Worker pro­tec­tion in the Gig econ­omy

Financial Mirror (Cyprus) - - FRONT PAGE -

To­day’s labour mar­kets are un­der­go­ing rad­i­cal change, as dig­i­tal plat­forms trans­form how they op­er­ate and rev­o­lu­tionise the na­ture of work. In many ways, this is a pos­i­tive de­vel­op­ment, one that has the po­ten­tial to match work­ers with jobs more ef­fi­ciently and trans­par­ently than ever be­fore. But the in­creas­ing digi­ti­sa­tion of the labour mar­ket also has at least one very wor­ry­ing draw­back: it is un­der­min­ing the tra­di­tional em­ployer-em­ployee re­la­tion­ships that have been the pri­mary chan­nel through which worker ben­e­fits and pro­tec­tions have been pro­vided.

The ecosys­tem of dig­i­tal labour plat­forms is still in its in­fancy, but it is de­vel­op­ing rapidly. Large pop­u­lar plat­forms like LinkedIn have so far mainly been used to match high­skill work­ers with high-end jobs. But th­ese plat­forms are al­ready ex­pand­ing to ac­com­mo­date mid­dle-skill work­ers and jobs. Nearly 400 mil­lion peo­ple have posted their re­sumes on LinkedIn, and in 2014 the site fa­cil­i­tated more than one mil­lion new hires world­wide.

Mean­while, other types of dig­i­tal plat­forms are emerg­ing, link­ing work­ers with cus­tomers or com­pa­nies for spe­cific tasks or ser­vices. Such plat­forms play a grow­ing role in the mar­ket for “con­tin­gent” or “on-de­mand” work­ers, broadly de­fined as work­ers whose jobs are tem­po­rary and who do not have stan­dard part-time or full-time con­tracts with em­ploy­ers. Well-known dig­i­tal plat­forms that link con­tin­gent work­ers di­rectly to cus­tomers in­clude Lyft, TaskRab­bit, Uber, and Angie’s List. Free­ and Up­work are ex­am­ples of plat­forms that help com­pa­nies find and hire con­tin­gent work­ers for a range of spe­cialised tasks such as soft­ware or web­site de­vel­op­ment. Free­ has more than 17 mil­lion users world­wide.

The trou­ble is that even as th­ese sites pro­vide new op­por­tu­ni­ties for work­ers and com­pa­nies, they are by­pass­ing the tra­di­tional chan­nels through which the US and many coun­tries de­liver ben­e­fits and pro­tec­tions to their work­force. In the US, in par­tic­u­lar, the “so­cial con­tract” has long re­lied on em­ploy­ers to de­liver un­em­ploy­ment in­sur­ance, dis­abil­ity in­sur­ance, pen­sions and re­tire­ment plans, worker’s com­pen­sa­tion for job-re­lated in­juries, paid time off, and pro­tec­tions un­der the Fair La­bor Stan­dards Act. Al­though the Af­ford­able Care Act has made it eas­ier for work­ers to ac­quire health in­sur­ance on their own, most work­ers con­tinue to re­ceive health in­sur­ance through their em­ploy­ers.

With the pro­lif­er­a­tion of dig­i­tal job plat­forms, the so­cial safety net for work­ers in the US – thread­bare to be­gin with – is at risk of un­rav­el­ing for a grow­ing share of the work­force. This is be­cause most in­di­vid­u­als who find work through dig­i­tal job plat­forms op­er­ate as in­de­pen­dent con­trac­tors, leav­ing them with­out the ben­e­fits and pro­tec­tions pro­vided in stan­dard em­ploy­ment con­tracts for full-time and part-time work­ers. The dif­fer­ence be­tween the cost of a full-time em­ployee with ben­e­fits and an in­de­pen­dent con­trac­tor can be 30% or more, so there is a strong in­cen­tive for com­pa­nies to re­place work­ers on stan­dard full-time em­ploy­ment con­tracts with in­de­pen­dent con­trac­tors as long as com­pa­nies can at­tract the tal­ent they need.

Dig­i­tal job plat­forms also make it eas­ier for busi­nesses to hire and fire work­ers on tem­po­rary con­tin­gent con­tracts. This creates the po­ten­tial for a race to the bot­tom, with em­ploy­ers com­pet­ing on la­bor costs through reg­u­la­tory ar­bi­trage.

Un­less pol­i­cy­mak­ers act, the US will con­tinue to drift to­ward a two-tier la­bor mar­ket. One tier will be pop­u­lated by fully em­ployed high-skill work­ers with gen­er­ous em­ploy­er­pro­vided (and tax-ad­van­taged) ben­e­fits, as well as high-skill in­di­vid­u­als who fi­nance their own ben­e­fits from high in­comes earned as in­de­pen­dent con­trac­tors or from self­em­ploy­ment. The other tier will in­clude a large pool of con­tin­gent mid­dle- and low-skill work­ers with­out the ben­e­fits, in­come, or se­cu­rity on which a ro­bust and re­silient mid­dle class de­pends.

New poli­cies are needed to pro­vide work­ers in con­tin­gent em­ploy­ment re­la­tion­ships ac­cess to ben­e­fits, and new in­sti­tu­tions are needed to de­liver them. There is grow­ing sup­port for the view that ben­e­fits should sat­isfy at least three con­di­tions. They should be por­ta­ble, at­tached to in­di­vid­ual work­ers rather than to their em­ploy­ers. They should be univer­sal, ap­ply­ing to all work­ers and all forms of em­ploy­ment. And they should be pro-rated, link­ing em­ployer ben­e­fit con­tri­bu­tions to time worked, jobs com­pleted, or in­come earned.

Two re­cent pro­pos­als in­cor­po­rat­ing th­ese con­di­tions call for the cre­ation of “in­di­vid­ual se­cu­rity ac­counts” anal­o­gous to US So­cial Se­cu­rity ac­counts, but en­com­pass­ing por­ta­ble ben­e­fits that would be avail­able to all work­ers, re­gard­less of em­ploy­ment sta­tus, and would ac­crue via pro-rated au­to­matic pay­roll con­tri­bu­tions.

A group of strange bed­fel­lows – “gig” em­ploy­ers, la­bor or­gan­i­sa­tions, ven­ture cap­i­tal­ists, and bi­par­ti­san think tanks – re­cently is­sued a let­ter call­ing for a stable and flex­i­ble safety net based on th­ese con­di­tions. Mean­while, in Congress, for­ward-look­ing pol­i­cy­mak­ers like Se­na­tor Mark Warner of Vir­ginia are seek­ing ways to get ahead of the is­sues and cre­ate mo­men­tum for bi­par­ti­san so­lu­tions.

Much re­mains to be done be­fore a new safety net for all work­ers is in place: de­ter­min­ing which ben­e­fits and pro­tec­tions to in­clude, how to pay for them, and how to de­liver them to work­ers. La­bor groups, in­clud­ing unions or new types of la­bor or­gan­i­sa­tions like Co­ and the Free­lancers Union, could fill the gap, pro­vid­ing ben­e­fits as unions have done in the con­struc­tion in­dus­try and guilds have done in the en­ter­tain­ment in­dus­try. In Sil­i­con Val­ley, where thou­sands of con­trac­tors and free­lancers are hired ev­ery week, new pri­vate com­pa­nies like MBO Part­ners are emerg­ing to han­dle the ben­e­fits of con­tin­gent work­ers who work for many em­ploy­ers.

The McKin­sey Global In­sti­tute es­ti­mates that dig­i­tal la­bor plat­forms could in­crease US GDP by 2.3% and US full-time equiv­a­lent em­ploy­ment by 2.7% by 2025. But re­al­is­ing th­ese econ­omy-wide gains while pro­vid­ing a se­cure and por­ta­ble safety net for all work­ers will re­quire new ways of think­ing by com­pa­nies and pol­i­cy­mak­ers.

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