Abstract
This article aims to shed light on one crucial aspect of the ‘gig’ economy: the extent to which the new forms of work in this field undermine the pillars upon which traditional Bismarckian systems of social security have been built. Focusing on Spain, three main issues are analysed. First, after considering the legal classification of this type of service provision and its implications, the scheme within the social security system that corresponds to the registration of the service providers is identified. Second, how registration and subsequent social security contributions affect the generosity of social benefits is clarified. In particular, attention is paid to both the risk of partial, or total, lack of, protection due to the absence of compulsory contributions and the low-level of contributions made by the self-employed. And third, the impact the development of the platform economy may have on the financing of social security and its future sustainability – given the current difficulties confronting the Spanish economy – is examined. Some recommendations relating to these three issues are outlined as concluding remarks.
1. Introduction
The economy is undergoing a major shift 1 caused by a process of great technology-driven transformation. This ‘wave of digital disruption’ may not have led to a new ‘crowd-based capitalism,’ 2 but it has already certainly opened the door to ‘business models where activities are facilitated by collaborative platforms that create an open marketplace for the temporary usage of goods or services often provided by private individuals’. 3 Described as the sharing economy – a common, yet imprecise term – this growing phenomenon encompasses a wide range of economic activities based on the use of online platforms.
Leaving aside those non-profit-seeking activities and other marketplace-like ones, 4 this article analyses activities that exert a direct influence on the employer-employee relationship as new (digital) forms of work. 5 While being conscious of the numerous and tricky issues raised by crowdwork online, 6 my basic interest is in so-called work-on-demand via apps 7 since its offline component makes it closest to the ‘typical’ (or more traditional) employment relationship. 8 In this regard, the use of digital platforms is transforming how we formally define work and, probably more relevant, the conditions in which such ‘work’ is carried out.
To date, most labour experts have concentrated their analyses on the effects that this ‘Uberisation’ of the economy has on employment regulation; 9 conceived of as a set of guarantees that have historically balanced the relationship between labour and capital in Western Welfare States. Attention has mainly focused on the ability of labour law to provide an adequate response to this new type of service provision in which subordination, one of the defining features that shapes the concept of the employee, is blurred, thus creating serious risks of precariousness, casualisation and commodification of work.
Much less attention has been given until now to the critical consequences that this deep transformation has for social protection. This is particularly relevant in Southern European countries where public social security systems were originally designed to protect employees working in the industrial and service sectors. Following the pattern of a continental social insurance model, these compulsory schemes, based on pay-as-you-go financing, provide earnings-related benefits that depend on previous contributions and the duration of affiliation to the scheme. Given the contractual conditions in which service provisions are carried out, two main questions arise: are continental social security systems still able to cover the needs of the new on-demand service providers in the ‘gig’ economy? And, if not, should these public schemes be subject to profound reforms in order to guarantee the financial sustainability and the adequacy of social security benefits?
From a Southern European perspective, and using Spain as the main point of reference, this article aims to present as its main contribution an analysis of the challenges faced by social security systems due to the emergence of new forms of work associated with the platform economy. Given the difficult financial standing of Spanish social security, dealing with this issue seems particularly appropriate as a way of anticipating the effects of a structural change that will have to be tackled in order to guarantee its viability. Further, my attention will focus on how (labour) law treats these new forms of work and its ability to secure decent working conditions.
2. Work on-demand via apps and labour law
Before considering the implications of work on-demand via apps on social security, it is important to examine certain specific aspects relating to the contractual side of these types of service provisions. The mainly professional basis of the Spanish system of social security (social insurance scheme) makes it particularly relevant to determine first, whether we are faced by an employment relationship or not, as this will imply a different scheme – and subsequent conditions – within the system to register with; and second, the specific working conditions of the activity in terms of earnings and working time, since they will have an effect on the level of contributions made and, eventually, on the benefits granted. 10
2.1. The thorny legal classification of ‘collaborators’ in the platform economy
The legal classification of the relationship between online platforms and service providers (‘collaborators’) evokes an old and continuing discussion of the characteristics of subordination as a defining feature of the employment relationship. 11 The original socioeconomic reality which gave rise to the emergence and consolidation of labour law has evolved over time and is now starting to recognise – partly, at least – a major transformation thanks to digital progress. This new state of affairs means that the traditional categories used to build up the concept of ‘employee’ are not entirely satisfactory, so there is a widespread idea that an update is urgently needed.
Without questioning this judgement, two preliminary remarks are pertinent in order to avoid an exaggerated response to the new phenomenon which could jeopardise the hallmarks of labour law. On the one hand, we should bear in mind that there have always been employment relationships corresponding to activities in which the employee is not in a very clearly subordinate position. Remote working is a good example. 12 On the other hand, the need to establish legal guarantees in order to attain decent working conditions remains, basically, because the conflict between labor and capital still exists in the new economic context.
2.1.1. Theoretical legal classification in Spanish law
Theoretically, Spanish Law offers three possible legal classifications of the relationship between the online platform and the service provider depending on the specific circumstances. Two of them leave ‘collaborators’ – in the most common sense of the term – outside the domain of labour law.
First, they may be identified as independent contractors, which is to say self-employed individuals who are in business on their own account. This implies the absence of any specific guarantees beyond the very basic ones recognised by private law between parties or contained in the Self-employed Workers’ Statute (Act 20/2007).
Second, as a variation on this, service providers may also be classified as dependent contractors, 13 so-called ‘economically-dependent self-employed workers’ [trabajadores autónomos económicamente dependientes (TRADE in Spanish)]. These are professionals whose work has some characteristics in common with employees and independent contractors. By virtue of section 11 of the Self-employed Workers’ Statute, this relatively new category specifically refers to those who usually, personally and directly carry out an economic or professional activity for profit receiving 75 per cent (or more) of their income from one single client – the digital platform in this case. Moreover, a further requirement for obtaining this status – not a minor one as we shall see – is a formal recognition by the client (section 11, Act 20/2007). Currently the important thing is that such a classification would entail certain legal guarantees – not foreseen for ‘ordinary’ self-employed – with respect to conditions on the termination of contract, working time limitations, work-related accident coverage, cessation of activities, and collective agreements.
Beyond the realm of independent contractors, the third and last possible classification is that of employees, a status that, needless to say, opens the door to all labour guarantees for employees and the corresponding obligations for employers (digital platforms, again). As with other forms of labour regulation, employees are defined as those providing services for another person within the scope of the organisation and management of that person, the employer, according to section 1 of Workers’ Statute (Royal Legislative-decree 2/2015). Moreover, such a provision is reinforced by the existence of a ‘labour presumption’ contained in section 8 of the Workers’ Statute and paragraph 9 of ILO Recommendation No. 198, which states that a contractual relationship in which someone personally works for the benefit and under the direction of someone else in exchange of remuneration is, in principle, considered as an employment contract. Thus, the appearance leads to the recognition of labour status.
2.1.2. The primacy of the fact principle and its implications
What is happening in practice? How do digital platforms in Spain conduct their relationships with ‘collaborators’? In virtually every case, service providers are being treated as independent contractors. Nevertheless, contractual classification is not in the hands of the parties in accordance with Spanish Law. On the contrary, a “primacy of fact” principle rules. Thus, it is facts, and not labels, which determine the attribution of employee status or, on the other hand, the existence of a commercial relationship. 14 This means that, as in other countries, legal classification depends on the result of a multifactorial test that is based on the facts that emerge from the relationship between the platform and the service provider (‘collaborator’). 15 Specifically, attention should be drawn to those defining features that separate the concepts of employee and self–employee in Spanish Law (section 1 WS), which are questioned in these types of cases where the intermediate legal classification as an ‘economically-dependent self-employed worker’ does not seem to be a real option. Thus, we are back facing what has been expressly described as the ‘cornerstone’ of labour and employment law. 16
Depending on the kind of crowdworking that is examined, controversies affecting the defining characteristics of the concept of employee may vary. As far as offline work-on-demand via apps is concerned, the main controversy is associated with dependency – or the lack of it – and its two dimensions: subordination to the authority of the alleged employer and economic dependency. 17 As a matter of fact, Spanish labour law scholars and courts, following De La Villa, 18 refer to the former as dependency (or subordination) and to the latter as ‘otherness’ (ajenidad), pointing at the ownership of the benefit. Quite often, drawing the boundary line so as to isolate both concepts is a very tricky task and it makes sense here to use dependency as an all-embracing term.
The assessment of the existence of (in)dependency in Uber-type activities is based on the multiple test, mentioned above, that takes into account signs of the existence or non-existence of such a feature. Following Spanish case-law, 19 a traditional analysis of the potential employee status would find strong evidence of independency (self-employment) stemming from the following contractual conditions. First, the most relevant one arguably is that working time is determined at the collaborator’s discretion, which means that there is no fixed timetable and, more importantly, that the ‘collaborator’ decides when to be active in the platform. Second, and along the same lines, it is common that he/she enjoys freedom to refuse tasks commanded through the platform. Third, it seems to show autonomy in that the performance of the activity is basically self–directed, notwithstanding the existence of common instructions directed to all ‘collaborators’. Fourth, the non-exclusivity of the contractual engagement, which is to say, the possibility of ‘collaborating’ with several platforms, is generally considered a sign of independence. And, fifth, the fact that activity-related spending is not compensated for by the platform could also indicate that the service is provided on his/her own account.
Having said that, evidence of the dependency of the ‘collaborator’ on the platform is frequently found in practice, some of this being typical signs of a traditional idea of subordination and others showing new forms of dependency. First, in cases of work on-demand via apps, where the performance is physically carried out, it is common to have ‘collaborators’ fulfill certain conditions before being activated. Second, another sign of subordination lies in the personal dimension of the performance in the sense that it is not transferable. Third, according to the experiences analysed in Spain, the supremacy of platforms is obvious in several different ways: strict (no matter if indirect) supervision and control 20 ; detailed indications of how to perform the tasks; price fixing of services performed; sham incentives on ‘activation’ that hide a minimum level of availability. Fourth, the fact that the platform is allowed to ‘deactivate’ ‘collaborators’ in a wide range of circumstances shows a sort of disciplinary power, one of the most typical characteristic of employers. And finally, it is also a sign of subordination of ‘collaborators’ that the relationship established with the client (payment included) is always channeled through the platform.
2.1.3. The Spanish ‘Uber case’ as an illustration
At this point, it is interesting to draw attention to the opinion handed down by the Advocate General Szpunar in the Elite Taxi v. Uber case. 21 Although the questions referred to the ECJ for a preliminary ruling are not particularly concerned with the nature of the relationship between Uber and its ‘drivers’, the considerations made by the Advocate General, if confirmed by the judgement, could determine the legal classification of these types of activities in Spanish Law. After examining Uber’s activity, he concluded that it involved much more than matching supply to demand: ‘it creates the supply itself’ and, even more relevant, ‘also lays down rules concerning the essential characteristics of the supply and organises how it works’ (para. 44). Such a statement seems to be well-founded if we consider the following.
On the one hand, some facts prove an undoubted subordination of the ‘collaborators’ (drivers) to the platform (Uber) shown by the terms and conditions that ‘cover both the taking up and pursuit of the activity and even the conduct of drivers when providing services (para. 44).
These requirements have to do, first, with access to the platform and the ability to drive on behalf of Uber, since a car with certain characteristics (size, age, inspection, insurance) as well as a driving license are needed. Second, with control over the quality of the transport service – including the driver’s conduct – channeled through a ratings function contained in the application; the fact that it is not direct supervision, since it is the passenger who rates the driver (and vice versa), should not weaken this point, especially because this sort of action could enable Uber to exclude the driver from the platform. And third, with Uber’s ability ‘to tailor its supply to fluctuations in demand’ through different instruments, such as giving a financial reward in case of accumulating a certain number of trips, or informing on the best time periods to be active. On the whole, despite the formal possibility of pursuing the transport activity on behalf of Uber alongside other professional activities – whether related to transport or not –, in this case, all the drivers providing services for Uber did so as their only or main professional activity.
On the other hand, signs of economic dependency are also found. One is that prices for the trips are set by Uber: a driver’s theoretical ability to ask for a lower rate does not seem to be ‘a genuinely feasible option’ (para. 50), since any reduction would only affect his/her income. Another one is that the service is provided through a smartphone application that belongs to Uber, so that clients establish a relationship with this platform and users are given the impression that Uber is responsible for the service provision and its quality. And finally, the fact that Uber is not the owner of the vehicles is, in Szpunar’s view, not relevant given that ‘a trader can very well provide transport services using vehicles belonging to third persons’.
To sum up, Uber ‘controls the economically significant aspects of the transport service offered through its platform’: it does not sell software, but services that are provided by ‘collaborators’ subject to detailed instructions. So, it is irrelevant that the Opinion – hypothetically the judgment – does not go into the legal classification of the relationship between Uber and its drivers. For the purpose of this article, the important thing is that, in such an emblematic case of on-demand economy via apps like this, national courts (certainly the Spanish ones) will normally tend to regard ‘collaborators’ as employees based on the aforementioned multifactorial test. 22 However, we should be aware of their vulnerability.
2.2. The vulnerability of platform ‘collaborators’ beyond the legal classification
Nowadays the position of Uber-like ‘collaborators’ is very vulnerable in spite of their legal classification. We have already seen that, in Spain, they are normally classified as self-employed workers. However, in most cases, the specific characteristics of the contractual relationship may well support a different classification according to Spanish Law.
The first alternative – economically-dependent self-employed workers (TRADE) – does not seem to be completely satisfactory. As an intermediate category reflecting the mix of features that makes it difficult to give a clear-cut response according to the traditional patterns, this solution might in principle be attractive for both parties since it offers a minimum level of professional guarantees to ‘collaborators’, and flexibility and reduced costs to those firms behind the platforms. 23 But, the requirement of a formal recognition of TRADE status (or the way it is foreseen by the law) prevents this potential group from growing. Therefore, notwithstanding that such a condition can be successfully claimed in court, the reality is that the number of registered economically-dependent self-employed workers has always remained very low, even after a legal amendment in 2011. 24 On top of this, overcoming such an obstacle is still not fully satisfactory since this intermediate category could be used to cover real employment relationships according to section of the Workers’ Statute. 25 Thus, our attention will be focused on the employer-employee relationship.
As we have seen, updating the definition and interpretation of dependence in the light of an employment relationship is crucial for preserving the employee condition of platform collaborators. But, remaining within the employer-employee relationship may not be enough to guarantee decent working conditions. The weaknesses associated with service provision based on a just-in-time dynamic are serious.
One risk is that short-time activities could jeopardise an adequate level of income. That would not be a major problem in those cases where work on-demand via apps does not account for the main source of earnings, but there is a real threat of underpayment if it is the principal activity. So, alongside those cases where ‘collaborators’ act as independent contractors without bottom limit for payment, we find that microtasks and just-in-time services increase the risk of low-wage workers 26 opening the door to in-work poverty and economic instability.
From a different perspective, another risk has to do with working time given the fact that the ‘collaborator’ is (theoretically) free to determine when to be ‘active’. In particular, as the payment for the service may not be generous, overworking could become a reality and, in that sense, a way of self-exploiting in order to guarantee a decent level of income.
There is also a risk that reinforcing the platform’s position within the contractual relationship goes too far in the light of labour regulation where strong subordination is evident. The clear individualistic component 27 of service provision virtually annuls the collective dimension of an activity carried out by an undefined (usually numerous) group of ‘collaborators’. This kind of individual vulnerability is not easily faced by the typical collective subjects and actions of labour law.
And finally, the position of employer could, in certain cases, be altered: it is relatively common for start-ups to have a business model based on the absence of large investments that are exposed to a higher risk of failure. In that sense, it is not exaggerated to speak of more prevalent business ‘precariousness’, a relevant factor that tends to aggravate the instability of the employee’s status.
Taking account of the former, a logical step forward would be to urge the adaption of labour regulation and institutions to the new working forms, so that the resulting legal framework offers sufficient flexibility to platforms, while, at the same time, preserving labour guarantees in favour of ‘collaborators.’ 28 The question is how to achieve such an ambitious goal. In Spain, two main solutions are conceivable.
One option would be to formulate a new special employment relationship in the terms foreseen by section 2 of the Workers’ Statute. 29 This means that, without being excluded from labour law, the aforementioned contractual relationship would be subject to a specific regulation designed to reflect the singularity of certain circumstances typical of the new economic activities. Nevertheless, two objections can be made. On the one hand, it is foreseeable that an ad hoc regulation would imply – following most of the special employment relationships – certain sacrifices for employees in favour of employer interests. And, on the other, in the long (possibly even medium) term, this new sort of business model would probably represent a major proportion of economic activity, not a minor part as it does today. Therefore, a special, less protective regulation could turn out to be a way of undermining labour rights.
As an alternative, the classification of platform ‘collaborators’ as ordinary employees could be compatible with adapting the Workers’ Statute to the particular working conditions that characterise this type of activity. From our point of view, this is a more reasonable solution insofar as labour status is reinforced without prejudice to the specific provisions of adapting the ordinary employment regulation to the digital environment. Note that there is already a precedent referring to a similar case, the current remote working clause (section 13 WS). Following this example, I would suggest a new section that would regulate certain aspects of work on-demand via apps – with working time, salary, surveillance and collective bargaining scope as the most significant ones – within the general legal framework applied to common employment relationships. 30 This new regulation should aim to face the threats of vulnerability of ‘collaborators’ that we have already seen and that can be summarised as follows.
One would be the excess of labour flexibility, 31 because experience shows that it generally tips the balance in favour of platforms 32 without entailing greater freedom for the worker. 33 A second threat stems from individualisation, since a distinctive component of this type of activity lies in the competence of ‘collaborators’ hampering the collective dimension of the employment relationships. 34 And, lastly, the blurring role played by on-line platforms is often deliberately sought to reduce labour costs.
3. Work on-demand via apps and social security
From this point onwards, the paper focuses on the impact of this new business model on social security systems, and particularly on the Bismarckian-systems typical of Southern European (Mediterranean) countries. The difficulties of legal classification and, above all, the specific characteristics of work on-demand via apps change the socioeconomic basis upon which social insurance schemes are built causing major problems in the field of social security. 35 Taking the Spanish case as the main reference point, this section of the article tries to answer four key questions: First, how does social security treat these new forms of working activities channeled through digital platforms? Second, has the system the ability to secure adequate social protection? Third, could the so-called gig economy impact on the financing of social security and its future sustainability? And, fourth, could this new state force a change in the design of income resources, possibly as a first step towards a more Beveridgean system?
The analysis in this section falls into three parts concerning the correspondent key issues: worker registration with Social security, adequacy of social benefits and impact on the financial condition of the system. But, before tackling them, it is necessary to justify why this issue is particularly relevant in a Southern European country such as Spain.
3.1. A brief account of social security systems in Spain
As is well known, a close relationship between the employer-employee relationship and the social security system is a common feature of all European countries. But, following a consolidated pattern that distinguishes two basic models within the European Union, 36 this link is particularly pronounced in the continental social insurance model and in it Mediterranean version.
In accordance with this pattern, social security in Spain is channeled through a double scheme of benefits in cash. 37 An unambitious, non-contributory scheme (nivel no contributivo) modestly covers old-age, invalidity, family benefits and unemployment assistance. It works on a means-tested basis – it is financed through general revenues and represents 11 per cent of total spending. The most significant part by far of the social security system is the contributory scheme (nivel contributivo). It is mainly financed through contributions paid by employers and employees, and accounts for almost 90 per cent of total social security spending, providing benefits in cash to compensate for the occurrence of a social risk. Three remarks are pertinent.
First, these (contributory) benefits come in the form of pensions in the case of retirement, invalidity and survivorship; ‘incapacity for work’ benefits, in the case of sickness, maternity, paternity and other related personal circumstances; unemployment benefits, for job losses (or time working reduction); and certain family benefits.
Second, the contributory level is divided into a ‘general scheme’ (Régimen General) that covers wage earners subject to labour law; and some ‘special schemes’, among which the ‘Special Scheme for Self-Employed Workers’ (Régimen Especial de Trabajadores Autónomos) stands out. 38 As will be seen, there are some significant differences between the two schemes concerning the scope of social benefits and, above all, in social security contributions. In the former case, the payment of contributions is shared by employers and employees, whereas in the latter they are paid by self-employed persons. 39
Third, the compulsory social insurance (contributory) scheme provides earnings-related benefits to workers (for employees and the self-employed) which depend on previous contributions and the duration of affiliation to the scheme. Thus, the connection between employment history and access to social benefits – retirement pension as the most representative economic benefit granted by social security – is obvious: it will be generous when the beneficiary has had a stable and long career with a high salary; and, on the contrary, it will suffer in cases of low level of contributions caused by any sign of labour precariousness or unemployment. This leads us to highlight the fact that the frequent irregularity and/or uncertainty typical of work on-demand via apps constitutes a serious threat to the functioning of the social security system, as it will make it more difficult to fulfill the conditions required to qualify for pensions and other benefits and will affect the generosity of these benefits.
These effects have been aggravated in recent years in Spain due to the orientation of the reforms that have, in general terms, strengthened the contributory principle through a more accurate proportionality between contributions and benefits. Pension reform – and to a certain extent unemployment benefit reform – are the best examples. 40 People have to work longer in terms of retirement age or social security contributions to receive a full pension, and, if not, will receive a less generous pension. But, this assumes that all employees (including the self-employed) will be in a position that enables them to fulfill such conditions. Unfortunately, this is not the case for all forms of non-standard employment, including ‘gig’ workers.
On the other hand, it is also important to comment on the financial aspects of the Southern European model of social security. Social insurance schemes are based on a repartition technique (pay-as-you-go) for short-term and long-term benefits; whereas their main source of financing (roughly 90 per cent in Spain) are contributions paid by employers and employees. Thus, they play a very limited role in the public budget. This financial structure will be (and already is in some countries) subject to strong tensions in the coming decades. It is generally believed that this difficult situation is basically caused by the process of ageing that all European societies are experiencing. But we should not underestimate the impact that the emergence of the platform economy could have.
As a final comment, it should be noted that these threats to the financial and social sustainability of the Spanish social security system are not new given the long ‘tradition’ of high unemployment and various forms of precariousness (e.g. overuse of fixed-term contracts, frequent underpayment and bogus self-employment, among other problems). The interest, however, in examining the specific consequences associated with the new platform economy lies in the fact that its consolidation as a major part of the economic system would entail – in Spain and probably elsewhere – a definite change in the foundations of the Welfare State.
3.2. A formal but relevant issue: registration with Social security
The first issue is to clarify which scheme within the social security system, if any, corresponds to the registration of platform ‘collaborators’ service providers. It is certainly not irrelevant; on the contrary, it acts as a starting point for dealing with the two other key issues. 41
Starting from the platform collaborator’s legal classification, the answer is in three parts. First, when he/she has the status of employee according to the Workers’ Statute, his/her employer will be bound to register him/her with the General Scheme. This is so, regardless of how brief or infrequent the working activity is, and despite the formal provision that attributes to the Government the ability to exclude from the scope of application of social security marginal activities that do not provide for sufficient means to make a living (section 7.5 of the Social Security General Act). 42 In this case, alongside the implications to labour law in terms of employee guarantees, the main consequence is that the employer is always obliged to pay the employee’s social security contributions. This will entail a significant increase in labour costs for the employer which could explain, although not justify, the employer’s ‘interest’ in hiding the employment relationship.
The position of the self-employed is more complicated. As we have already seen, often the platform’s collaborator is regarded as an independent contractor; a legal classification – that includes economically-dependent self-employed workers – and leads, in principle, to their enrollment in the Special Scheme for Self-Employed Workers. But, this is not the solution when services are provided in a sporadic manner. In such cases, there is no obligation to register with the social security system and, therefore, no further access to benefits. The key lies in the legal definition of whether the activity carried out by independent contractors – in theory, including economically dependent self-employed workers – is deemed to be sporadic.
In this respect, the obligation to register with the Special Scheme of Social Security for Self-Employed Workers is subject to certain requirements (see section 305 of the Social Security General Act). One of the trickiest requirements is that the activity must be performed regularly (de forma habitual). How is this interpreted? Case law has attempted to give an answer without using a time criterion by pointing to a minimum level of (net) income, equivalent to the national minimum wage 43 (i.e., 707 euro per month in 2017). Nevertheless, most scholars concede that such a rule is not completely adequate. 44 In general terms, it can be argued that it is still uncertain and entails a serious risk of fraud for undeclared work. But, this solution is even more unsatisfactory when it is projected onto activities based on work-on-demand via apps. 45
We need to consider the fact that in these sorts of activities it is common for earnings not to reach a specified minimum amount given their typically intermittent nature. A further consequence is the exclusion of the ‘collaborator’ from the social security system. From this perspective, it seems reasonable to suggest that this criterion should be revised in response to the new economic environment in which the digital dimension of the activity makes it easier to measure working time. In fact, this could be an appropriate way of proving a regular performance.
Nevertheless, such a solution could also be problematic insofar as it would result in an obligation for the (self-employed) ‘collaborator’ to make the corresponding contributions to the Special Scheme for Self-employed Workers; a burden that could be unbearable for Uber-like ‘collaborators’, often leading to fraud, which is a pre-existing structural problem in Spain and other Southern European countries. 46 This is an additional argument supporting the idea that an employment relationship between the platform and the collaborator exists. However, the difficulty of affording social security contributions could be interpreted as a sign of economic dependency. As a matter of fact, this sort of problem is not limited to digital activities; on the contrary, it is widely shared by most of the rising number of self-employed persons who are becoming a representative group within non-standard employment. 47 Here, it could be interesting – though not free from risk – to explore the possibility of restricting the level of social security contributions to correspond with the actual working time through the recognition of part-time self-employment. 48
This gives rise to an additional comment regarding cases of ‘pluri-activity’ in which collaboration with the platform is just one of the activities performed. Two different situations need to be considered. On one hand, we find cases in which digital work constitutes the main activity – that is to say, the main source of income – among others, digital or not. It is obvious that the position of these types of ‘collaborators’ is particularly vulnerable, and the existence of legal guarantees is therefore necessary to preserve decent conditions of working and living.
The case in which Uber-like activity is merely supplementary is somewhat different. In this case, the (sporadic) ‘collaborator’ works simultaneously as an employee (for example, in an ordinary job from Monday to Friday, and provides sporadic services through a digital platform during the weekend); or, beyond the labour field, because he/she is in the process of training or studying. Then, the digital service provision could be conceived of as a way of earning extra income that is not strictly necessary for maintaining a given standard of living. This is actually one of the incentives that is frequently used by platforms to attract new ‘collaborators’: a straightforward way to make extra money. From this point of view, working conditions would not be that crucial for the ‘collaborator’. Such a view, however, could be harmful for those who have a greater dependence on the platform. Thus, the only way of avoiding the risk of abuse in terms of low remuneration would be to take account of any digital on-demand service provision for the purpose of social security, regardless of the duration or the frequency. 49 That would mean following the same rule applied to employees in the General Scheme, the difference being that in this case it is the ‘collaborator’ who is obliged to bear the burden of making contributions to the system. 50 And again, this could act as a disincentive to develop the activity and increases the risk of fraud.
3.3. The risk of inadequate protection
Having examined registration and the subsequent payment of social security contributions for Uber-like service provision, we now consider the impact that this will have on the accrual of entitlements to social benefits and their adequacy (generosity). We see a serious risk of inadequacy – here understood as partial or total lack of protection – stemming from two main circumstances. 51 On one hand, legal regulation which, as we have seen, excludes certain activities from the scope of social security and limits the benefits given to some groups, mainly the self-employed. And on the other hand, working conditions – earnings, in particular – which are the basis of the functioning of contributory social security schemes and tend to be precarious in the case of work-on-demand via apps.
The range of risks faced by ‘platform’ workers includes, first, a total lack of protection from the social security system. This lack of entitlement to social security benefits has to do with the potentially common pattern of sporadic services that results in the absence of compulsory payment of contributions, making it impossible the access to contributory benefits. Note that this problem also occurs when the ‘collaborator’ is regarded as self-employed, because, for employees, the obligation to contribute exists, no matter how short the period of employment is. In this respect, in countries like Spain and other Southern European states in which the underground economy plays a significant role, it is likely that the development of work-on-demand via apps will bring about a serious increase in bogus self-employment as a way of avoiding General Scheme obligations.
On top of this, it is important to call attention to the fact that the coverage enjoyed by the self-employed – if that is the legal classification – is not as complete as that for employees. 52 Among others, protection against employment risks is not fully provided for the self-employed. Given that it only works on a voluntary basis, the outcome is that a very low proportion of self-employed opt for it in Spain: five out of six self-employed are not protected against the risk of labour accidents or occupational diseases. In this sense, the decision to revoke the provision that led to the extension of mandatory coverage of occupational accidents for new self-employed is to be regretted. 53
As already pointed out, a second major risk is inadequacy, i.e. insufficient protection. Lower contributions, which are a reflection of lower earnings, are common in Uber-like work due to the reduced working time and characteristically intermittent working. Leaving aside those cases that are excluded from registration with social security, this risk of limited coverage is particularly significant – though not new for this group 54 – in the case of the self-employed because of their entitlement to freely decide, within certain limits, the amount of their contributions. 55 But, this risk also affects those platform ‘collaborators’ who are regarded as employees because, for example, they will only be entitled to unemployment benefits after contributing for a minimum of 360 days, a threshold which is often quite difficult to reach in these kinds of digital activities. For this reason, we can conclude that we are faced by a new form of non-standard employment with a weakened guarantee in terms of social protection.
On the whole, we observe that some grounds on which social-insurance schemes have traditionally been developed are missing here, questioning the efficacy of social security systems or, at least, demanding a specific response before poverty and inequality undermine their legitimacy. The need to guarantee decent working conditions, alongside the laying-down of non-contributory mechanisms to offset work instability, seems urgent in order to avoid a reduction of benefits and, therefore, to preserve the crucial role played by these contributory social security systems in Mediterranean countries. In this respect, it is no exaggeration to anticipate that the typical labour trajectory of ‘platform’ workers will have much in common with the current trajectory of female employees: the combination of career interruptions, part-time contracts and low paid jobs culminating in lower earnings-related entitlements and thus in inadequate benefits. 56 Nevertheless, the steps taken in recent years – notably in Spain – run in the opposite direction: higher employment instability due to aggressive labour reforms and the reinforced proportionality of benefits with respect to previous contributions.
3.4. Impact on the financing of Social security and its future sustainability: Which way forward?
The last part of this article deals with the impact that the development of the platform economy may have on the financing of social security and its future sustainability. From the issues examined above, it could be easily concluded that the funds coming from contributions will decrease as a result of lower (or a complete lack of) contributions associated with the new forms of platform work. The relevant point here is that this fall is particularly problematic in countries with the Mediterranean (Bismarckian) model of social security, like Spain, where contributions are the main source of financing. In fact, it could become a serious structural weakness. Could this lead to a change in the design of social security, possibly as a first step towards a more Beveridgean system? We focus again on Spain.
From the perspective of social security financing (excluding healthcare), the development of the platform economy is clearly a major challenge for the Spanish system in which funds come mainly from contributions. In addition to the impact of these Uber-like activities, which often are excluded from the scope of the system and, when they are included, are associated with low remuneration and therefore with low contributions, two circumstances aggravate their significance in terms of financial sustainability.
The current financial condition of social security in Spain is critical: its budget imbalance has increased in recent years, exceeding 1 per cent of GDP since 2012 (it was 1.7 per cent in 2016). 57 It is important, however, to stress that this imbalance is not caused by an accelerated increase in pension expenditure, but by a fall in the funds coming from contributions 58 due to job losses caused by the economic crisis and the austerity-driven policies that resulted in acute wage devaluation. Another unfavourable circumstance is that Spain, like all European countries, faces a major challenge derived from the process of ageing. This will undoubtedly mean a significant increase of the population over 64 years old 59 and, subsequently, a growing need for additional economic resources to pay for pensions in the future.
In brief, the current structure of the Spanish social security system is facing the serious possibility of a permanent budget imbalance and, therefore, of unsustainability. Even if the system is able of correcting itself, the outlook is still very gloomy. The reason for this is that the contributions paid by employers and workers will not be able to cope with the problems associated with the need for additional resources that ageing will bring about, and, as far as the central issues raised in this article are concerned, with the decreasing amount of contributions due to the new forms of employment and, particularly, to work-on-demand-via apps.
In light of this new situation, it seems that the ‘Uberisation’ of the economy will, sooner or later, force deep reforms in the design of social security financing. Given the structural changes that will inevitably weaken funding through contributions in coming years, it seems reasonable to defend a redesign of social security financing by increasing Government’s contribution from the public budget to make up for the foreseeable insufficiency of resources. How this new structure of financing would be organised is no minor matter insofar as it drives the system in two different directions.
First, an increase in funding by the Government could prompt a reduction in the funds coming from contributions. This would potentially represent a first step towards a more Beveridgean system if it led to a significant reduction in the level of social insurance benefits and a focus, instead, on reducing poverty through a greater emphasis on social assistance benefits. The development of occupational pensions – linked to an employment relationship – would then be essential to maintain the living standards of beneficiaries but this would certainly be no less problematic given the existing precariousness. Likewise, this trend could give way to the reinvigorated basic income proposal, an old idea attracting renewed attention given growing inequality and the rising labour precariousness linked – among other factors – to the digital transformation, thus including the platform economy. 60 As a potential instrument to solve certain problems of social protection, it would entail a major shift in the social security system. 61
Second, the alternative is to keep the traditional (Bismarckian) pattern of social security in which contributions paid by employers and employees (and the self-employed) play a key role both in funding the system and in granting benefits; making it compatible with the increase in the Government’s subsidy that would be used to compensate for the foreseeable fall of contributions and the negative consequences of labour precariousness and ageing. This deeper involvement of the State in funding social security benefits could be decisive in preserving the sustainability and adequacy of the current model of social security.
In this context, we must consider the proposal for a ‘robot tax’. An in-depth study of such a tax is beyond the aims of this article, but two comments are nevertheless appropriate. On one hand, in coming years, we will see different initiatives attempting to fiscally compensate for the loss of jobs caused by the digitalisation of economy. 62 From a general perspective, a full revision of tax systems seems necessary in order to adapt to economies in which labour loses relevance in favour of capital. On the other hand, taking into account the impact that this transformation will have on the financing of social security, it might be reasonable to increase the tax on digital capital in order to provide for the necessary resources to pay social benefits. Along these lines, an earmarked tax to finance social security should be considered. 63
One last word on the debate about the future of social security in Spain. Many voices, mainly linked to the financial sector 64 defend the position that benefits based on previous employment should be funded exclusively from contributions from by employers and employees or self-employed persons. However, this would lead to an acute and alarming reduction in benefit levels, partly because of the growing numbers of pensioners, but also because of the process of ‘Uberisation’ of the economy described in this article. Seen from the opposite perspective, it could be argued that the emergence of this new business model channeled through digital platforms constitutes a further reason to claim that a significant increase of government funds coming from general revenues or earmarked taxes 65 is urgently needed.
4. Concluding remarks
The ‘Uberisation’ of the economy is the last sign of the loss of relevance affecting employee status. This could lead us to accept with resignation the collapse of labour and social security regulation, increasingly powerless to tackle the new economic environment that undermines the political, legal and financial foundations of welfare states. On the contrary, we should be conscious of the negative impact that this would have in terms of increased inequality and weakened social cohesion. 66 Consequently, far from submitting to the collapse of the central institutions of the welfare state, we face the challenge of adapting the balancing and redistributive mechanisms, which have traditionally characterised it, to a different socioeconomic reality.
Seen from Southern Europe, these new forms of ‘Uberised’ work threaten the pillars on which the Mediterranean version of Bismarckian systems of social security have been built. One problem is that the dependence of social benefits on unstable professional trajectories is giving way to a new allocation of (economic) risks. This is fuelled by individualisation and will enhance the tendency towards social polarisation. Those more vulnerable to labour precariousness are precisely the ones who face greatest difficulties in accruing adequate social security benefits. At the same time, the second major problem is that social security systems face mounting financial needs caused by ageing populations with a decreasing amount of resources coming from the contributions paid by employers and employees and by the self-employed. So, it is urgent to adapt the design of social security financing to meet the changing nature of work.
Focusing on Spain, the analysis made throughout this article enables us to make some recommendations that could be useful in adapting the Spanish social security system to the needs of those working in the ‘gig’ economy.
Looking beyond social security, the first involves solving the problem of the legal classification of this type of workers by redesigning the labour framework so as to preserve the status of employee in the case of economic subordination. In this respect, strengthening the intermediate category of independent contractors (TRADE in Spanish) could be counter-productive.
Second, finding ways to register low-income self-employed persons with social security should become a priority. Without excluding more imaginative solutions – perhaps using French experience as a model 67 – this problem could be tackled through a new regulation on social security registration and contributions. Registration would be compulsory for self-employed workers from the very first moment in equivalent terms to employees. Thus, contributions to social security would be determined by the income generated in the activity – or, as an alternative, by working time – not on a voluntary basis.
Third, closely related to the effects associated with just-in-time work and other expressions of labour precariousness, the adequacy of social security benefits already is (and certainly will be) endangered in the ‘platform’ economy. To preserve and even aim to improve it, social security reforms in Spain should introduce further measures to adjust the proportional relationship between contributions and benefits (contributory principle): reducing the requirements (basically, previous contribution period) for unemployment benefits or introducing a more generous regulation of contribution gaps are just two examples. In other words, solidarity – understood as referring to the redistributive components of the system – should be reinforced.
Finally, the financing of the Spanish social security system must be adapted to a changing production context in which an excessive dependence on contributions could threaten financial sustainability or lead to significant cutbacks. Although there are different options for increasing government funds, the proposed introduction of an earmarked tax on wealth and capital income merits serious consideration.
Footnotes
Acknowledgement
A preliminary version of this paper was presented at the 3rd Labour Law Research Network (LLRN) Conference that took place at the at the University of Toronto (Canada) in June 2017.
Declaration of conflicting interests
The author(s) declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.
Funding
The author(s) received no financial support for the research, authorship and/or publication of this article.