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Australia’s Deliveroo exit shows why gig workers need more protection

This article by Alex Veen, Senior Lecturer and DECRA Fellow at the University of Sydney, Caleb Goods, Senior Lecturer in Management and Organizations at the University of Western Australia Business School and Tom Barratt, Senior Lecturer at the University of Western Australia, was originally published in The conversation on November 17, 2022.

Deliveroo’s decision to leave the Australian market, after a period of boom for food delivery platforms, may seem surprising. But the writing has been on the wall for some time.

The UK-based platform – one of the first to start operating in Australia – announced yesterday that it will move into voluntary administration.

He cited “difficult economic conditions” and an inability to achieve “sustainable position of market leadership” as the main reasons for his decision.

Creditors must now await decisions from the appointed administrator, KordaMentha, on how much money owed to them will be paid.

Crucially, those potentially disbursed include up to 15,000 couriers who have worked for the platform as independent contractors.

They are not officially employees, so they are not covered by the federal government’s Fair Law Guarantee, which ensures that workers left behind by an employer declaring insolvency can receive a portion of their unpaid wages, annual leave and other rights.

Difficult economic conditions

Globally, Deliveroo has exited countries where it is not in a “sustainable leadership position”, i.e. it is effectively one of the two biggest players in the market for food delivery.

It has already closed its operations in Germany (2019), Spain (2021) and the Netherlands (2022).

Deliveroo’s Australian operations were also seen as a drag on the British company’s share price. Although it was one of the first app-based food delivery platforms in Australia, as of 2015, it has not held a leading position in the market since 2016-17.

It sought to differentiate itself as a niche player, working only with “high-end” restaurants while promising fast deliveries to the consumer. In Australia, however, this model has struggled against competitors delivering from a wider variety of restaurants with more couriers making deliveries.

Relentless market dynamics

The release of Deliveroo highlights the fierce market dynamics of the on-demand gig economy.

COVID-19 restrictions have been a peak for it and its other food delivery platforms (Uber, DoorDash, Foodora and Menulog).

Demand for food deliveries has skyrocketed during the shutdowns. The same is true for labor supply, as those laid off from other jobs – especially temporary migrants excluded from JobKeeper and JobSeeker benefits – have sought alternative work.

But boom profits are not guaranteed to continue. Inflation is hitting consumers’ discretionary spending and the era of “cheap money” is coming to an end.

Platforms have often had to offer their services at a loss to increase or maintain their market share. This is partly because consumers of food delivery services are very price sensitive, as our research has shown.

More regulation to come

Another key local factor that may have influenced Deliveroo’s decision is the prospect of greater regulation.

The Albanian government has promised to improve conditions for gig workers. This includes legislation giving the federal industrial relations arbiter, the Fair Work Commission, the power to regulate “employee-like” forms of work.

Currently, the commission can only adjudicate on employee issues. The government’s approach is to avoid the seemingly endless debates over classification and instead provide all workers with greater protection.

Giving platform workers more benefits and protections as employee-like workers — whatever form that takes — will drive up costs. But Deliveroo’s exit highlights why greater protection for gig economy workers is needed.

It is now up to the Albanian government to make meaningful and innovative reforms.

This article is republished from The conversation under Creative Commons license. Read it original article.

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