Friday 28 October 2016 6:32 pm

Giving Uber drivers “worker” status is bad news for passengers, the gig economy and the drivers themselves

Sam Dumitriu is research director at The Entrepreneurs Network.

Friday's decision to grant two Uber drivers worker status is bad news not just for Uber, but for its drivers, its customers, and the future of the “gig economy” as a whole.

It is primarily bad for Uber drivers. We know for a fact that, by vast margins (five to one), they don’t want to be classified as workers. The Uber platform is great for people looking for increased flexibility, the ability to be their own boss, to choose their own hours, and to be able to reject any job. They wouldn’t trade that for a slightly more stable income.

The case centred on drivers who claimed to have been paid below the minimum wage. Now contractors aren’t entitled to it, but workers (a bizarre halfway house between contractor and employee) are. In fact, the average Uber driver earns well above the National Living Wage – around £16 an hour – and that’s after Uber has taken its cut. After drivers’ costs are taken into account, they’re left with around £12 an hour to take home. It’s higher for Londoners too.

The drivers who earn less than the National Living Wage tend to refuse trips more frequently and work at quiet times. In one case, a driver made it look like he was earning just £5 an hour by rejecting almost 85 per cent of jobs offered. If this decision stands and applies beyond the two drivers in question, then Uber will be forced to pay drivers a wage for time spent using the app even when they don’t have a passenger.

Uber’s not a charity. It’s not going to simply raise wages across the board. Rather, it’ll look to claw back things like paid holiday and the minimum wage by taking higher commission from drivers. But it’s not just going to be a financial hit. Currently an Uber driver is free to reject any job they wish. If Uber were obliged to pay drivers even if they reject jobs, then I doubt Uber will continue to offer drivers that freedom.

Read more: Why the future is renting… everything

Less freedom and flexibility for drivers will mean fewer drivers signing up to the platform. Fewer drivers means longer wait times, higher and more frequent surges, and increased fares for consumers. That’s a disaster for the thousands of Londoners who Uber currently helps get from A to B. This isn’t a trivial cost. Evidence from America suggests Uber’s availability is linked with falling assault rates and fewer drunk driving fatalities. It’s also taken more cars off the road than it’s added, and those cars on the road typically have more passengers, reducing congestion and cutting air pollution.

The ruling sets a worrying precedent for the wider gig economy. Britain’s flexible labour market has allowed us to come out of the financial crisis with record levels of employment. A big driver of those high-employment rates is the rise in self-employment. Many of those people work in the gig economy, using platforms like Uber, Deliveroo, and Taskrabbit. Now it is true that wages aren’t rising as fast as we’d like, but many people are choosing to trade lower wages for shorter hours and the ability to fit their jobs around their family.

Hopefully, this decision will be overturned on appeal. If not, the government should consider reforming the law so analogue labour laws don’t hold back a dynamic digital Britain.

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