The gig economy’s cash management issue

By Izabella Kaminska Apr 28, 2017 3:30 AM EDT

This story was shared from this site

Over the last few years, labour practices in the gig economy have triggered a heated debate over where the boundaries of self-employed status should begin and end.

The feeling among many critics is that corporations are exploiting the classification simply to save money by not providing the rights and benefits that come with traditional employment. This is contributing to a major power shift in the social contract that was hammered out during decades of strife between labour and capital, they say.

But there is another thing possibly being missed in the debate as it stands. It relates to the role cash management plays in the gig economy.

Take the taxi market in the UK as an example.

Companies such as Uber like to claim they’re busting open an uncompetitive licensed taxi cartel, which operates against the interests of consumers.

But in the case of the UK market, this is a slightly disingenuous claim. Black cabs have always been forced to compete with private hire and mini-cab rivals.

So, one might ask, why is competition from Uber deemed intolerable from a labour and incumbent perspective but not from the private hire or mini-cab market?

Two factors arguably dominate.

The first, and most written about, relates to Uber’s scale and capital advantage. Unlike local mini cab firms or even relatively centralised players like Addison Lee, Uber’s well funded status alongside its immense scale means it can undercut incumbent players with below-cost pricing. Small local players simply wouldn’t be able to carry on loss-making operations for years in the same way, and hence can’t compete.

The second, and possibly less recognised factor, relates to the power shift associated with using a centralised dispatcher for self-employed operations. That dispatcher (Uber, in this case) also happens to be a cash manager, which is important.

Indeed, one

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