Unruly disruptors.

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Europe Will Defend Its Gig Economy Workers

Leonid Bershidsky is a Bloomberg View columnist. He was the founding editor of the Russian business daily Vedomosti and founded the opinion website Slon.ru.
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On Thursday, the European Parliament voted overwhelmingly to back a report calling for better worker protections in the on-demand economy, also known as the sharing economy. The resolution isn't binding, but potentially, the issue presents a bigger threat to companies such as Uber than the resistance of their more traditionalist rivals. Europe is not afraid to appear retrograde when it comes to worker benefits, and though that may drag it down economically, it's also what makes it a nice place to live and work.

QuickTake The Sharing Economy

Rapporteur Maria Joao Rodrigues called for "decisive steps towards legal certainty on what constitutes ‘employment,’ also for work intermediated by digital platforms." She said open-ended contracts should remain the norm, and on-demand platforms should guarantee "certain core working hours" to all workers. In approving these demands, the European Parliament added its weight, and some specific demands, to the European Commission's push for more stringent regulation of the "gig economy." If the EU moves to force the platform owners to recognize their workers as employees, this will upend their business models and in some cases make them indistinguishable from traditional companies.

A different line of attack against Uber and its ilk is now under consideration by the European Court of Justice: a taxi association in Spain argues that the U.S. unicorn is a transport company that should have applied for all the necessary licenses before entering the Spanish market. But even if the court rules against the U.S. company, it won't create a high enough hurdle to drive it out of business in Europe because it won't ban it from hiring "independent contractors" at a fraction of the cost incurred by incumbents, who have regular employees. And the verdict won't make any difference, say, to the takeaway couriers used by U.K.-based Deliveroo: It doesn't need a license to deliver pizzas.

Mandated employment standards, however, could break these companies. After all, their true innovation isn't the rather straightforward and easily replicated tech behind them, but their ability to bypass labor standards and thus undercut competitors on price -- perhaps even after the money they get from investors is used up and they can no longer subsidize their services.

At this point, Uber and other similar innovators are even facing problems with their approach in the U.S., with its soft labor standards: Uber is finding it difficult to reach an acceptable settlement with drivers who want better terms, and some workers have been able to secure recognition as employees from regulators. In Europe, gig economy companies also face troubles. Last October, a London employment tribunal forced Uber to recognize two drivers as employees and guarantee them a minimum wage. The U.S. firm appealed the ruling.

Deliveroo, for its part, has to deal with couriers' attempts to unionize -- something that's relatively easy to do in Europe -- and obtain full benefits, including paid vacations and a minimum wage.

These are, however, minor setbacks compared with the possibility of Europe-wide regulations specifically targeting on-demand platforms. If they are adopted, companies that are too "advanced" to recognize their workers as employees will need to become more like the new crop of companies that provide temp workers -- Swiss-based Mila or San Francisco-headquartered Wonolo, which legitimately employ the personnel they hire out. While these firms are still competitive because the industry they're disrupting is unforgivably low-tech and slow-moving, the taxi industry has largely made up its technological lag compared with Uber. For delivery services, the tech barrier is also low.

The EU is right to be worried. According to a 2016 paper by Ilaria Maselli and her collaborators, written for the Center for European Policy Studies, the share of contingent workers in the EU has risen to 32 percent in 2014 from 27.4 percent in 2002. While this has helped alleviate unemployment problems since the financial crisis, these are not the kind of jobs Europe needs.

Countries with high unemployment --10 EU members have an unemployment rate above 8 percent -- could temporarily allow the growth of what University of Hertfordshire professor Ursula Huws calls "cybertariat." For other European nations, job quality -- and the quality of life in general -- is more important than adding to their number. There's no point in multiplying workers unhappy with their lot because of the precariousness of their position, the lack of a guaranteed income and a social safety net. Companies that can only grow on these terms are doing something wrong.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

To contact the author of this story:
Leonid Bershidsky at lbershidsky@bloomberg.net

To contact the editor responsible for this story:
Therese Raphael at traphael4@bloomberg.net