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Want to save the High Street? Reform social security

Voiced by Amazon Polly

It goes without saying that online retail has had a good pandemic.  And when it comes to online retail, Amazon leads the pack.  At the same time, “bricks and mortar” aka “High Street” retail has taken a pounding, as the retail apocalypse gathers pace.  Understandably, demands for a new “Amazon Tax” have been given voice across society; from the lowliest shop worker to the most senior government ministers.

Taxes though, are slippery creatures which often miss their intended target.  Amazon, for example, is better thought of as an online marketplace rather than a web-based version of a department store.  That is, Amazon doesn’t own the millions of items which appear on its website.  Rather, it – in effect – rents out space on its website in the same way that the owner of a physical market rents out stall space to individual retailers.  Third party retailers may either supply goods up front – to be held in Amazon’s warehouses – or choose to arrange delivery themselves on receipt of orders.

Are you starting to glimpse why an “Amazon Tax” might backfire yet?

Amazon – a giant global corporation – is advised by the best tax-lawyers money can buy.  It has already been structured in the most “tax efficient” manner, with income channelled to headquarters in jurisdictions with the lowest tax rates.  The idea that Amazon’s senior executives are just going to shrug their shoulders and write a big cheque to Her Majesty’s Revenue and Customs, smacks of gross naiveté.  It doesn’t take a genius to see that online retailers like Amazon are simply going to pass the tax on to those less able to dodge it.

Third party sellers – many of them, small, specialist businesses that could not reach their customer base any other way – are an obvious target.  Levy an online sales tax on Amazon, and you can be sure these small businesses are going to end up paying at least a proportion of it.  For sales in the USA, for example, it is the third party businesses who pay the sales tax on products sold via Amazon.  And while seeking to defend small businesses on the High Street is a laudable aim, it is of little use if it comes at the cost of rendering internet-based small businesses bankrupt.

There is another group of people who will find themselves picking up part of the online tax bill.  This group is already among the most exploited in the modern economy; pseudo-self-employed delivery drivers.  As an anonymous (for obvious reasons) correspondent in issue 1541 of Private Eye explains:

“I found myself in need of a job, so I applied to deliver parcels for one of the world’s most consumer-focussed companies.  I’m sure you’ve heard of them.  But you won’t have heard of the company I actually work for – it’s known as a Delivery Service Provider, or DSP.  But I am not an employee; I’m ‘self-employed’.  Allegedly…

“We’re constantly monitored by our mobile phones, which check productivity and safety.  Fall behind and you’ll get a call asking what you’re up to.  But try to make up time and you’ll receive a poor driving score. These metrics affect whether your team receives a bonus.  Victorian mill-owners would be proud.”

The correspondent goes on to detail the vehicle hire and insurance scam:

“… a firm will lease you a van for £120 a week – a mere £6,240 annually.  Not surprisingly the vans are owned by the manufacturer’s finance company, which becomes part of the chain of exploitation…”

Then there’s the compulsory insurance – £5,200 a year; with an excess of £2,500.  All of which has to be paid out of the income for delivering parcels:

“Our wage slips – sorry, invoices – show we receive £116 for a nine-hour working day.  But lease and insure a van and you get less than the minimum wage.  As for paid holidays, bank holidays, sick pay, death in service benefits or even a paid lunch break, what do you think we are, employees?…

“Why do it?  Because most of us are desperate for work… So please be nice to us.  We’re the ones who subsidise your deliveries.”

This, for the most part, is the reality of the post-2008 gig economy.  For sure, there are just enough genuinely self-employed professionals such as architects, lawyers, business coaches, musicians, etc., to give a veneer of respectability to independent working.  But for the majority in low-paid driving and delivery work, self-employment is a product of desperation rather than a genuine choice.  This, of course, is why many of these gig workers have sought to unionise and have brought court cases against platform owners like Uber and Deliveroo in an attempt to be recognised as employees.

During the various lockdowns in response to the pandemic, despite their low pay and demanding conditions, this group of workers have emerged as truly “essential workers.”  And in the aftermath, it is anticipated that self-employed delivery work will mushroom, as more of us work and shop from home.  Interestingly though, the senior managers of these online platforms are far less confident about their ability to meet demand as economies emerge from the pandemic restrictions.  As Aarian Marshall at Wired reports:

“Unemployment in the US remains stubbornly high at 6.3 percent. Job growth has stalled, with 9.6 million fewer jobs in January than the same month a year earlier. But gig companies say they’re having trouble finding people to drive, pick up, and deliver for them.

“‘I’m worried about one thing going into the second half of the year: Are we going to have enough drivers to meet the demand that we’re going to have?’ Uber CEO Dara Khosrowshahi told an analyst last month. DoorDash chief financial officer Prabir Adarkar called the situation ‘a tale of two cities,’ with hordes of new customers racing to order takeout but fewer drivers offering to deliver it…

“The looming driver shortage confounds executives’ predictions. ‘With record unemployment, we expect driver supply to outstrip rider demand’ for the ‘foreseeable future,’ Lyft CEO Logan Green said in May. For a time early in the pandemic, Lyft blocked new drivers from signing up. It was understandable, because today’s tech gig companies were born during the Great Recession. They benefited from a deep pool of workers newly outfitted with smartphones and suddenly in need of supplemental income.”

So what has changed to create driver shortages at a time of high unemployment?  In two words: social security.  As is the case in the UK, welfare in the USA had been dismantled by successive neoliberal administrations in the decades prior to the 2008 crash.  The result was that when a depression came along, the system was unable to prevent people from sinking into abject poverty.  Moreover, these systems were re-designed during the debt-based boom of the 1990s, when it appeared that there was plenty of employment to be found; if only people were prepared to look for it.  Long-term unemployment was assumed to be the result of personal failings rather than an absence of jobs.  And so various “sanctions” were built-in to deter those who were workshy, while coaching and support was provided to older, disabled and mentally ill people who were deemed to need additional help securing work (ignoring the fact that there is widespread employment discrimination against such groups).

The result was that being on welfare in the aftermath of the 2008 crash, was worse than accepting the most exploitative and low-paid gig economy work on offer.  Tech companies which are now household names were propelled into the stratosphere in that fertile environment.  But this time around – at least in the short-term – things are different.  As Marshall explains:

“The nation’s hastily constructed pandemic safety net appears to be working, leaving people less desperate. Like most Americans, gig workers received stimulus checks—one last spring and a smaller one in January. (Another one appears to be on the way.) For gig workers who used to have other full-time jobs, states have extended unemployment insurance payments. And for the first time, gig workers—and all other freelancers—became eligible for a form of federal unemployment insurance, $600 a week.

“Gig companies say they’ve felt the impact. A spokesperson for Uber says the company’s data suggests that its number of drivers available fluctuated according to unemployment insurance policies. When the stimulus hit drivers’ bank accounts, for example, fewer signed in to work on the app…”

The situation in the UK, where social security benefits were raised by £20 per week for the duration of the pandemic, is likely to be similar.  Low pay has not gone away, and the cost of living is still rising.  But that uplift – a 26 percent increase – although small in absolute terms, has been sufficient to take the edge of desperation off the search for work.  And with millions of people expected to become unemployed in the course of the pandemic, it may prevent destitution in the months ahead.

The shortage of drivers as the pandemic comes to an end, gives credence to the arguments in favour of some form of universal basic income.  Take poverty off the table, and people have the time to take a breath, step back and properly plan their future employment; rather than being rushed in and out of various under-paid and exploitative “self-employed,” zero-hours or part-time work.  And crucially, underhand exploitation, which uses “self-employment” as a cover for avoiding the Minimum Wage and employers’ tax contributions, becomes far more difficult to sustain.

The driving work won’t go away.  But with decent social security, the online platforms will have no alternative but to raise “self-employed” pay at least in line with the Minimum Wage.  And yes, dear reader; that means you and me paying a little more for our deliveries… something which may also allow the most efficient High Street retailers to compete fairly again… and at least the poorest among us will have the currency in their bank accounts to pay the extra.

As you made it to the end…

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