Just how much disruption is good for us?

By Neil Patrick

There's a lot of  fog in Uber world...

This year, Yassen Aslam and James Farrar, have been busy taking on the might of Uber in court. Their grievance was that as Uber drivers, they were denied basic workers’ rights: no minimum wage, no sick pay, no paid holiday. An employment tribunal judge, Anthony Snelson, heard the case over several days in July, where they argued that this classification was both wrong and unfair. And yesterday at the end of the hearing, the judge agreed.

There has ensued a great deal of jubilation from other Uber drivers, trade unions and the political left. Personally I am also pleased at this ruling. But not because I am opposed to disruptive businesses per se. We need innovation in business, but this needs to be balanced with legal and statutory interventions which curb the tendency of new business models to become exploitative long before regulation catches up with them.

Business do what businesses do. They seek profits and growth. If we seek to regulate them such that they cannot innovate, the result is inevitably a bureaucratic free enterprise devoid climate in which progress and growth are suffocated. Think USSR and all those grey apartments and Trabants.

Self-employment is the biggest jobs growth trend in recent years. And I have jokingly referred to it previously as ‘self-unemployment’. But in this case, we are not talking about a new breed of Bransons, Trumps and Zuckerbergs, we are talking about people at the lowest levels of pay who are being forced by the absence of better options to take whatever they can get.

Such people are not hot-shot entrepreneurs. They are just people trying to feed their families. This is the terrible reality of the current gig economy. Business models like Uber grow fast because they design out the costs from traditional business models, leveraging scale and IT investments to provide a product or service cheaper than the competition. And much of this cost is cunningly passed to their workers.

It’s not unlike the off-shoring revolutions of the last 25 years. At first everyone is enthusiastic because, it drives down prices. And Uber make much about giving people freedom, flexibility and choice. But the reality is this is all PR spin. If you are paid even the new higher minimum wage in the UK, you will earn just £288 for a 40 hour week. Yet Uber was not even paying minimum wage. And it passed much of its costs to its drivers.

Uber position themselves as a plucky underdog, providing jobs for people on their own terms. It’s nothing of the sort. First Uber has a market cap of $50bn making it more valuable than Tesco and Barclays combined. Second, Uber manage their drivers just like employees. They are interviewed, disciplined, and submit to Uber’s rules just like any employee.

As Aditya Chakrabortty wrote today in the Guardian (rarely my favourite source), “For some Britons, self-employment doubtless means freedom. But for others, it means the freedom to be exploited, deprived of rights – and to be underpaid. According to recent research from the Resolution Foundation, the typical self-employed Brit is now earning less than when John Major was prime minister.” (that was 1990-97, in case like me you can’t remember dates).

This isn’t really the future. It’s the past. A regression to a world where labour exploitation is revived, cloaked in a bit of high tech ‘innovation’ and pitched to the world as progress.

There’s a world of difference between a self-employed person who is truly independent and a self-employed person who is freelancing through a global mega-corporation. The former is free to truly work on terms that they decide. The latter has no such choice.

It’s time that disruptive businesses thought a lot more strategically about their impact on the people that they use. And this judgement is going to force them to do that. It’s a small but significant step in the right direction.