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The Gig Economy and the Case for a New Social Contract

Without benefits like maternity leave and employment insurance, huge tracts of the labor market could be left without any support when they take time off to have a family, are sick and cannot work, or move from job to job.
Transformation Insights

Is it time for a new social contract with today’s workforce?

There are certainly signs all over the world that the systems we have put in place to support working people are rapidly falling behind changes in technology and the labor market in general. This is particularly true when it comes to the alarming increase in what are broadly referred to as “contingent” working arrangements.

Some refer to it as the “gig economy.” For others, it’s “platform work,” jobs that rely on digital applications to connect workers and employers. Add in other more traditional non-standard employment arrangements—part-time and temporary work, self-employment and job-sharing—and you have a growing segment of the developed world’s labor market that involves individuals working well outside the edges of the social safety net.

“Time to Talk,” a new report from The Adecco Group, outlines a series of economic problems created by this new segment of the workforce, along with some possible solutions.

Individuals involved in contingent work typically have to do without extended health benefits, maternity leave, sick leave, employment insurance, retirement savings and access to government/employer sponsored retraining programs. Individuals in more traditional work arrangements pay a share of the cost of these programs through payroll deductions, often sharing the total cost with both employers and government.

Unfortunately, most of those in non-traditional jobs—particularly digital platform work—do not make those contributions, nor do the organizations that employ them. Hence, we see a huge gap in coverage that has dire consequences for developed economies.

Without benefits like maternity leave and employment insurance, huge tracts of the labor market could be left without any support when they take time off to have a family, are sick and cannot work, or move from job to job. That is a large number of people who cannot afford to make any contribution to the broader economy. It also represents a constituency that may, in the absence of supports normally provided to working citizens, have no other choice but to put additional stress on what are typically over-subscribed welfare programs. 

As the number of people in non-traditional jobs increases, we must acknowledge the consequences of doing nothing to address the growing gap.

“Forms of work are changing,” says Professor Paul Schoukens of the Institute for Social Law at Belgium’s University of Leuven. “If social protection systems don’t take that into account, and instead try to enforce what was designed many years ago, things will go wrong.”

Jurisdictions around the world are growing more concerned about the social protection gap as the number of people left without any coverage increases. The situation varies significantly from country to country, based largely on the size and scope of existing social protections. But the global trend is clear—more and more people are falling outside the net.

Research by The Adecco Group shows widely varying levels of coverage across the globe. In South Korea, for example, only half of all workers have access to unemployment insurance. 

In Europe, the situation is not that dire: 13 percent of legally recognized workers fall outside unemployment insurance schemes and eight percent do not get sickness benefits. Those numbers may not seem very high, but one percent of the EU workforce translates into 1.5 million individual workers. That means more than 14 million Europeans have no benefits available in the event they lose their contingent jobs. 

In the European Union, several countries have launched studies or programs to help people in the contingent labor market, including the United Kingdom, where the Taylor report, an independent review of modern working practices by Matthew Taylor, recommended mechanisms to tax all labor in the same way to support social protections, and France, which has struggled through several attempts to provide unemployment benefits to self-employed and platform workers. 

In the United States, there are pilot projects at the federal, state and municipal levels that have suggested a wide-range of solutions for the provision of social protections, many funded via contributions from both employees and gig economy employers. None have found permanent traction.

Solutions for these challenges will not be easy to come by, but there are certain principles that can be applied regardless of jurisdiction or existing social protection programs. 

In its report, The Adecco Group suggests that protection should be designed to be “individual, portable and transferable.” In countries where there are existing programs, it’s important to ensure that workers not lose protection or earned benefits if they change employers. For the gig economy and platform work, governments will have to collaborate with employers to properly classify the working arrangements and provide the corresponding benefits that other employers provide.

The most important thing, however, is that governments, employers and workers keep talking and looking for solutions that will match the rate of change in the labor market.

“You can look at the debate around social protection and platform workers negatively or positively,” says Professor Schoukens of the University of Leuven. “Negatively you can see it as a kind of danger or challenge to existing protections. Positively, I see it as an invitation to rethink our systems in order to make sure that they’re up to meeting future needs.”