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Digital labour platforms: The flexible labour market of the future or a "race to the bottom"?


Digital labour platforms add flexibility to the labour market, but also present potential challenges. And if the traditional players make good models for platform economy, new opportunistic upstarts will undoubtedly come into play.

It is a global trend that “the labour market will be characterised by fewer permanent employees and more freelancers and self-employed people”. This sentence is from IDA’s Vision 2025, and even though it is difficult to find figures that show exactly how many people currently work entirely or partially as freelancers, there is no doubt that atypical employment is growing on a global basis.

But what will the digital labour platforms, which offer and demand labour, get of any significance from the labour market of the future? And is it a trend that we should just let more and more people work under looser and more free conditions uncritically?

In Denmark, especially the Danish Confederation of Trade Unions (LO) and the National Union of Commercial and Clerical Employees (HK) have stated their positions at an early stage. For example, HK's chairperson, Kim Simonsen, has said that “we have to look at how we can ensure that there are also rights and conditions that prevent the creation of a proletariat on the new platforms”. And also at an early stage, LO has stated that the platform economy is welcome in Denmark. But only on the condition that it is in accordance with Danish legislation and the Danish model.

In IDA, a study shows that the digital platforms are still not something that members are very concerned with about. But we have taken a look at both the advantages and disadvantages of the platform economy, and what future models may look like in the Danish labour market.

Flexibility, flexibility, flexibility

When we are to point to the clear-cut advantages of digital labour platforms, it is hard to not to miss flexibility. For companies, there is great strength in being able to hire employees for busy periods, while having less permanent salary frameworks during periods in which fewer items are added to the order book. At the same time, there is also a degree of flexibility in being able to hire a highly specialised person for selected tasks, while in the case of permanent employment you would probably tend to hire employees with more general skills, who can carry out a number of types of tasks. And flexibility is also a keyword when it comes to freelancers.

“We can see that more and more people have started to be their own bosses as freelancers, consultants, project managers, or whatever they call themselves. The common denominator is that you go from project to project and do not necessarily get married to the same company,” says Mathias Tao Agger Linnemann, CEO at one of the new digital labour platforms, Worksome, who is clearly an advocate of the platform economy.

Especially young people are looking for more flexible jobs. And it is a great strength to be able to take care of tasks that you have chosen to carry out yourself. It provides the opportunity to work on more interesting tasks while giving you the possibility to get acquainted with new tasks in a non-committal way, if you are considering moving in this direction in terms of work. At the same time, many freelancers will also have a much higher degree of freedom with regard to when and where the task is to be carried out.

Used in the right way, digital platforms may also prove to be a bridge to the labour market for people on the edge. For example, some people at Uber succeeded in getting a group of people in a type of employment, when they otherwise would have had difficulties finding work. Others point out, on the other hand, that it could have the opposite effect.

Another advantage for companies that use labour force from digital platforms is that you can choose the very best person from a pool of workers, which also includes countries such as India and China, as well as Eastern European countries. And this can make companies more competitive.

“If you look at things from the companies’ point of view, we can see that there is a constant lack of the labour that is required. We can see it in scientific disciplines, IT, programmers, etc. And then there is the need to be ready to embrace changes,” says Mathias Tao Agger Linnemann.

Thus, the labour market will grow dramatically, and it may be a good way to fill some of the positions, for which it is difficult to find employees for today. And, at the same time, we cannot ignore that there is an obvious advantage for a company to pay an employee in the Philippines, which would be significantly less expensive than paying a similar employee a Danish salary.

An unregulated field

But it is precisely the salary that is a good example that a switch from a classic life as a salaried employee to working full-time via global, digital labour platforms is not without challenges. Before you decide to find your tasks via digital labour platforms, the traditional employer-employee relationship disappears in most cases. Instead, you will be considered as being self-employed, and therefore there are suddenly a number of benefits that you will have to take care of yourself, explains Anna Ilsøe, Associate Professor at the University of Copenhagen’s Employment Relations Research Centre (FAOS). This is the case, for example for pensions, insurance, salary during illness and maternity or paternity leave, holiday pay, etc. And it is a larger package that most people realize.

“If you calculate what collective agreements actually add to salary - and what you also should add to your fee as a freelancer - it adds up to an additional 50-100 per cent on top,” says Anna Ilsøe, and continues.

“That is quite a lot, and therefore I also think that it is very difficult for a freelancer to ensure that 50-100 per cent is added on top each time a fee is negotiated. Especially in the case of small fees. If your fee is DKK 2,000, you also need to remember that half of it must go to pensions and insurance. At the same time, there are many different things that a self-employed person has to remember to pay”.

She also points out that paying taxes is a complex area. Because there is no clear employer, there is no automatic reporting obligation regarding salary to the Danish tax authority, SKAT. Therefore, the person who has done the work must report his or her income to SKAT.

“Do you get this done if you earn less than DKK 50,000 a year and your company is not registered with the Danish Central Business Register (CVR)? And is it quite clear how to do this? There are a number of ambiguities here," she says, and continues

“And it gets even more complicated if you - as was the case with Uber - have to report deductions for wear and tear of your own car, deductions for driving expenses and tax payments with regard to your own income”.

Although Anna Ilsøe believes that digital labour platforms are, in many ways, an unregulated area, there are still differences in what the challenges are in a country like the United States, at EU level and in Denmark. At the same time, it is important to remember that there are big differences between the global and Nordic labour platforms, as well as the growth of atypical employment having been on the way for many years, so this is not a trend that is coming suddenly. She also thinks that it is difficult to compare, for example, engineers, who are a professional group that is in great demand and who have a low level of unemployment, with, for example, unskilled immigrants, who to a greater extent are on the edge of the Danish job market.

“The Danish model has adjusted itself many times to changes in the job market. So I think, actually, that experiments can also be made to adjust the model here. But I believe that the organisations in the labour market will have to stretch themselves a bit in the first attempts. They cannot necessarily have a full-blown Danish model with industry collective agreements in the first attempts. You need to experiment with, for example, framework agreements, company agreements or temporary staff agreements,” says Anna Ilsøe.

Everyone - including engineers - should be worried!

The British economist, Guy Standing, is more worried about digital labour platforms. He is especially known for re-actualising the term, precariat. A social class, which primarily consists of young academicians, freelancers, immigrants and casual labourers, who have an involuntary loose connection to the labour market, without pensions, holidays and daily subsistence allowances. And he predicts that digital platforms may push more people into an insecure existence on the edge of the job market.

“I believe that all professions - including engineers - should be worried about the development of a precariat. Because what we have seen over the last 10 years is that profession after profession becomes fragmented so that there is an elite that earns extremely high salaries and a group that loses traditional rights, such as security in employment, pensions, good salaries, paid holidays, etc. And the size of the precariat will accelerate due to digital platforms,” he says.

Guy Standing sees more dangers in the digital labour platforms. Among other things, that digital platforms will become so strong that there will be monopoly-like conditions, where you, as an employee, are dependent on one or very few platforms, which can take a disproportionately large piece of the cake when an employee carries out a task.

“A platform like Uber enters a market and loses money on purpose. So it will often pay drivers extra, while they demand less for a trip. And as soon as they have outperformed the competitors, they raise the prices and have a monopoly,” he says, and continues,

“It is crazy that platform owners earn billions, and the people doing the work have decreasing salaries, decreasing benefits and more insecurity. I think that politicians, trade unions and employers have a major task in addressing it,” he says.

Guy Standing also points out that digital labour platforms may cause problems especially for those workers who are not among the most successful. Because another aspect that Guy Standing finds to be problematic is that many digital labour platforms have a rating system, in which employers and employees assess their counterparts as a basic feature. And if you end up with a low rating, it will also be very difficult to find tasks, and it will also be difficult to change platforms if you have used a lot of time creating the profile that de facto becomes your portfolio. This results in platforms with much too much power owning all information about your working life, Guy Standing believes.

We have been spoiled

Clearly, platforms can present some challenges regarding an orderly labour market. But some of the challenges may also contribute to the platforms moving closer to a traditional role as an employer. According to Anna Ilsøe, a number of the Danish and Nordic platforms that facilitate labour to one degree or another are working towards getting closer to the status of temporary employment agencies or similar roles. This is because the Danish model has a number of advantages for companies, citizens and the state. Collective agreements relieve the burden on the state for a number of expenses – and at the same time, businesses are free to negotiate rules in the labour market with their counterparts without being regulated much by legislation.

“In Denmark, we have been spoiled by a relatively simple tax system for citizens because we have third-party reporting directly to the Danish tax authority, SKAT, from employers. If we are in a freelance labour market, in which the tax reporting must be done by the freelancers, who earn DKK 2,000 here and 5,000 there, it is a lot more work for the individual to report taxes,” says Anna Ilsøe.

She points out that we can end up like in the United States, where many salary earners have to hire an accountant to calculate tax. We do not have this worry in Denmark, where employers automatically report annual income.

“It is a simple system from the citizens’ point of view, and there, we can end up in a completely different ball game”.

More dialogues with the trade unions

She points out that nothing has been settled yet, regarding the Danish model and digital labour platforms. But an interesting change is taking place. There are platforms such as Uber, which are far removed from discussions of models other than subcontracting to freelancers. But there are also platforms that begin to integrate elements in the direction of orderly conditions in a more traditional sense. She mentions Meploy and Happy Helper, which have a minimum salary on their sites. Happy Helper also has an insurance scheme for those who work via the platform.

“Whether it is a high salary is a matter of discussion. But some practices are starting, which are going in the direction of orderly conditions,” she says.

Anna Ilsøe also tells that she has spoken with the owners of Danish, Swedish and Norwegian platforms, and they typically have considerations that are different from those you see in, for example, American-owned platforms. The Nordic-owned ones typically have more dialogues with trade unions.

“A number of Nordic platforms are actively trying to work towards orderly conditions. Obviously, when you start a business model in which you have freelancers or self-employed people, your starting point is there. But there are quite a lot of considerations about which way to go on many to these platforms. Thus, one of the most important processes right now is starting a dialogue between platforms and organisations in the Danish labour market,” says Anna Ilsøe.

Neither does Guy Standing think that we have to avoid using digital platforms.

“There is no doubt that they give people more choices and that they are flexible, and in some cases, practical.

So it would be the wrong approach to try to stop digital labour platforms,” he says, and continues,

“Instead, I think we should work on having them be run to the benefit of all groups. And at the moment there is nothing that suggests that they will be”.

You have to give some things a try

Guy Standing says that he likes the idea of the development of cooperatives. And he thinks it would be a good way to prevent global platforms, which are primarily run from Silicon Valley, from having too much power and taking a larger and larger share of the income. For example, traditional trade unions, such as IDA, could create the platforms themselves, which members could use and thus obstruct purely market-based platforms, which to a lesser degree are concerned with employee conditions.

“And as far as I can see, there is no reason, for example, for the Danish Society of Engineers not to be able to design an app and as system of governance, in which standards and ethics are complied with, contracts are acceptable and where the distribution of income is made in a way that provides security to the majority rather than a small minority,” he says.

Anna Ilsøe repeats that it is crucial to create a digital Danish model, that the labour market’s traditional players can reach out, carry out some experiments and contribute to creating good models for the digital labour platforms. Otherwise, other players will do so. They could, for example, be insurance companies or alternatives to the traditional unions, which can see a business model in the area. And one model could be having your own platform.

“I think that it is relevant to consider a number of different possibilities for cooperation with platforms. Because you have to give some things a try before you find a form that suits all of the parties involved – including the people who want to work as freelancers,” she says.