Towards a sustainable platform economy

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The link between prosperity and economic growth remains strong. Growth will enable people to be employed, consumers to improve their purchasing power and the welfare state to be financed. There is no fundamental contradiction between growth and ecological sustainability – if economic activity is steered in an environmentally friendly way with sufficiently effective means. Sustainable growth is based on productivity growth, which in practice means more efficient and productive use of resources. Productivity growth is driven by the introduction of new ideas and practices.

New Replaces Old

The latest economic research emphasizes the importance of startups and the so-called creative destruction in increasing productivity. In creative destruction, old products, companies and practices leave the market when they are left behind by new and more efficient players. This can be also described as market disruption.

Digital platforms tend to concentrate.

The biggest source of disruption and creative destruction in recent years has undoubtedly been the platform economy. The idea of a platform economy is to connect a large number of actors through an electronic marketplace: consumers, producers, citizens, institutions, etc. As the market is on the Internet, it is very advantageous to expand and replicate it in practice. Platform companies can use transaction data to optimize their operations and increase transactions. Digital platforms tend to concentrate because the more actors it has, the more attractive it is.

Europe is in the forefront

From these starting points, platforms have great potential for prosperity and growth. The more transactions, the better and more efficient the allocation of resources and the more prosperous our economies become, right? Personally, I think this basic story is still valid – although public debate around platforms has often focused quite a bit on problems – imaginary and real. The European Union is at the forefront of regulating large online platforms and addressing the concentration of markets – regulation of platforms, artificial intelligence and digital services is constantly increasing in many different directions. There’s no point in trying to push back, but rather effort should be put to achieve regulation that works and is efficient. Few things work well for society without clear rules and controls.

I would like to see focused action on social security blind spots and the development of the digital implementation of the system.

Talk About Working Conditions

A very special topic for discussion and debate are the working conditions on platforms. Digital platforms can be used to convey a wide variety of assignments; both high-skilled expert assignments and less-trained gigs such as transportation assignments. The applicability of labor laws and social security to the world of digitally allocated gigs is a concern for many. In principle, in the field of social security, universal and clear systems also work well in the platform economy. The most important areas for development in Finland are the entrepreneur’s pension system and taking into account the fact that people can work in many roles during their careers, e.g. as an entrepreneur and employee at the same time. I would like to see focused action on these social security blind spots and the development of the digital implementation of the system.

Labour legislation should be renewed

Instead of solving these practical problems, there is more debate about whether those working on the platforms should be classified as employees or entrepreneurs. Digital tools have made it possible to allocate assignments in a way that traditional labor law is ill-suited to. It would be a shame to ban such a part of the new economy, which, however, has created a way for so many people to work and improve their own livelihoods. Labor laws that define the employment relationship have their place and need, but forcing all platform work under them does not do justice to reality and would lead to a reduction in job opportunities.

Surveys also show that the majority of entrepreneurs working on a platform do not want to change their classification by force; they value the freedom associated with their position and regard it as the best aspect of platform work. This result has been repeated in virtually all surveys, in all markets, and regardless of the commissioner or author of the survey. The aim of public policies should be to enable platform work, both as employment and as an entrepreneur, and to clarify the legal boundary between them. Clarification can take place both through new legislation and through judicial decisions, and both are likely to be seen. Sustainable platform work has a clear legal foundation, is covered by adequatesocial safety nets and is socially acceptable.