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GLOBALOUTLOOK COVERSTORY


TAXI APP-BASEDWORKTENDS TO PAY BETTER IN DEVELOPINGCOUNTRIES DIFFERENCE IN HOURLY EARNINGS FOR APP-BASED VERSUS TRADITIONAL SECTORS


Lebanon India Ghana


Indonesia Mexico Chile


Ukraine Morocco Kenya


Daniel Isenberg, an active angel


investor and professor of entrepre- neurship at Babson College, points out that economic complexity, rather than a focus on early-stage companies yields more benefits. “‘Start-up ecosystems’ is a misno-


mer,” he exclaims. “To look at one particular age of company, one par- ticular financing model or one par- ticular segment is intrinsically a mistake.” Mr Isenberg argues in his book,


Source: International Labour Organization


sectors generally have smaller mar- gins and lower returns.”


Location-based platforms But differentiation can come with profound societal effects, as shown by the new workforce models pio- neered by gig economy start-ups. Ride-hailing apps, such as Uber and Lyft, and on-demand delivery ser- vices, such as Deliveroo and DoorDash, have been heavily criti- cised over job insecurity, lowpay and a lack of rights for workers on their platforms. A 2021 analysis of 300 Deliveroo


riders’ invoices in the UK, conducted by the Bureau of Investigative Journalism, found that a third made on average less than £8.27 per hour, which is less than the current UK national minimum wage of £8.92 per hour for those under the age of 23. Notably, one worker was logged in for 180 hours and was paid the equivalent of just £2 per hour. “With companies such as Uber


and Deliveroo, a major barrier to them being profitable would be if all of their workers are being paid for the hours they are logged onto the app,” explains AlexWood, a soci- ologist of work and employment, who has extensively researched the gig economy. “The tech sector is a very individ-


ualised and competitive system,” he continues. “If you don’t have much bargaining power, in theory you might have more flexibility, but really youremployer is just deter- mining when you work.” In several countries, regulators


have stepped in toempower plat- form workers. Deliveroo is report- edly considering pulling out of Spain,which will become the first EU country to amend its laws on


24


August 12 to give gig economy work- ersemployee rights, such as collec- tive bargaining. Back in 2019, NewYork became


the first US city to pass a minimum wage for Uber and Lyft drivers, with other cities since trying to followsuit. On the other hand, the gig econ-


omy offers attractiveemployment opportunities in developing coun- tries. Statistical analysis by the International Labour Organisation (ILO) indicates that app-based work tends to pay higher than traditional sectors, ranging from22%more in Ukraine to 86% more in Ghana.


Failure rates While the value of the global start- up economy is estimated at almost $3tn, according to Startup Genome, an innovation policy and research firm, about 90% of start-ups will fail in their lifetime. Research suggests that significant revenue and job growth at a fewsuccessful start-ups is substantially offset by these losses in other firms. A 2014 study ofmore than


158,000 start-ups across 10 countries worldwide found thatamong those in their fifth year, total job destruc- tion—or the declines in headcount among retrenching companies— accounted for 65% of all the new jobs created in that year. Mr Canales points out that the


well-knownrate of start-up failure has broader implications. “We knowthat theemployees


who take personal risks together with the start-up risks, probably need some future support finding their way through the labour mar- ket again,” he says. Others question the whole notion


of start-ups and entrepreneurship as isolated forces for prosperity.


‘Worthless, Impossible and Stupid: Howcontrarian entrepreneurs cre- ate and capture extraordinary value’, that entrepreneurship is not defined by the age of a company, but rather the value it creates. “Public leaders have latched


onto this notion of unicorns being some proxy for growth. It’s not — it’s a proxy for concentrated share- holder wealth,” he says. Up until July 15 this year, 291 new unicorns were created, according to Crunchbase, which is more than any other full year on record.


Hypergrowth pushes outsourcing As private investors finance and push start-ups to scale at a rapid pace, many companies look for tech talent outside their locations base. Pleo, like many start-ups, has had to hire soft- ware engineers internationally. “You can build a globally success-


ful company out of Denmark…and I think it is important to have most of the workforce here,” says Mr Rindom. “But as a shareholder, I think we can build the company with a workforce split across 20 dif- ferent countries.” Scarcity of software engineers, in


particular,means that some jobs and economic benefits created by start-ups are in countrieswhere tal- ent is available, rather than where the company was founded. Astudy by the consultancy Korn


Ferry foundthat theUStech sector could lose out on $162bnworthof rev- enues annually unless it finds more high-techworkers.Onthe flip side, Korn Ferry predicts India could have a surplus of more than one million high-skilled techworkers by 2030. Uma Rani, a senior economist at


the ILOin Geneva who has researched digital labour platforms, has tracked a rising trend of early- stage tech businesses outsourcing work to developing countries. “Start-ups sitting in the US or


Europe have a lot of their labour com- www.fDiIntelligence.com August/September 2021


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