Social Constructor: Yaroslav Kuzminov on Regulating the Platform Economy
Yaroslav Kuzminov, HSE Academic Supervisor, in a column for Forbes Russia magazine analyses the development of the platform economy and the different approaches to its regulation, including the extension of the system of social guarantees to this sector.
Digital platforms have made a breakthrough and have created a vast marketplace where almost every worker can find clients on their own terms, and clients, in turn, can find what suits them from a wide range of offerings. The freelance market has become completely different.
As of the second quarter of 2022, the share of the platform economy in Russia's GDP structure exceeded 1.5% of GDP, and in the same year, according to HSE data, the total number of people employed in this sector was around 15.5 million—if we take into account both those for whom this was their main employment (1.7 million people) and those who used platforms for occasional or regular side jobs. According to Rosstat data for the third quarter of 2023, on a regular basis, 2.5 million people—or 3.4% of all employed in the country—have received orders through platforms.
Each generation enters the economy with its own labour behaviour characteristics. Over the past 25 years, the development of culture, arts, and education has led to the emergence of new needs in the labour sphere for individuals. Self-determination has become an important value for many alongside the level of remuneration. On the other hand, this form of employment allows for increasing earnings. It is now important for workers to independently plan their working time and set the characteristics and intensity of their work.
Self-employment has been prevalent before. However, there is a huge difference between freelancers a hundred years ago and today. Today, it is largely additional employment, additional income.
People seek to increase their income to bridge the gap between needs and primary income
Typical situations include a young family with children where a wife is temporarily not working; the need to raise funds for a major purchase; side jobs during the early stages of a career when a worker receives a small salary. Another, and the most rapidly growing group of freelancers, are professionals who are fully dedicated to their job and derive their main income from it.
What was the self-employment market like before the emergence of platforms? Leaving aside highly skilled professionals, we can say that the ‘range of opportunities’ for each participant in this market was limited to word of mouth.
Workers remained tied to local clients and their social circle
Another part was ‘attached’ to some anchor client. On the one hand, this hindered the freelancer's ability to quickly increase their income or, conversely, reduce their working hours, and on the other hand, it limited the motivation to improve quality of work.
Thus, platforms have created a public good. The beneficiaries of this good are not only the engaged workers but literally all people and enterprises. This is significant for those who want to earn extra money or need to work for themselves without having start-up capital.
A platform is not working through an agency, let alone wage labour. We are talking about a form of organising the market similar to a stock or commodity exchange
This is a service market of independent workers—some of them join teams, organise cooperation among themselves. The main form of regulation on the organised market is to ensure full information for all its participants, guarantees of equal access to the platform. Such information includes the declared service standard, the right to complain, and service quality assessments. In this regard, one of the possible forms of platform regulation is to guarantee transparent service operations declared by the platform for clients: search systems, rating.
Since the platform provides access to services that can affect the health and life of the client, such as passenger transportation or cosmetology, regulations should prevent cases where the performer is sick or overly tired
Of course, the interests of platform participants, both from the client's and the performer's side, are primarily focused on this. And the state satisfies these interests in its regulation. At the same time, the presence of a stable and growing group of workers for whom platform employment is the main or even the only source of income raises the question of regulating labour relations within the platform framework—regardless of whether the work here is self-employment rather than wage labour.
And here we are talking about pensions, medical and social insurance