Uber and the impact on employment in London

By Ian Brinkley, Chief Economist, CIPD

The recent decision to revoke the licence of Uber in London by TfL has attracted both supporters and detractors, some influenced by wider questions and concerns about employment in the gig economy. The TfL decision that Uber breached some of the safety related conditions required to hold an operator's licence is subject to appeal and the courts will judge whether TfL’s decision was justified or not. Others will have to judge whether it increases or decreases the safety of London’s mini-cab users if Uber is forced out of London and use of conventional mini-cab companies increases.

The decision to in effect close a large operation like Uber in London is unusual. Regulators typically try to get companies to mend their ways first, backed if necessary by fines and other penalties, before going for the nuclear option. The Independent Workers Union which can fairly claim to be a representative voice for some gig economy workers has suggested that better and more consistent enforcement might have been a better option, given that 40,000 drivers depend on Uber for all or part of their income.

However, we need to keep the impact on employment in perspective. Claims that closure of Uber in London will cause 40,000 people to become unemployed are wide of the mark. Many Uber drivers will be part time and already have a main job. In fact, our latest research on the gig economy found that only a quarter (25%) of gig economy workers say it is their main job.

Those who cannot or do not want to find work as conventional mini-cab drivers will suffer a loss of income until they can find some other work, but most will not be unemployed. Those drivers who took out loans to buy vehicles compliant with Uber requirements may struggle unless they can quickly find alternative employment. Others, perhaps including many who are more dependent on employment with Uber may be able to sign on with other mini-cab companies who are the closest rivals to Uber. Those that cannot are likely to be unemployed for a period.

It is possible some might gain, notably current Black cab drivers who have claimed that Uber unfairly undercuts them, reducing hours of work. Some current mini-cab drivers might also gain in the short term if large numbers of Uber drivers withdraw from the market.

Although hailed by some as sending a warning to other gig economy companies about their employment practices, it is not clear why it should other than to suggest that the authorities might be looking for reasons to close them down. The judgement about Uber was not, as far as we can tell, about its employment conditions or access of workers to holiday pay or the minimum wage. Trade unions were suggesting that any new licence to Uber should address these points. It is not clear whether TfL could reasonably have imposed such conditions on Uber, but any chance of changing employment practice at the company through this route has now been lost.

It is ambiguous whether the change will reduce or improve the quality of employment in this sector, as employment status in the conventional mini-cab industry is typically self-employed. People who work in this way may be less subject to control than at Uber, but it is unlikely that earnings or conditions would be significantly better otherwise the company would not have been able to attract many drivers. Some former Uber drivers may find the transition difficult if conventional jobs do not offer the same flexibilities that came with Uber. Overall, it is very unlikely that many if any former Uber drivers will be able to secure permanent employee status while doing similar jobs.

In the US, the demographics of Uber drivers are distinctly different to those of conventional cab drivers, at least in the major cities. Uber drivers are younger, better educated, more likely to be white, and somewhat more likely to be women. We have as far as I am aware no comparable analysis for the UK. It is therefore not clear whether the withdrawal of Uber would change the demographics of the mini-cab industry, for example, fewer women cab drivers.

There are other possibilities, not least that rivals to Uber will see an opportunity to secure Uber’s former London market. That might make it easier for former Uber drivers to make the transition, but it remains to be seen how quickly a rival could secure a licence from TfL and then build up the market and drivers network to match Uber’s current prescence. Another unknown is whether licencing authorities in other cities outside London will follow TfL’s lead or whether Uber’s whole UK operation is now in doubt with the potential loss of the large and lucrative London market.

Setting aside the merits or demerits of the actual decision, if it is upheld we can expect some adverse impact on some household incomes and very modest increases in unemployment, at least in the short term. Impacts on employment quality are ambiguous, but my guess is that it is more likely to slightly lower rather than improve average employment conditions in the sector. To the extent that some Uber drivers were trade union members, trade union presence among gig economy workers is also likely to decrease. It is also likely to reduce choice, to the extent that most Uber drivers seemed to prefer the flexibilities on offer to regular employment. In the context of the wider London labour market these are small changes which are unlikely to show up in aggregate statistics. But if this is a victory for gig economy workers, it is hard to imagine what defeat would look like.

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