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Section 3

Drivers of change

Chapter Sections

  • Employers seek flexibility
  • Many employees want flexibility, too
  • Social protection is an essential partner to flexibility

Drivers of change

The growth of alternative working arrangements reflects the new possibilities of the digital world and the new economic reality following the 2008 financial crisis, with organisations across all sectors looking to save costs, improve back-office efficiency and review their hiring and talent strategies. But it is also symptomatic of a new desire for flexibility – from both employers and employees.

Employers seek flexibility

Facing the heightened competition of globalising markets, employers need labour flexibility, according to the OECD’s Stijn Broecke, “to deal with fluctuations in demand, to address risks, and to grab opportunities.” Diverse and flexible employment arrangements give employers greater agility at a much lower cost than they would have with a workforce dominated by “inflexible” contracts.

Few would dispute this. The controversy is around whether these diverse forms of employment are good for workers, who might face heightened economic risks and sometimes lower access to social protection. For some, this is the crux of the matter. Philip Jennings, General Secretary of the UNI Global Union, for example, believes that in misclassifying workers many companies are seeking to do more than simply drive down their costs. In some countries, self-employed contractors would fall foul of competition laws if they attempted to organise, so self-employed workers provide companies with a workforce where unionising is not only difficult, but illegal.

Undoubtedly, some companies take advantage of their market power to use such arrangements inappropriately. The solution will be to make sure that existing rules, which most countries have, are applied in practice.

But the issue can even affect entire economies: the high number of employees in South Korea on temporary contracts (28% in 2016) reflects in part a widespread practice of keeping staff on regularly renewed contracts of shorter than two years to avoid the additional costs associated with permanent status under Korean law.1

Complicating matters in some countries, according to Matthew Taylor, is a “fuzzy boundary between work, self-employment, and casualisation”.2 High-profile lawsuits in the US and Europe related to the employment status of those platform workers remind us that the search for labour flexibility can be a contested process, where both sides claim the support of the law.

Taylor’s recent UK government review of working practices in the modern economy recommended legal changes around employment status so that workers and companies have a clearer set of rules and mutual expectations.3 But he also believes that applying current law could go a long way towards preventing misclassification: “Even when recognising the boundary can be blurred, for most people you can distinguish between employment categories.”

Many employees want flexibility, too

Controversy should not overshadow the bigger picture, however: diverse forms of employment are growing more popular partly because many people choose to work that way.

“The majority of people who work as self-employed or as a part-time employee have chosen this form of work,” says Rebekah Smith. “We shouldn’t have this negative discussion around certain types of work saying that permanent full-time jobs are the only ones that people want.”

The data back her up. In Japan, even as the proportion of the labour force involved in part-time work has risen, the percentage of these employees who have such positions involuntarily has declined – from 29.9% in 2002 to 19.5% in 2016. By 2016, across the EU only a quarter of part-time workers were involuntarily part time, and in the US the proportion was just 7%.4

The figures for temporary work tell a similar story. In the EU, in 2016, just 8% were in “non-permanent” work because they couldn’t find an open-ended job, and only in Spain (23%) did this number get above one in five.5 Even in South Korea, where giving a greater number of temporary workers permanent status is high on the national political agenda, a majority (55%) say they are in temporary work by choice rather than as a result of not finding a permanent job.6

Such data are rarely collected for self-employed workers, but the UK, which has seen substantial growth in self-employment, is an exception. A 2016 government survey found that just 22% of respondents became self-employed unwillingly – 16% because of a lack of other opportunities, and 6% because of previous employer pressure. However, after experiencing this kind of work, 84% said they were better off financially than if they had been employed.7

Similarly, Singapore government figures say that for 83% of self-employed workers the status was their choice.8 These examples are consistent with global data showing that, in the world’s more developed economies, entrepreneurs are far more likely to be self-employed because they are consciously pursuing opportunities than because they don’t have any choice.9 A recent study by the Adecco Group and LinkedIn found that a majority of those in flexible working arrangements chose them because they met their lifestyle needs.10

Governments should not stand by and allow unfair practices that lead to forced self-employment or other kinds of exploitative misclassification. But clamping down on these practices would still leave social protection gaps for the majority of people in diverse working arrangements who choose to work that way. For them, better social protection is often a pressing issue, and improvements here might lead even more workers to choose diverse and flexible working relationships.

The numbers of workers seeking such arrangements is already likely to increase, because of generational preferences. The Adecco Group and LinkedIn survey, for example, has found that 82% of 18–26-year-olds see freelancing as a career choice.11

Social protection is an essential partner to flexibility

The same market volatility that makes labour flexibility essential for companies also makes social protection essential for workers.

“You can’t ask people to take risks if all the risks fall on their shoulders” without compensating benefits, says Philip Jennings. He therefore expects “a rebirth of the idea of a universal social protection net and a reconsideration of what it looks like. It won’t just be about keeping poverty away, but also about how we can accompany people through the dislocations to come.”

This will not only be important for individuals. Companies will soon be facing smaller, ageing workforces in European and Asian countries. What they offer potential talent, including around social protection, will have to be sufficiently attractive to a wider age range.

Social cohesion will also demand answers to social protection challenges: if a larger number of millennials, for example, compared with other generations, are interested in diverse forms of work, says Rebekah Smith, “we have to ensure that there is intergenerational solidarity – that the generations just coming into the labour market have adequate access to social protection but in an economically sustainable way.”