being unfair, this creates a horrible disincentive for productivity growth. These workers literally do nothing for half their time. If the almost one million platform workers in Canada actually worked all their days, rather than just half of them, national productivity would improve noticeably.

There are two ways to reduce the wasted days and wasted nights of platform work. One is to require platforms (like other employers) to pay minimum wage for all hours (New York City does this). Platforms would reduce excess labour so those working are more efficient.

The other is to cap the number of workers (as Toronto tried with ride-hail licenses), so those working can earn a decent wage. Not surprisingly, the platforms resist either solution fiercely.

The time wasted by digital platforms is just the most extreme example of a broader problem afflicting Canada’s productivity. Businesses degrade the pay and stability of work with precarious employment strategies like labour hire, contracting out, and gigs. Their goal is to cheapen labour, and shift the risks of market fluctuations onto the backs of workers.

But when labour is cheaper and more ‘flexible,’ employers have little incentive to improve genuine efficiency: through machinery and technology, better skills, and upgraded work systems. In the extreme, if labour is free (as is true for half of platform workers’ days), there’s no limit to how much can be wasted.

Genuine productivity depends on valuing workers and their time: treating labour as a scarce resource, not a throw-away input, and allocating it wisely. Employers pay much more attention to this task when the cost of wasting workers’ time is significant.

A powerful way to promote productivity, therefore, is to raise the price of labour – starting by paying platform workers at least minimum wage for the time they sit idly waiting for another order. Their employers will quickly find more efficient ways to match labour with customer demand. That will free hundreds of thousands of people to do something more productive. And anything is more productive than sitting around doing nothing.

Jim Stanford is Economist and Director of the Centre for Future Work. He divides his time between Sydney, Australia and Vancouver, Canada. Jim is one of Canada’s best-known economic commentators. He served for over 20 years as Economist and Director of Policy with Unifor, Canada’s largest private-sector trade union.