In recent years, economic news has increasingly become dominated by the emergence of the gig economy and its potential. Its explosive growth has come hand in hand with a litany of controversies, allegations of abusive industry practices and lawsuits. These include from Uber, the crown jewel of the gig economy, which faced hundreds of lawsuits in 2017 alone. Other ongoing disputes almost all the companies in the economy are facing include whether workers under their umbrella are employees or independent contractors. But can this innovative model be utilised in a way that does not result in such toxic platforms?
What is the gig economy?
The gig economy is a loose term roughly describing a labour market dominated by short term contracts. The term has become associated with the sharing economy which revolves around online, peer to peer transactions. In essence, the gig economy describes online platforms which put together a customer and a service provider quickly and efficiently. One of their biggest pitfalls has been that the platforms themselves take the lion’s share of the profits.
The most successful platform to date has been Uber, a ridesharing platform which has been expanding into the food delivery realm and which in 2017 posted revenues of $7.5 billion. The model of the gig economy has been praised for being able to cut costs across industries it is introduced to and improve the customer experience by being able to efficiently pair up consumers with their desired service. Firms in the gig economy don’t recognize that the people who work for them are not short term freelance workers but rather full employees, which would entitle them to a range of employee benefits. To counter this, these workers have been turning to platforms cooperatives.
What are platform cooperatives?
A platform cooperative is a platform like any other in the gig economy, designed to bring together consumers and service providers. The difference is that rather than being owned and controlled by shareholders, whose primary goal is to maximize the returns on their investment, the platform is collectively owned by the people who work through it. They bring the same ideas to the gig economy that cooperatives have always brought to their industry; collective ownership by people who are invested in growing the brand by satisfying and retaining consumers and a democratic process of control, ensuring decent pay and income security for workers. The concept of bringing the cooperative model to the gig economy was first fully articulated by Professor Trebor Scholz in late 2014 with his article Platform Cooperativism vs the Sharing Economy.
How can platform cooperative challenge corporate platforms?
The platform cooperative model is appealing to both consumers and workers alike but there is one key demographic which has no reason to be attracted to them; investors. Without proper investment these platforms will always struggle to grow and maintain relevance in their industries, so the question has become, how do these cooperatives secure adequate funding? The idea is not to give up control to a group of shareholders, so most investors are off the table and banks are rarely if ever willing to invest in such risky new technologies. But emerging platform cooperatives have been finding innovative ways to become successful businesses. One place to turn to is cooperative banks and credit unions, the institutions which are most often the source of investment into traditional cooperative outside of the gig economy. For smaller ventures a viable alternative has been to combine the promise of democratic control and shared ownership with crowdfunding schemes, so in other words traditional investment but being performed at a small scale by prospective employees rather than prospective shareholders.
To some extent, the controversies around the corporate platforms’ treatment of their workers has eased the pain of platform cooperatives seeking investment. This is because labour unions have increasingly been stepping in, providing funding to what they see as sustainable business models which can provide job security and acceptable wages to industry workers.
Finally, in tandem with the rise of the gig economy has come the rise of the blockchain technology and cryptocurrencies. 2017 saw a huge spike in Initial Coin Offerings, funds raised through the issuing of a new cryptocurrency tied to the business which is being promoted and platform cooperatives have not been an exception to this rule. The Initial Coin Offering market is incredibly volatile and prone to exploitation but to those looking to enter into the market, perhaps they should consider platform cooperatives as investments which will not generate massive returns but which are stable and, more importantly, ethical investments.
Young writer. Studying a Economics degree starting Spring. Passionate about finance and financial trends. Currently interning at Ztudium and intelligenthq.
