Justice in the digital society? Why employment status is not everything

Posted in: Business and society, Decent Work, Digital, Economy, Employers, Research

As conference season draws to an end, we asked business and society scholars to share their conference contributions. Here Stefan Hielscher details his work on gig economy workers, explaining how "order ethics" can be used to find both a moral and practical solution to managing the digital economy.  

In recent years, controversy has beset companies like Deliveroo and Uber over how to classify the service providers of these digital platforms, both legally and corporately. Although Uber and others have argued that their drivers are independent, third-party contractors, many observers in academica and the media, have taken issue with the insecure working conditions of gig economy workers, claiming that they should be treated as dependent employees. In March, the British Supreme Court confirmed the second view, arguing that Uber drivers are to be classified as “workers” under UK employment law and thus entitled to benefits, including national minimum wage, and maximum weekly working hours.

So, what can business ethics add to this debate? When we, as business ethicists, have thought and written about this problem, we realised that the focus on the employment status of gig economy workers in the public debate is misleading. While there is, of course, no one ‘correct’ ethical view through which to discuss such issues, let alone decide them, our ethical perspective argues that ethical reasoning should not be limited to an exercise to justify a pre-determined normative goal. This is known as “order ethics” or “ordonomics”. This theory requires you to start with a broad ‘normative premise’ – ideally a consensus-based moral goal shared by many people – and perform an informed analysis of its empirical conditions (with a strong emphasis on recognising how moral ideas can be practically implemented in a modern, democratic society). This allows you to form a pragmatic ethical conclusion.

In the context of the debates around the working status of platform workers, the three-step process could be reconstructed as follows:

  • Normative premise: It’s a moral goal to assure platform service providers minimum working conditions, including minimum wages and paid holidays.
  • Positive premise(s):
    (a) Platforms do not provide minimum working conditions for service providers if the latter are classified as independent, third-party contractors.
    (b) If service providers were classified as dependent employees, platforms would have to provide minimum working conditions.
    (c) Platforms do not hire service providers as dependent employees without government intervention.
  • Conclusion: Governments ought to intervene and obligate platforms to treat service providers as dependent employees so as to guarantee minimum working conditions.

Reconstructing ethical arguments this way allows you to carefully examine each premise and the consequences, to determine their value. In this case, the positive premises seem unquestionable, and so the conclusion seems logical. The crucial point of contention however is the normative premise. Can we really assume that, from the point of view of current and future platform service providers, minimum working conditions is all they care about? Is it really the case that all platform service providers would prefer to be dependent employees and enjoy these benefits, other things being equal? For example, why is it that many service providers voluntarily quit their dependent employment relationships in favour of independent, third-party platform contracting, as is documented for Uber in the UK and the US? Empirical studies provide possible reasons, many of which suggest that platform “work” is not as bad as its public reputation, and many people prefer this work due to the flexibility and freedom it provides.

Would people who wish for flexibility and freedom favour the conclusion above – to be hired as dependent workers, not as independent contractors – if they knew all the consequences? If service providers became dependent employees, platforms would likely reduce the flexibility and freedom that independent, third-party contractors currently enjoy. The reason is simple: minimum wages and paid holidays increase labour costs for the platform. Standard economics tells us that platforms will likely introduce incentive mechanisms for their currently employed drivers to increase work effort to compensate for higher labour costs. More importantly, however, there is a substantial risk that many people currently working for platforms would be unable to do so in future, because the platforms would choose to hire professional and experienced drivers who could make up for the cost increase. All this would reduce the freedom of drivers to choose their preferred working conditions and restrict employment options for other, non-professional drivers, who are hoping to supplement their income through this sort of work. Of course, we don’t know for sure, but this is what standard economics and industry experts would tell us to expect. Some even have argued that Uber will reduce its service by a third in the coming year or so.

On a fundamental level, however, our exercise shows that the ethical argument described above starts with too narrow a normative premise that is politically controversial and unlikely to create consensus with those who think differently. Instead, if ethics starts with a broader set of potential goals, values and interests of the involved and affected individuals, we need to broaden the normative premise. What is a normative goal to which all platform service providers, current and future, could potentially agree? It helps focusing on the relevant task that lies ahead of us: to take seriously, understand, and address the novel societal opportunities and challenges that arise with the innovation in digital economy while preserving the human needs of people:

  • Normative premise: In a just society, it is an important moral goal that all people can freely choose and use the opportunities stemming from organisational innovation, including employment options that best meet their interests and requirements, while being able to enjoy minimum living standards.
  • Positive premise(s):
    (a) Many service providers freely choose to offer their services on digital platforms. This practice suggests that service providers are better off because they prefer flexibility and freedom, all else being equal.
    (b) Platforms can provide flexibility and freedom only if providers offer their services as independent, third-party contractors. Hiring service providers as dependent employees would reduce both flexibility and freedom.
    (c) Independent, third-party contractors can potentially work under precarious conditions. The reason is that today’s social security systems guarantee social protection for dependent employees, not for independent, third-party contractors.
  • Conclusion: To preserve justice in modern society, which maintains the opportunities and addresses the challenges of the gig economy, governments need to keep an eye on all stakeholders in society. That means both to reform social security systems so as to cover the new semi-independent forms of employment that are emerging on digital platforms and compensate those that have lost income opportunities to structural change.

Of course, the gig economy is another ‘disruptive innovation’ that challenges democratic societies. Some people are harmed, in particular those whose future earnings have been devalued by the new competition, for example holders of expensive taxi licenses or medallions. To preserve the opportunities of platform-mediated services and do these people justice, it is an important responsibility of political decision-makers and society at large to think carefully about appropriate compensations for those who have lost from platform innovations.

Against this backdrop, the employment status is really not the most relevant issue when it comes to the gig or sharing economy. The challenge - mammoth though it is – is to reform current social security systems to serve the newly emerging forms of employment. This is particularly important because it’s likely that third-party platform contracting will grow and absorb more industries and professions in the future.

Reforms, however, will have to meet two conditions. First, a new system of social insurance must be compatible with people’s increasing desire for flexibility in their working patterns (revealed by the pandemic). Second, social security reforms need to ensure that people continue to engage productively with others in society, thus evading the potential negative repercussions of the universal basic income. If we handle these challenges well, a digital platform economy might even help realise an important dream of humankind, already expressed by Aristotle: to achieve happiness and life fulfilment, with and within our work.

Photo by Joshua Lawrence on Unsplash

Posted in: Business and society, Decent Work, Digital, Economy, Employers, Research


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