Gig workers grapple with “unsustainable” business models amid COVID-19

TORONTO — Ivan Ostos biked through rainstorms, braved the coldest days of the year and pedalled up plenty of hills to drop off hot meals for three popular food delivery apps — until a significant portion of his work vanished May 11.

That’s when Foodora, the company that provided about 85 per cent of his business, closed its Canadian operations after concluding it couldn’t be profitable in the market.

For Ostos, who spent years in a battle seeking the right to unionize after breaking his arm and being unable to work for almost five months, the realities of the gig economy are once more making it harder for him to pay the bills. To make ends meet, Ostos will now have to turn to Uber Eats and Door Dash. He fears they too could exit the country on a whim, leaving him jobless again. 

He’s among a growing group of workers who have seen work dry up as the companies that once paid their invoices slash spending, lay off staff, close Canadian operations and even declare bankruptcy amid the COVID-19 pandemic.

Experts say this trend means the future of gig employment and precarious jobs is not promising.

Foodora Canada’s managing director David Albert has said the company was faced with “strong” competition in the Canadian market and was “unable to get to a position which would allow us to continue to operate without having to continually absorb losses.”

While COVID-19 has resulted in record demand for food delivery, companies like Foodora aren’t immune to the broader economic climate. Meanwhile, other on-demand sectors such as travel, vacation home rentals and ride-hailing have seen demand dry up due to government mandated lockdowns. 

Economists believe the conditions often faced by gig, freelance and contract workers — low salaries, no benefits and uncertain or inconsistent hours — won’t go away. In fact, employers trying to scrape by or reopen after shutting down and laying off staff will probably find it more attractive. 

“Maybe there’s a situation there where firms will rely more on non-salaried employees,” said Pedro Antunes, the Conference Board of Canada’s chief economist.

“Especially given the uncertainty going forward, we may see more contract work.”

The pandemic has so far caused “unprecedented” upheaval to the jobs market. The April unemployment rate was nearly 15 per cent and the number of hours Canadians have worked is down by 27 per cent from February, Statistics Canada reported last week.

The jobless rate was even higher for some demographics. It hit 30.2 per cent for those with a temporary job, 29.5 per cent for those with tenure of one year or less and 21.2 per cent for people not covered by a union or collective agreement.

The transportation, leisure and hospitality sectors felt the brunt of the declines, Antunes said.

“Canadians generally, on average, earn slightly over $1,000 a month and when we look at most of the industries that were hardest hit, those are industries where the wages are half of that and that includes overtime,” he said.

This month alone, Airbnb shed 1,900 jobs, or 25 per cent of its staff, Uber said goodbye to 3,700 workers — about 14 per cent of its workforce — while at Lyft there were 982 layoffs and 288 furloughs.

Those salaried positions were spread across the globe, but the gig workers employed by the companies are affected too.

Uber is closing its on-demand food offering in the Czech Republic, Egypt, Honduras, Romania, Saudi Arabia, Uruguay and Ukraine. The company says the move was part of its “ongoing strategy to be in first or second position in all Eats markets by leaning into investment in some countries while exiting others.”

Ostos said the idea that delivery app companies could start “dropping like flies” creates a lot of anxiety for workers like him. “It just shows me this whole industry is not really sustainable the way they have built it up,” he said.

Estimates suggest gig workers amount to between 3 and 8 per cent of the country’s workforce, but verifying that is tricky, said Judy Fudge, a labour professor at McMaster University.

The sector can be hard to quantify, especially when some workers pick up quick jobs here and there to supplement full- or part-time work.

That makes predicting the gig economy’s future difficult.

Amid the pandemic, some Canadian restaurants have abandoned Uber Eats over high commissions.  Rental, ride hailing and repair app companies have realized that many don’t feel comfortable allowing strangers to stay in their spare room, hop in the back seat of their vehicle or enter their home to clean or renovate during a pandemic.

“What they have really done is revealed that this model is completely unsustainable if there is any form of economic disruption,” Fudge said.

She thinks a “re-regulation” of work is needed and that guaranteed annual income, a concept Ontario tested from 2017 to 2019, could be promising.

Studies showed it creates significant improvements in people’s standards of living and didn’t cause them to flee jobs because they were guaranteed money.

Fudge believes if it is offered broadly — to employees and gig workers alike — and the government deals with issues around tax havens and tax fairness, it could get wide support.

Jessa Agilo, the founder of arts and culture advocacy group I Lost My Gig Canada, believes the pandemic has been the strongest argument that we have had in a generation or more for universal basic income.

Without a quick change, gig workers who are already contemplating changing careers or struggling to sleep at night will be grappling with the uncertainty, she said.

“There is a capacity and willingness to keep going despite adversity, but the traditional modes for support… are definitely going to be under some serious duress if this goes on for too much longer.”

This report by The Canadian Press was first published May 12, 2020.

Tara Deschamps, The Canadian Press