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Why Politicians Need To Get Real About Digital Innovation

14/11/2016 16:12

The UK employment tribunal's ruling that Uber's UK drivers can't be classified as 'self-employed' has important implications for the techno-optimistic politics of innovation says Futurice business director Professor Risto Sarvas.

The digital zeitgeist has it that governments should support and listen to new business innovators and start-ups. Technologists at the cutting edge of innovation see the future, unlike grey, outdated politicians many of whom probably can't tell a hashtag from a hash brown. Regulation is uninspiring and bureaucracy hampers innovation. Can we please allow digital disruption to just happen?

Can we?

Yes the world is changing fast. It's obvious that digital innovation operates on a more accelerated timetable than the time it takes to change laws and regulations. But is that a good enough reason to place technologists and innovators in the driving seat? What kind of a society will they create? What kind of politics will 'disruptive innovations' introduce?

The UK employment tribunal's recent verdict on Uber sheds some light on this issue. The judges decided that Uber's UK drivers can't be classified as 'self-employed'. In fact, they were scathing about Uber's attempts to claim otherwise stating:"the notion that Uber in London is a mosaic of 30,000 small businesses linked by a common 'platform' is to our minds faintly ridiculous".

There are still a few appeal courts before a final decision is reached. Regardless of the eventual outcome, this early ruling is a step change for the politics of innovation.

First, the decision highlight the business model of the gig economy where workers are treated as self-employed entrepreneurs, rather than employees, with brands such as Uber taking commission on their earnings. Just as a big corporation hires consultants, or a homeowner calls a plumber to fix the pipes, in the gig economy there is no employment contract because after all, it's only a gig.

In the UK, Uber has around 40,000 drivers, so to date this approach will arguably have saved Uber employment costs (holiday pay and the living wage) 40,000 times over. Replicate this across the 66 countries in which Uber operates and you gain some insight into the business model behind a company valued at $66 billion.

This sky-high valuation partly explains why Uber takes centre stage in the politics of innovation: it's the poster boy for digital disruption. If digital innovation hype is to believed, Uber isn't just an elegant service or a great user experience, it's a perfect example of how outdated business models could and should be overturned by smart digital services.

Is this a real concern? Is the hype around Uber and digital innovation impacting politics and policies?

In July a report by the Business Innovation and Skills Committee suggested that government should not use regulation to protect established industries from disruption by the likes of Uber and Airbnb . In other words, let the digital disruptors disrupt and bring with them new growth, new taxes, and new jobs. Anachronistic politicians and regulators should step aside. This hand-off approach places a lot of trust in technologists and innovators: have they done anything to earn it? To put it in another way, how many politicians would actively support a business framework which allowed companies to circumvent employer responsibilities for profit?

Yes, politicians calling out the working practices of gig economy brands like Uber risk being called digital dinosaurs. But the bigger risk by far, is that by falling for the hype around digital innovation and failing to regulate new platforms and services adequately, they unwittingly usher in a return to good, old-fashioned worker exploitation.

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