Riding Through Headwinds: How Platform Workers Can Be Supported During Periods of High Inflation

Technology Policy Digital Government

Riding Through Headwinds: How Platform Workers Can Be Supported During Periods of High Inflation

Commentary
Posted on: 13th October 2022
Oliver Large
Senior Policy Analyst

Most countries are facing rising prices, driven by the cost of fuel and food. Behind these inflationary headwinds are myriad factors, stemming in part from post-Covid economic policies (such as Biden’s economic stimulus) and the repercussions of the war in Ukraine, felt especially in Europe.

Although Southeast Asia has been relatively protected from high inflation compared to the rest of the world, it has not been immune.

Last year, TBI’s Digital Government Unit set up a project to understand working conditions and worker experiences on digital labour platforms. Looking at four countries which we have used in our ethnographic research – the UK, Singapore, Indonesia and Kenya - inflation is on the rise.

The inflation rate year on year (Aug 2021-22) has risen from 6.6 to 8.5 per cent in Kenya, 2.4 to 7.5 per cent in Singapore, 1.6 to 4.7 per cent in Indonesia and 3.2 to 9.9 per cent in the UK. Fuel is a significant part of these rises. In the three-month period to July 2022 petrol prices in these four countries increased by between 10 and 20 per cent.

Our participatory research project showed that in the eyes of workers one of the key attractions of  platform work is the higher income than might be available elsewhere in the market. The reality, especially in times of high inflation, may fall short of this.

Platform workers will be some of the hardest hit by inflation, not least because transportation-based work makes up more than four fifths of global customer transactions on digital labour platforms.

Many of the workers using those platforms will use a motorised vehicle and, as self-employed workers, would be solely responsible for fuel payments.

Workers should not be left to cover the costs of inflation - both platforms and governments have a role to provide support.

How can platforms think about inflation?

As inflation bites, platforms will have to navigate the trade-offs between profit and growth, maintaining workers’ pay at a sufficiently attractive level, and keeping prices competitive.

Platforms influence both the supply of and demand for labour through levers such as price strategies (often creating lower prices to consumers and targeting incentives for new joiners/existing workers).

This market-making power allows the platform to shift costs between customers, workers, and the platform itself. Inflation poses a tricky problem for platforms because it exacerbates the trade-off between profit, growth, wages, and prices.

On the customer side, opting for increasing prices may lower overall demand for the services platforms provide, especially since customers may already be cutting back on “non-essential” services.

For workers, persistent inflation is likely to encourage some to leave platform work altogether as their revenue is offset by rising costs. A shortage of drivers may lead to increased wait times for customers which can have a knock-on effect on demand. However, workers affected by inflation in other parts of the economy may also be driven to join digital labour platforms to supplement their income.

Workers who stay on platforms might seek to increase their wages by engaging in income-maximising tactics such as joining multiple platforms, or use bots which allow workers to access higher paid tasks.

The impact at the platform level is unclear. Although inflation may lead to a fall in the affordability and availability of services, while constricting the platform’s growth strategies and profit margins, it is unlikely to be existential.

Swiggy, a food delivery service in India, has already halted its “Genie service” (delivering a range of goods) in three cities, and Wolt (a ride-hailing platform) voiced concerns about the trade-off between cost of increased worker payments and future investment. Ultimately, scaling back growth may have an impact on the job opportunities workers will have in the future.

What have platform responses been?

Platforms have broadly responded to the threat of inflation on worker livelihoods in three ways:

  • Increasing worker pay by shifting the cost to customers, often through a time-limited or temporary increase to the base rate of a ride. Gojek announced an increased start rate in Singapore, which varies depending on the type of vehicle and the length of the journey, and Grab followed suit with its own temporary fee. Some platforms, such as Swiggy in 2021, had already introduced a permanent component in rider pay-outs indexed to changing fuel prices on a monthly basis.
  • Increasing worker pay at the expense of the platform’s profit and/or growth. For instance, Wolt is piloting a new payment model after discussions with workers that pays for the distance the courier takes towards the merchant. In a blog post, Wolt said this would provide “several million” additional euros to couriers and “address the key issue of rising gas prices.”
  • Avoiding trade-offs by leveraging networks and partnering with fuel companies to reduce supply-side costs to drivers, for instance, through Grab’s partnership with the Petro-company Caltex, or Deliveroo’s partnership with Shell in the UK, which saves 4p per litre on fuel. Platforms have also partnered with companies to provide deals on electric vehicles, which are cheaper to run.

Some platforms have not announced specific measures. In some cases, this is a result of legacy policies.

In others context-specific factors may have mitigated the platform’s response, such as the courts re-classifying workers (as employees, or an intermediate employment status) and so guaranteeing them a minimum wage. Others still may not have made any response.

What is the Government’s role?

Government responses to inflation have differed between countries. The response has also depended on existing policies which have influenced the scope and willingness to act.

For instance, in countries where taxes are raised against fuel, these levies have been reduced. In the UK, fuel duty was cut by 5p per litre.

Where subsidies exist, such as in Kenya, or with state-owned petro-companies in Indonesia where prices are controlled, significant pressure has been put on the government to keep fuel costs low.

However, the room for additional government support is limited: the Kenyan fuel subsidy will be phased out by next year due to increased cost pressures, and another 5p cut to fuel duty in the UK would cost the government £2.4 billion (around one fifth of the UK’s annual international aid budget).

The limited scope for extra financial support highlights the need for governments to pull non-fiscal levers, especially to influence platforms.

Governments should also ensure that of the four factors under the platform’s influence – growth, profit, workers’ pay and customer prices – there is a fair balance so that businesses can thrive while workers are not over-burdened from rising costs.

The so-called “Uber Files” - a leaked trove of messages between executives of the company between 2013 and 2017 – show how workers can be taken for granted in the platform strategies for growth.

One potential immediate option for governments is to ensure that platforms pay workers a base rate for each trip. In Indonesia a minimum tariff for ride-hailing services was introduced in 2019 which factors in the cost of fuel.

In the UK, Uber drivers are classified as “workers” – an intermediate category between self-employed and employed - which guarantees them a minimum rate between accepting and completing a trip (not all platform workers have access to this protection).

While not resolving all the issues relating to inflationary pressures – including the supply-side problems – this measure would support workers to ride through inflationary headwinds.

Find out more
institute.global