When sharing becomes uncaring

“There are too many drivers on the road and fares are low,” he says while driving a black rented Mazda. “I might or might not stay long term; it depends on the job market. If the job market is bad, I won’t have a choice.”

There are scores of others like Riza, working in the so-called gig economy, in which individuals engage in short-term contracts or freelance work. The Ministry of Manpower’s (MOM) “Labour Force in Singapore 2018” report states that there are more than 210,000 own-account workers in Singapore, defined as self-employed persons engaged in a trade or business without employing any paid workers. They include taxi drivers, private-hire drivers, insurance and real estate agents (see Charts 1 and 2). The majority of them have chosen to do this kind of work, according to the report. However, there is relatively little data available on people who work as independent contractors, rather than employees, of so-called “platform” companies such as Grab, Deliveroo, GoGoVan and Gojek.

To be sure, not all gig workers use technology platforms. Some may be engaged by traditional companies or take on projects as freelancers. But dominating the gig economy are a few major online transport and food delivery service companies, which have a combined value of US$1.8 billion ($2.45 billion) in the Singapore market, according to the latest Google-Temasek report on Southeast Asia’s internet economy.

However, there is no specific data on how many gig workers use these platforms because they were displaced by the job market or are from low-income households — a demographic that some social workers have observed. But local economists and market observers say it is matter of concern if a significant number of people who faced job disruption or are from low-income households are stuck in gig work.

“As said by Minister for Manpower Josephine Teo in March this year, the number of self-employed persons (SEPs) [in Singapore] — which include gig and platform economy workers — was more than 8% [of the total number of employed residents], and of these, about 90% preferred self-employment to regular jobs,” says Ian Lim, partner at TSMP Law Corp, who heads the labour and employment practice. “Assuming the accuracy of the data, this may not sound like much of a problem, unless the remaining 10% of SEPs, who would in fact prefer regular employment, are mostly from lower-income families, who only do gig and other freelance work because they don’t have a choice.”

The situation is probably compounded by the fact that growth in the local economy has been muted. The number of retrenchments in Singapore rose to 3,230 in 1Q2019, up from 2,510 in 4Q2018. The number of job vacancies in 1Q2019 declined for the first time in two years. In 2Q2019, Singapore’s economy grew just 0.1% y-o-y, the lowest in a decade, according to official estimates. Economists are expecting further retrenchments and fewer job opportunities.

In addition, Singapore workers are also likely to be hardest hit by technological disruptions among countries in the region, according to a study by Cisco and Oxford Economics. The study also concluded that, despite its already highly skilled workforce, it is Singapore that faces the biggest skills challenge, as the majority of new jobs will be created in highly skilled managerial and professional roles. “Thus, a considerable uplift is required in the overall skills composition of that workforce,” the study noted.

“If [there is a significant number of low-income people in the gig economy], it means that the rest of the economy is struggling and job creation is weak or job losses are high. So, steps will have to be taken to energise the rest of the economy so that there are sufficient jobs and people are not working in the gig economy because of a lack of choice. Also, more jobs will need to be created through appropriate policies in terms of investment,” says NUS Business School’s Professor Nitin Pangarkar. He adds that he does not have the data on the number of people going into the gig economy because they were forced out of regular employment.

Gig to get bigger

Industry watchers say the gig economy is only going to get bigger, fuelled by the growth of ride-hailing and food delivery services. According to data from MOM, own-account workers made up 8% to 10% of the resident workforce in the last decade. But analysts argue the numbers do not reflect the situation on the ground. And, more people are going to be engaged by the various technology platforms.

Says Lee Ju Ye, an economist at Maybank Kim Eng Securities: “We think the gig economy may be larger than reflected by the number of own-account workers, based on other statistics such as the rising trend of fresh graduates going into non-permanent jobs. Around 41% of Institute of Technical Education and 33% of polytechnic graduates opted for part-time, temporary or freelance jobs in 2018, a significant increase from five years ago. About 9% of university graduates from Nanyang Technological University, National University of Singapore and Singapore Management University are also opting for non-permanent jobs, up from around 6% in 2013.”

DBS Research puts the total number of gig workers with platform companies at around 97,000 individuals, which is 4% of Singapore’s labour force. “Sixty to 70% of gig economy workers would be working in the ride-hailing sector [including GrabFood] while others would be in food-delivery and other delivery services,” says Sachin Mittal, senior analyst at DBS Research. “Based on the Land Transport Authority’s 2018 statistics, there were 45,000 chauffeured private-hire cars in Singapore, the bulk of which should be on Grab. We have assumed around 14,000 motorcycles on GrabFood as well, which is around 1% of the motorcycle and scooter population in Singapore.

“Assuming that 78% of the ride-fare goes to the driver and, for each food delivery, $8 goes to the worker, the total income for gig economy workers would be $1.63 billion. Taking into account the cost of fuel and other things, net income should be close to $1 billion [a year] in our estimate.”

Mittal notes that the sector is likely to grow bigger in market size as well. According to the Google-Temasek report, the online transport and food delivery sectors in Singapore will hit US$4 billion in 2025, from US$1.8 billion last year.

To regulate or not to regulate?

As the gig economy expands and the platform companies that drive it grow bigger — with valuations in the billions — critics have argued that the workers behind the growth lack the protections afforded workers in other sectors. Grab, as a company, is valued at US$14 billion, based on its latest funding this year. Its rival Gojek is estimated to be worth US$10 billion by market intelligence company CB Insights. Meanwhile, Deliveroo is worth more than US$2 billion. At the same time, these billion-dollar platforms have an uncomfortable level of control over these workers, who are not officially employees but are nonetheless required to comply with the companies’ policies.

Importantly, it would be a major challenge for policymakers if these platforms have become a permanent refuge for people from low-income households or workers displaced from regular employment.

“Because regular employment offers career progression and social security benefits, such workers could be out of luck in the future if gig jobs go away,” says nominated Member of Parliament Walter Theseira, who is also an associate professor of economics at the Singapore University of Social Sciences. He adds that the prospects for career progression of higher-skilled workers in the gig economy may be dim in the long term because they may not have built the right skills to take their career forward.

Given the size of the gig economy and the heft of some of the major tech platforms, the question is whether it is time for regulators and policymakers to step in to introduce some degree of protection for the workers.

When these platform companies entered the market five or six years ago, they were seen as disruptors of traditional business models, or innovators that policymakers hoped would transform industries to become more agile and nimble through technology. Proponents of such platforms say they allow individuals to monetise their underutilised assets and personal time. These platforms also offer greater flexibility than traditional employment does. Across most developed markets, these platform companies were given leeway to experiment, with light-touch regulatory oversight.

Giving such companies the space to develop, with little to no regulation, may have been the right thing to do then. But now, market watchers, lawyers and economists say the industry needs regulation or guidelines as they become a billion-dollar industry with a significant number of people transacting on these platforms and indirectly responsible for the livelihoods of many.

“The truth is, government legislation has not caught up in this space. Before you could sort out the bike-sharing industry, they had left the market,” says Patrick Wong, president of the Sharing Economy Association in Singapore.

“Gig economy workers rely on the platforms to support their earnings. There should be some welfare structure or security to guide what they earn and their interaction with the platforms,” Wong says. “The platform businesses are not looking for top-down [rules] but some guidelines to support gig workers.”

Industry watchers that The Edge Singapore spoke to expressed significant support for regulation. A financial analyst says most platform companies are still unprofitable, kept afloat by private venture funds. What is more, some businesses may not even be able to withstand regulation, as seen in the case of local bike-sharing operators, which folded under rules necessitated by the chaos that had ensued.

“Disruption of traditional industries has led to unemployment. Not subjecting new economy companies to the same standards of worker protection and [environment and social standards] as well as other costs of doing business that traditional industries are subjected to is effectively [giving] an artificial lifeline,” the analyst says.

To be sure, major platform companies have started to look into the welfare of their workers, though sceptics put it down to competitive forces.

For instance, Grab offers fuel subsidies and car maintenance discounts, as well as insurance at affordable premiums and Medisave co-contribution. Grab also has a partnership with SkillsFuture Singapore to help its drivers figure out their skills development needs and finance them if they do not have enough credits to pay for the course. Deliveroo offers free online learning courses and working opportunities at restaurants for gig workers. It claims to have spent US$17 million on insurance for riders. The company previously said it had 6,000 riders in Singapore.

But detractors worry that these platform companies that are unprofitable may consolidate or scale back, leaving gig workers adrift or with few options. “It’s more often about privatising the gains and sharing the losses. The business model for many platforms is fundamentally about avoiding employee liability, socialising economic insecurity and worker vulnerability,” says Eugene Tan, associate professor of law at Singapore Management University.

“But [workers’ protection] is crucial as Singapore seeks to tackle social inequality and promote social mobility. The gig economy cannot be the means by which such imperatives are undercut from within. If the gig economy results in a tiered economy based on unequal workplace rights, entitlements and protections, then we will have a growing socioeconomic and political time bomb on our hands that can undermine the industrial peace and sense of fair play that is so important in a richly diverse society,” he adds.

Similarly, other lawyers also urge for greater protection for gig workers. However, they say there is no one-size-fits-all solution. Different markets around the world have approached the proliferation of platform companies differently.

In California, the state assembly passed a law requiring companies to recognise gig workers as employees. In the European Union, lawmakers approved a new legislation in April outlining certain rights for gig workers. The rules include compensation for cancelled work and regular working hours. In Philadelphia, the US, and in Australia, however, Uber drivers were ruled to be not employees, as they can work whenever they like.

“Changing global treatment may spark a review of these workers’ status. Singapore’s employment legislation and landscape are under constant scrutiny, and it may be helpful to make changes to the existing rules to expand employment protection to gig workers without impeding the growth of the gig economy. It is conceivable that the law may be enhanced to offer greater protection for gig workers and other on-demand service providers,” says Koh Chia-Ling, managing director of OC Queen Street LLC.

In Singapore, steps have been taken to protect self-employed workers. The government will be piloting a “contribute-as-you-earn” scheme in 2020. This helps workers make small regular contributions to their Medisave accounts instead of a big lump-sum payment at the end of the year. The MOM also released a set of guidelines called Tripartite Standards of Contracting with Self-employed Persons last year, which is meant to help reduce late payments and settle contractual disputes for freelancers. But none of the major platform companies have adopted the standards.

“If the platforms are resistant to the voluntary standards or see themselves as exempt, then it may well be that some degree of regulation is specifically required to protect gig workers,” says TSMP’s Lim.

Fine line

To be clear, Singapore’s labour laws have a clear framework that differentiates between employees and independent contractors. This includes considering factors such as the employer’s degree of control over an individual and whether the individual took on financial risks similar to running his own business.

“The main legal challenge is the status of these workers. The gig economy grants the independent contractor self-employment status. However, as self-employment status enters through the door, employment rights make their way right out of it,” says Koh.

The crux of the issue lies in how much control gig workers have on these platforms. For instance, about a dozen private-hire drivers and food delivery riders tell The Edge Singapore that they work long hours and almost every day to meet incentive targets dished out by these platform companies. And if they do not meet the incentive targets, the payments are simply too low to justify the work they do. “We get pumped down to a lower band from Diamond to Sapphire if we get bad comments. Which means that we don’t get priority for bookings [bookings will pop up later on their app] and our rebate or earnings per trip is less. So, to maintain rating, I need to work from 6am to 10pm most days in a week,” says 26-year-old Janelle*, a former industrial relationship officer.

Five food delivery riders also say that some food delivery companies penalise them by locking them out of the mobile application when they have rejected too many orders. For its part, Deliveroo says its riders work fewer than 18 hours a week.

Lawyers say that, on the one hand, some of these moves suggest some degree of control by the employers. But the flipside is that drivers and riders can choose when they want to work and what compensation they want. There is an increasingly fine line between independent contractors and employees, as the nature of work has changed rapidly through new platform businesses.

One way the line has been tested in other markets is through lawsuits. Uber drivers have filed dozens of lawsuits against the company in the US. But a judge in Philadelphia ruled in favour of Uber. In Singapore, lawsuits may not be feasible, as the jurisdiction does not allow class action lawsuit. Gig workers, Theseira points out, are simply not rich enough to file lawsuits. “In other jurisdictions, [there are] groups, unions or organisations with certain interests. They are the ones taking this up and fighting for the workers,” he says.

“My view is that a lot of gig economy platforms actually end up dictating a fair number of conditions for work on people contracted on the platforms. They dictate because the platforms want to provide a uniform quality of service to people using the platforms. [How much control these platforms have over gig workers] is a question that has not been settled — whether these conditions constitute employment.”

Says TSMP’s Lim: “Given the level of strict control and platform-switching disincentives many platforms have, a number of gig workers seem to end up rendering most, if not all, their services to a single platform. It may be that the time has come to consider introducing a separate, intermediate category of ‘workers’ — in between SEPs on the one hand and employees on the other — with some but not all the rights of employees.”

Asked about a new classification for gig workers in Parliament in May, Minister of State for Manpower Zaqy Mohamad said that could lead to the opposite hazard of companies misclassifying employees as such workers. In response to letters in the press, an MOM official had also said earlier this year that whether a worker is an employee depends on a combination of factors. This includes whether the company has an obligation to provide work for the worker, whether the worker is obliged to accept work by the company and the extent to which the worker needs to comply with the company’s procedures and prescribed method of work.

One can argue that the demarcation between gig work on platform businesses and regular employment is becoming less clear. While they are not obliged to accept all jobs posted to them on the platform, workers on some platforms are penalised in some way: by being pushed to a lower tier with fewer incentives. The platforms also set and match the price of the ride and customers for the drivers.

Market watchers and lawyers say it may be time to have a clearer definition of an independent contractor. “The following are worth considering: the extent to which the company controls or directs the person’s work, and that the person who is engaged operates independently and is primarily involved in the same trade or business as the work performed,” says SMU’s Tan.

“Further, legislation should consider giving gig-economy workers temporary or fixed-hour contracts after six months of continuous gig work. Companies should also abide by notice periods and compensation for cancelled shifts,” he says.

Not the end of innovation

Like Tan, others have made a long wish list of protection measures for gig workers working full-time on platform companies. The list includes paid leave, mandated breaks after a certain number of hours and remuneration deadlines, as well as co-contributions to CPF. Some of the suggestions go beyond the Tripartite Workgroup’s recommendations to support self-employed people.

But critics worry that these benefits risk crossing the line into employment contracts for gig workers. This may make the industry as a whole less efficient. The platforms are also likely to incur higher costs, which may be passed to consumers. Moreover, there is already some recourse available for independent contractors to settle disputes with companies. Some critics say it may be better to intervene only when there is a true market failure such as when gig workers’ incomes are lower than those of unskilled workers in other sectors.

SMU’s Tan, who is one of the biggest proponents of the regulation of platform companies and gig work, believes it is not necessarily detrimental to the industry. “The assumption cannot be that regulation is bad. It boils down to how regulation is done. A combination of self-regulation and a light-touch framework of rules can be the starting point. Consensus among stakeholders is critical — that regulation has to be developed that will benefit all stakeholders and the companies and society,” he says.

*Names changed or last name omitted at the request of gig workers on Grab and Gojek’s platforms