When It Comes to the Future of Work, the Uber Case Shows the UK’s Social Contract Is Stuck in the Past

UK Policy Economy & sustainability

When It Comes to the Future of Work, the Uber Case Shows the UK’s Social Contract Is Stuck in the Past

Commentary
Posted on: 22nd March 2021
Jeegar Kakkad
Head of Productivity and Innovation

Crises tend to accelerate pre-existing trends, and the UK’s social contract was already creaking prior to the pandemic. The ‘Great Acceleration’ in tech adoption over the past year is reshaping the future of work. But against this backdrop of change, our system of social and economic protections remains rooted in the economy of the 20th century and is proving insufficient and unsustainable when confronted with the 21st century world of work.

These fissures can be seen clearly in the challenges faced by Uber in the UK. In February, the UK Supreme Court ruled in favour of 35 Uber drivers who argued they were not self-employed because Uber controlled much of the terms of their work, including allocating customers and dictating fares. Last week, Uber announced it would reclassify drivers as workers entitled to holiday pay, a pension and higher, post-expense wages for the time they are picking up and dropping off passengers. The measures introduced in the UK are similar to those Uber promoted as part of the Proposition 22 ballot initiative in California to overturn state law requiring Uber to treat drivers as employees.

The Supreme Court’s ruling and Uber’s response have raised more questions than they have answered. Should other gig workers be reclassified, and if so, what rights are they entitled to? What are the implications of formalising a new class of workers distinct from employees, as Uber is pushing in the US and Europe? Will the fight over employment rights spillover into taxation, such as VAT? Is this the beginning of the gig economy being bound by ever more regulation to provide workers with more security? How do these implications of gig working differ when it comes to digital white-collar work?

Together, these questions speak to a more fundamental issue about the future of work: how should the policies and institutions underlying our social contract be reshaped when work is becoming more flexible, more mobile and more decentralised?

The social contract is meant to capture the implicit promise to share risks between businesses, workers, consumers, and government via for example, unemployment insurance, health and safety standard or public health care.

So while the current bundle of rights, benefits and protections that make up the UK’s social contract have evolved over time, they are still rooted in an increasingly outdated understanding of the world of work: the idea that an individual gets an education; works for a traditional company throughout their career; has few if any episodes of voluntary unemployment; and then retires collecting their pension.

But technology has created new possibilities to develop new business models and scale them globally. It has given individuals the opportunity to work far more flexibly than the traditional linear-careers and business models embedded in approach to social insurance, employment law and regulation. For some, however, a more dynamic economy has also become a more precarious one. As technology takes over more tasks, more people will have to acquire new skills to find work that suits them.

Technology is therefore rapidly recasting the relationship between businesses and workers. In doing so, the pendulum has swung too far in shifting the balance of risk on to individuals, and our approach to the social contract has failed to keep pace.

The rapid digitalisation during the pandemic is likely to widen this gap. The ‘Zoom Boom’ is bringing a renewed focus on how technology can improve productivity. It’s not just a question of whether in-person meetings can shift to Zoom or if we can save on commuting times, but what in-person processes can shift to digital “tools, structure and workflow”.

Businesses are also using technology to unbundle tasks, allowing them to not only automate, outsource or offshore work but also manage and monitor that work more closely. These productivity gains – like those in manufacturing in the 80s, 90s and 00s – are likely to come with social and economic disruption as the composition of jobs shifts and competition for jobs puts pressure on wages.

These trends are likely to continue to push risk onto individuals. But the progressive policy response shouldn’t be to persist with an approach that is rooted in an increasingly outdated view of work.

Instead, the shifting nature of the future of work requires a more fundamental rethink. We need to rediscover the principles of risk-sharing in the policy framework that underpins the social contract. Then, we need to revamp that framework so that it better reflects the complexity, risks and opportunities inherent in new technologies. Priorities for a revitalising our approach to the social contract should include:

  • Not just a safety net, but a support system. The current system of social insurance is designed to be a safety net when a family or individual falls into crisis. Instead, social insurance needs to be redesigned to fit a more flexible world of work and to help people be resilient to risk, cope with challenges, and attain human capital.

 

  • Expanding access to all forms of capital. Access to capital used to mean just access to finance, and specifically your house as potentially both your retirement fund as well as collateral for entrepreneurship. Now, it also needs to include access to human capital and social capital (ie the supportive systems and communities that make flexible work possible).

 

  • Recasting power dynamics between workers and firms: It’s not just revitalising unions that matters to balance of power between workers and firms. The UK needs to modernise and better enforce employment law to make labour markets less insecure. It needs to look at examples of how a stronger social safety net can increase the market power of workers relative to platforms. And it needs rethink how regulation, taxation and redistribution can deliver both flexibility and security for workers and sustainable operating models for businesses.

If increased remote working is just a pitstop to precarity for whole swathes of workers, then the Uber case may just be the canary in the coal mine for bigger social, economic and political problems ahead. Both businesses and workers are using the pandemic to reimagine what the world of work looks like; the government needs to seize this opportunity to reimagine the social contract for a more flexible, digital world.

Find out more
institute.global