Mind The Gap: Welfare Reforms In A Post-Pandemic World

How do we find the right balance between the freedom for (solo-)entrepreneurs to run their business as they see fit, including the freedom to assess their own risks and to organise their own safety nets, while on the other hand ensuring societal responsibility towards vulnerable workers?

March 16, 2021

This article was authored by Menno Bart, the Adecco Group’s Public Affairs Manager and originally published here.

The recent article Welfare Reform in Post-Covid-19 Europe: New Thinking for a Post-Crisis World published via the Lisbon Council provided some food for thought and acts as a foundation for this response to build upon.

The authors, Elina Lepomäki, member of the Finnish Parliament, and Professor Enzo Weber, Chair of Empirical Economics at the University of Regensburg, make some excellent points that inspired me to provide further consideration and expansion.

Recognising that the Covid-19 pandemic has exposed gaps in social welfare schemes, they highlight that those likely to fall into those gaps are those whose work is outside of the traditional norms, such as platform workers. To me however, it is important to highlight that the people in diverse forms of work are far from a monolithic group, and so I want to underline the necessity to well classify and qualify the various forms of work, with their respective attributes of flexibility and security.

This comes as the European Commission has just started its social partner consultation on platform work, ahead of possible legislative action later this year.

What is ‘normal’?

As we know, a job for life is no longer the reality for many. People increasingly move between employers, sectors, and even forms of work at various stages in their lives: full-time open-ended, part-time, agency work, (on- or offline) freelancing, gig work, to name but a few. More and more workers will enjoy various sources of income simultaneously, with perhaps one income source from a part-time job, another from platform work and an additional source via another form of freelancing.

While we work towards reforming welfare systems, ensuring that work is rewarding for all, regardless of the form it takes, we must also recognise that employment and incomes are far more complex and flexible than the welfare systems in place to protect workers in times of crisis.

We must also bear in mind that the flexibility driving people towards gig work does not only come from self-employment. There are other well-established ways, such as agency work, which offer the same flexibility but do so in an employment situation, offering all the usual protections.

Welfare protections and those who fall between the gaps lay at the heart of this issue, with the global pandemic throwing this into sharp focus.

“A-Team”

Our paper The Best Thing Governments Can Do to Mitigate the Covid-19 Impact compared government response measures from 20 countries across the world and suggested one of the most crucial measures for governments to take was to support employment, for example via short time working (STW) schemes.

Germany, by way of example, successfully used short time working schemes in the previous crisis of 2007-08. As the Covid crisis began to take hold the German government followed a similar path, offering 60% of net wages, or 67% for parents. After 4 months, this rose to 70% (77% for parents) and 80% (87% for parents) after seven months. Some sectors in the country, such as the metals, chemicals or food preparation (Systemgastronomie) industries have collective agreements in place that raise STW wage compensations to 90%. Following urging from our industry, this adoption of short-time working also covered agency workers.

The range of measures put in place by Germany, which included STW, an investment in skills and income support for the self-employed, saw that country being ranked as category A (the best performing category) in the above-named report. Most other countries that weathered the crisis best had similar schemes in place, applying to workers in diverse forms of work.

Real gaps, real consequences

When Covid-19 hit the United Kingdom, the British government announced its Coronavirus Job Retention Scheme (CJRS), a furlough scheme that guaranteed 80 per cent of a worker’s salary, capped at £2,500 per month per employee. Nevertheless, it soon became apparent that the gaps in the British welfare system would have real-life consequences.

According to ExcludedUK, a grassroots, non-profit NGO that sprang up to support those excluded by the CJRS, some 3 million taxpayers in Britain have been left without financial help or a safety net of any kind since March 2020.

This 3 million equates to 10 per cent of the UK’s workforce which, says ExcludedUK, led to “thousands of people losing their livelihoods, careers, homes and, sadly for some, their lives.” It is not surprising to see that the UK ranked in the bottom group of countries in our comparative study mentioned above.

To be clear, those that faced these harsh realities cannot simply be categorised as platform workers. Instead, they include a group of vulnerable self-employed workers – taking either on- or offline assignments.

Different class

And this is not limited to the UK. We see the same need for welfare reforms across the world, suggesting a one-size-fit-all solution for platform work, as proposed by some, is not the answer. Indeed, our assertion is that we should not focus our attention on platform workers or those outside of the ‘norm’ – there are plenty of platform workers or others in jobs without open-ended contract (“diverse forms of work”) that do have access to social protection, including flexible workers with an employment contract, such as agency workers. These people can work via brick-and-mortar agencies, but might just as well be connected to their employment agency via an app. It is the employment status that determines their access to social protection, not the digital/physical element.

Instead, policy makers need to recognise that the key issue lies in the specific group(s) of potentially misclassified, vulnerable self-employed people. Clearly, some of these may be platform workers. Equally, many may not. A low paid, self-employed parcel delivery person, dishwasher or barman may face the same vulnerabilities, whether they are working via a platform or not.

As such, any welfare reform needs to be as inclusive, agile and flexible as the working people it supports.

Governments, employers and unions need to work together jointly to achieve a shift towards an individual, portable and transferable build-up of social protection, whilst recognising national specificities, preferences and the potentially misclassified. Where there is a national system of building up social rights, workers should not lose these as they move between forms of work or economic sectors. To some degree, self-employed may need to be included in this and may, indeed, require additional protection organised by their government.

On the other hand, we should not resort to vilifying self-employment. There is a lot of value in promoting entrepreneurship, giving people the freedom to run their micro-business as they see fit, giving them an opportunity to earn a living – and potentially more.

This in itself then raises a further discussion point. The self-employed are not one homogenous group. Many might have chosen this route voluntarily, while for some self-employment might have been a last resort as an only alternative to unemployment. As such, while some self-employed workers might welcome additional protection, others could feel it limits their entrepreneurial freedom.

The key seems to be a recognition from policy makers that the world of work has changed and that rigid and outdated systems no longer reflect the working reality. We must ensure that welfare systems adapt and change, but that they offer the same flexibility and agility that workers show when building different income streams. After all: If we start providing employment-like protections for the self-employed, should we not just then reclassify some of them as employees?