Europe Needs New Rules for the Uber Economy

Some people do actually work for Uber.

Photographer: Krisztian Bocsi/Bloomberg

The European Union is grappling with Uber and its peers, asking how best to regulate businesses that connect buyers and sellers in the so-called sharing economy. EU policy is shaping up to be much too heavy-handed.

A big question for these new enterprises is whether the people supplying the services are deemed to be employees (with rights protected by labor laws) or independent contractors (with little or no such protection). The answer isn’t obvious, and a lot is at stake. The first treatment could put many of the firms out of business; the second might leave workers open to exploitation.

The European Parliament is calling for a maximalist approach. It recently proposed a stronger European Pillar of Social Rights, including labor protections for all workers, “regardless of the type of contract or employment relationship.” This “core of social rights” is impressively wide-ranging, including provisions on work-life balance, training, maternity leave, collective bargaining, in-work support for people with disabilities, and much else besides.

Europe’s policy-makers see the benefits of the sharing economy, but view as suspect a business model that succeeds partly by shirking regulation: The EU is wary of anything that weakens its commitment to social protection. The trouble is, labor laws in many euro-zone countries already stifle job creation and innovation. Extending that framework to so-called platform companies would discourage new enterprises from forming and expanding. It would also hasten automation -- in effect, solving the worker-protection problem by reducing the number of workers.

A better answer is to emphasize flexibility, in two main ways.

First, rather than aiming to impose a top-down solution, the EU should welcome different approaches among its member states. Let national regulators try different models and see what works best. Second, accept that many non-traditional kinds of work don’t fall readily into the old categories of employed or self-employed. Some jurisdictions recognize a third group -- dependent contractors. For workers that combine attributes of employees (direction from managers, for instance) and independent contractors (wide discretion over whether and when to turn up for work), a similarly hybrid approach with a lighter regulatory touch makes sense.

At the same time, governments should accept the taxpayer’s role in providing better economic security for workers, whatever their terms of employment. More flexible working arrangements can add to insecurity, which adds to the need for a more effective social safety net. This protection should be seen as a public good, to be financed by citizens at large. Pushing those costs on to employers will only hold back the demand for workers.

The Sharing Economy

That’s why, with or without the likes of Uber, Europe should be liberalizing its labor laws across the board. Applying its “core of social rights” to the sharing economy would indeed promote equality -- by giving more people an equally good chance of being unemployed.

To contact the senior editor responsible for Bloomberg View’s editorials: David Shipley at davidshipley@bloomberg.net.