Future of work: Strategy roadmap for labour
Phuah Eng Chye (16 March 2019)
The most pressing question in the future of work is how to fix a broken labour market. Large industrial employment and traditional labour regulation grew up alongside each other and both are in tatters. Traditional employment is being replaced by transient and transaction-based work forms. The new work forms are largely unregulated and non-unionised and thus reducing the efficacy of existing legal frameworks and institutions such as trade unions.
It did not matter initially because non-regulated work or “shadow” employment accounted for a small proportion of the workforce. It operated as a safety valve for small businesses to tap “low-cost” migrant and temporary labour. The problem is becoming salient because large companies and labour intermediaries are exploiting the unregulated space and arbitraging wages, social protections, idle time costs and restricting choice. Governments have generally responded by endorsing these shadow employment practices as flexible work. There is little doubt businesses need greater labour flexibility due to landscape disruption. The problem isn’t that work is becoming more flexible but that work has become more unfair.
It is extremely difficult to fix the labour market. In fact, considerable resources, time and political capital has been expanded on labour reform with little to show for it. This is due to a couple of reasons. First, the trends are relatively new and it will take time to figure out what can and should be done. Second, uncertainty levels are high as it looks like greater disruption lies ahead. Third, even as the influence of traditional employment and organisations[1] wanes, there is considerable resistance to change.
It is unrealistic to expect everything to fall neatly in place. Everyone will continue to muddle along. A good strategy roadmap will therefore be useful in providing guidance to navigate the uncertainties by providing a sense of direction and highlighting critical principles and goals. My strategic roadmap for labour has two components; namely what labour can do for itself and what government policies should aim for.
Labour has been left behind despite the political rhetoric. Macroeconomic stimulus seems unable to overcome wage stagnation and inequality while labour reforms have moved at a snail’s pace. Labour need not wait and can explore new possibilities to bypass obstacles. In this regard, “when the landscape is disrupted by information, labour mimics their employers by shedding regimented structures in favour of a fluid cell-like social movement that can quickly adapt to landscape changes. The labour social movement is thus evolving from a regimented structure into a self-organising (intermediation) platform with the individual unions or worker centres operating as apps” [2].
- Voice and convergence. One abject lesson of the information society is that labour needs to be pro-active and vocal; otherwise their cause will be neglected. Hence, labour needs to reorganise to enhance its information, communication and self-organising capabilities. It needs to increase its presence on social media to compete for public attention, build stakeholder support and participation. The other trend to magnify its influence is to converge its interest with those other stakeholders and the political process. For example, to converge shareholder interest with worker interest, workers can seek representation on the board or on the renumeration committee. In the latter, worker representatives should have the ability to object to management and director pay increases if workers are not similarly rewarded. This will help to align CEO pay with workers pay. Another approach is to seek to influence the appointment of fund managers (managing workers’ funds) who will abide by a mandate not to invest in companies that are deemed to be treating workers unfairly. A third possibility is to increase the role of workers in relation to distressed companies and to force through the early conversion of unpaid salaries into equity so that workers have a stronger voice in debt restructuring negotiations. Finally, workers can converge labour power with political power by voting against politicians who do not support their agenda or by even standing for elections themselves.
- Worker-centric and cause-centric rather than job-centric. Since work has become transient, trade unions need to broaden out from firm-based or industry-based groupings and organise the labour movement around individual workers and causes.
- Target consumption and brand, not production. In the past, strikes were targeted at halting production. But with the emergence of value chains, firms now have options to organise production. In the current environment, firms will be more sensitive to the impact of workers’ actions on their sales and brands. In addition, labour movements can also consider endorsing firms and brands with acceptable worker practices (e.g. certifying good employers) as a means of strengthening their leverage.
- Expand range of models and tools to assist workers. Many workers now no longer work with a single employer and therefore cannot rely on a single institution (trade union) to meet their needs. Therefore, a range of platforms and tools should be established to assist workers with diverse needs and situations in relation to information, advocacy and social protection, income and capital[3]. Funding will be a major issue.
Governments are the main driver of labour reform. But In recent years, they have abdicated their role and made feeble attempts to improve working conditions. Perhaps blind-sided by market philosophies, they have given the private sector a freer hand to shape work conditions while, at least based on pronouncements, governments have curiously relied more on macroeconomic measures such as monetary stimulus and tax cuts with disappointing outcomes in terms of overcoming wage stagnation. In the meantime, welfare expenditures have continuously been targeted[4].
Social conditions have thus generally deteriorated. The increasing number of individuals working outside the boundaries of traditional employment is subjecting households to greater insecurities from demand-driven pricing, transient and fragmented work, from managing multiple work relationships and from bearing the burden of risks and social costs. Hence, governments need to adopt more effective strategies to enhance the social value of work.
- Align policies to facilitate shift from employment to participation[5]. There should be acknowledgment flexible work arrangements[6] are inevitable. Hence, there is a need for policies to address social concerns relating to transience, polarisation and the many-to-many relationships. First, policies should align workstyles[7] by reviewing corporate employment practices to protect workers’ choice in a multi-job environment. Monique Kremer, Robert Went and André Knottnerus note “governments and social partners can lend a hand in modernising employing organisations by facilitating greater flexibility in collective agreements…reach agreement about ways of customising working arrangements more so as to benefit both employers and employees…Small businesses could also find less comprehensive collective agreement helpful in allowing them to take on more permanent employees”. Second, regulations should aim to improve the quality[8] of flexible work by setting minimum labour standards. Third, Monique Kremer, Robert Went and André Knottnerus suggests national and local governments could lead by example through procurement policies that emphasise on responsible hiring conduct rather than price. They also suggest “the government, workers and customers can encourage and promote a situation where organisations and forms of cooperation are created and given the scope to improve the job security of people with temporary jobs and the self-employed…Examples include cooperatives of employees, products and suppliers…new forms of community in the labour market could help to improve the way flexibility and insecurity are dealt with”. Fourth, rather than attempt to rebuild the middle class, policy should target to strengthen the low-income baseline to insulate more households from various risks in a multiple-job environment. Fifth, there is a need to evolve a backbone welfare system that is no longer tied to traditional employment. Monique Kremer, Robert Went and André Knottnerus explains “if work is a bundle of tasks, people will increasingly perceive work as a portfolio of activities, for which payment is received in different ways. All these changes in the position and significance of work therefore require a social security system in which the source of income no longer determines its form”. They suggest one option is to focus on a “basic welfare state based on citizenship”, in which everyone is required to participate in the most basic forms of social security. A second is to link social security to individuals via a personal savings account which they can draw on in the event of unemployment, a training deficit, illness or old age. One idea being discussed is the “single employment contract” where entitlements are built up gradually so that there is no longer a clear split between permanent and temporary employment. In Sweden, permanent staff have a legal right to take a six-month leave of absence to launch a company (or to study or look after a relative). Employees are expected to be able to return in the same position as previously. Claire Ingram Bogusz notes “you meet a lot of people who’ve got permission from their employer to start up something in such a way that it doesn’t interfere with their employment, and once that business is up and running, then they take a leave of absence to see if they can actually make a go of it…It’s very common, particularly among highly-skilled entrepreneurs who build high-tech firms”. She adds that “a leave of absence means you can have the best of both worlds: the security of a job that’s not going anywhere, and time off to pursue what’s important to you.”[9]
- Regulate platforms and intermediaries. Janine Berg, Marianne Furrer, Ellie Harmon, Uma Rani and M Six Silberman notes that “currently there is no government regulation of crowdwork platforms; rather it is the platforms themselves that set working conditions…This situation is problematic since even the best-intentioned platform must place its business needs first, or risk losing market share to its competitors.” In my view, it is more expedient to regulate labour intermediation (markets and intermediaries) than to resolve employee classification issues or stretch traditional labour laws to cover the new work forms. The objective of the new framework should be to license labour intermediaries and platforms, above a certain size threshold, to ensure they are subject to oversight and to establish accountability. The new rules would apply to “non-employee” participants (as employees are already subject to employment laws). The regulation should focus on improving the quality of intermediated work based on the following principles. (1) Information transparency and fairness. Information on its own does not increase efficiency. It needs to be shared and be widely used. The established remedy for markets is to ensure reliable disclosures to address information asymmetry[10]. To promote fairness, terms and conditions should be as standardised as possible, subject to oversight by a regulator that contracts and pricing mechanisms are fair. (2) Choice. Anti-competitive practices restricting workers’ choice and impeding their ability to work on multiple platforms or intermediaries should be prohibited. (3) Registration fees. Large platforms and intermediaries should be required to register and pay a small per head/firm fee on all participants. The fees can be used to fund oversight costs or a nationwide portable social protection scheme. Registration fees also can be viewed as a form of tax on the social externalities from contingent work. (4) Minimum payments. From an economic perspective, idle time or waiting costs (the costs of waiting for an assignment) are extremely valuable. The option value of waiting should not be borne by workers but by platforms, intermediaries or employers. A minimum baseline payment to “on-call” workers should be established to cover the option value of waiting as well as to set a floor to price competition. (5) Work quality. The quality of contingent work or income should be good as that traditional employment. Bad practices should be eliminated and standards implemented to improve working conditions and benefits. (6) Use of technology. Janine Berg and Valerio De Stefano suggests technology can “also be used to regulate the work and provide protection to workers…to ensure that workers earn at least the minimum wage or ideally to regulate the wage agreed collectively by the workers and the platform…can help to minimise search time…facilitate payment of social security contributions…In theory, automation doesn’t have to eliminate jobs, on balance, or drive down worker pay. It could free up workers to do higher value, better-paid tasks. It could generate consumer demand and create new categories of jobs”.
- Holistic approach to support systems – single platform, many apps. The most effective way to maximise the benefits of participation is through establishing a single platform. Governments should launch a platform to coordinate the diverse range of public and private sector schemes covering employment, social protections, healthcare, pensions and others. The various public agencies, NGOs and private sector players can operate off the platform through their apps. A platform ensures there is a single true source of data with up-to-date profiles. This would reduce administrative and verification costs, improve matching, cross-referencing, reduce fraud and facilitate self-organising. The consolidation of information would provide a coherent overview of overlaps and gaps. It would facilitate targeting specific objectives such as unemployment by location or groups; or activities such as environmental sustainability, care-taking, welfare services and community building. It is possible to coordinate welfare and participation schemes[11] to feed into each other to strengthen the community ecosystem and economic renewal process. Employment schemes could be designed to assist debt repayment and promote business start-ups; the concept of retirement homes can include work programs; welfare or retirement payments can be linked to payment for caring services by family or relatives. Industry apprenticeship or skill-building schemes can be improved and also tied in with the educational system. Will McGrew suggest “innovative job-matching platforms, especially those integrated with training programs” can strengthen workers’ human capital and bargaining power. “Companies such as CodeSignal…are creating online platforms that allow job-seekers to practice their skills and earn credentials, which they can use to be matched with employers and job opportunities…these technologies could help create digital apprenticeships of the future, which combine training programs with pathways to gainful employment”. In addition, such platforms can provide notification of relevant job openings and “with the help of artificial intelligence, these services can keep workers informed of how their salaries and benefits compare to those of new vacancies…may reduce the search frictions workers face in transitioning between jobs in search of higher pay and a better overall fit”. There are also the possibilities of finding synergy from job matching schemes with team-building and community-based enterprise creation. Jerry Kaplan notes there are gaps in the education system as traditional schools are “not known for their responsiveness to economic trends” and are not up-to-date on “novel” skills or possess the capacity to provide training on these skills. In this regard, the error is to view the schooling phase as separate from the job phase. These two phases need to be strongly “interleaved” for professional training. In this context, he proposed the concept of a “job mortgage” or a vocational training loans which is secured by future income. Under his proposal, “employers will issue nonbinding letters of intent to hire you if you specified skills, and they will get certain payroll tax breaks if they ultimately follow through…Training institutions will have to craft their curricula around the specific skills required by sponsoring employers in order to meet the requirements of the loans, or else students won’t enroll…this form of scheme introduces a new form of feedback and liquidity into labor markets, enforced through the discipline of the free market”.
- Align tax, incentives and capital redistribution to address social deficiencies. There are a range of non-conventional approaches that can be considered to address income inequality and household vulnerabilities. One possibility are policies to make profit growth dependent on wage growth. For example, companies that grow profits at a pace higher than wages can be subject to a slightly higher tax rate. Another approach is to address size effects. Large companies that employ relatively few employees and pay low taxes can be deemed as not bearing their fair share of social costs. A two-prong approach can be used to correct this anomaly. One is to increase the effective tax rate for large companies. This would be accompanied by offering them incentives to increase their headcount. In relation to polarisation, rather than penalise CEO pay, incentives (e.g. tax rebates) can be offered for companies that offer relatively higher wage growth to employees or contract workers earning below a certain income threshold. To address transience risks, incentives can be provided based on the ratio of full-time to part-time or contract employees. Monique Kremer, Robert Went and André Knottnerus suggest consideration be given to “rewarding employing organisations that offer more people stability and security. Currently, it is financially beneficial for employers not to enter into a permanent arrangement…Employers who keep people in employment for longer or offer permanent contracts could be awarded a bonus in the form of a premium discount. as is already possible now in certain cases for employing a disabled person, an older or a younger employee”. There should be an extensive review of regulations and taxes to increase the incentives for permanent employment while imposing levies on the use of flexible and part-time workers. Conversely, incentives (tax benefits and deductibles) could be provided to flexible workers to mitigate income uncertainties.
In addition, it is difficult to reverse inequality trends if a large percentage of the population did not own assets. Hence, it is important to implement schemes to redistribute capital (or returns) or to widen ownership of assets. The ability to receive income streams from a variety of sources would mitigate household income uncertainty. It would also ensure that all individuals benefit from rising asset prices. This includes (1) Schemes[12] such as cooperatives or ESOS plans already exist. Incentives can be given to ESOS plans to skew the distribution of equity in favour of lower-income workers. (2) An unusual but highly effective idea is to facilitate the redistribution of capital returns to ensure greater equitability. In this regard, most retirement or savings funds exhibit the same pattern of wealth concentration, with the top 10% accounting for about 80% of the fund’s assets. As a result, low-income account holders are unable to accumulate sufficient savings while the incentives for saving seem to benefit the rich. My suggestion is for funds (that benefit from government incentives and guarantees) to redistribute the returns on capital. For example, for accounts with accumulated funds above a threshold, part of their returns (e.g. 25 basis points) can be redistributed to account holders with low balances. This would substantially assist in accelerating the pace of savings accumulation by low-income account holders. (3) Multiple funds, but centrally administered, can be established for citizens to meet the needs of individuals on a holistic basis. These funds can be established based on a one-time endowment from proceeds from sales of government assets or based on transfers from specific taxes such as inheritance or property, or be based on charitable donations. These funds can be used for purposes such as education, affordable housing and entrepreneurship. This would provide room for cross-linkages where unused welfare or medical benefits can be transferred as a credit to retirement savings.
Society is undergoing tremendous change and the pressures from waning of traditional employment and the aggravation of the wage-profit imbalance are building up. There is a need for more effective policies to establish a balance between the commercial need for flexibility and the social safeguards from transience, polarisation, multiple relationships and income uncertainty. Governments have a crucial role in shaping the critical outcomes through their policies on job creation, on labour regulation and their management of the fiscal trade-off between allocating resources to households (public wages, welfare, public good subsidies) and to corporations (income tax cuts, corporate subsidies).
References
Janine Berg, Valerio De Stefano (18 April 2017) “It’s time to regulate the gig economy.” Originally published at Open Democracy.
http://www.nakedcapitalism.com/2017/04/time-regulate-gig-economy.html
Janine Berg, Marianne Furrer, Ellie Harmon, Uma Rani, M Six Silberman (2018) “Digital labour platforms and the future of work: Towards decent work in the online world”. International Labour Organisation.
Jerry Kaplan (2015) Humans need not apply: A guide to wealth and work in the age of artificial intelligence. Yale University Press Books.
Maddy Savage (6 February 2019) “Sweden’s surprising rule for time off”. BBC.
http://www.bbc.com/capital/story/20190206-swedens-surprising-rule-for-time-off
Monique Kremer, Robert Went, André Knottnerus (May 2017) “For the sake of security, the future of flexible workers and the modern organisation of labour”. The Netherlands Scientific Council for Government Policy (WRR). WRR Investigation No. 36. file:///C:/Users/user/Downloads/V036-For-the-sake-of-security%20(1).pdf
Phuah Eng Chye (8 September 2018) “Future of work: Aligning workstyles and policies to accommodate flexible employment”. Economicsofinformationsociety.com.
Phuah Eng Chye (22 September 2018) “Future of work: The labour movement (Part 1: Labour 3.0)”. Economicsofinformationsociety.
Phuah Eng Chye (29 September 2018) “Future of work: The labour movement (Part 2: Labour as a social movement)”. Economicsofinformationsociety.
Phuah Eng Chye (6 October 2018) “Future of work: The labour movement (Part 3: Assessing the social media-based model)”. Economicsofinformationsociety.
Phuah Eng Chye (13 October 2018) “Future of work: The labour movement (Part 4: Alternative models)”. Economicsofinformationsociety.
Phuah Eng Chye (24 November 2018) “Future of work: Re-defining work (Part 3: Bad jobs, good jobs and what governments could do about it)”.
Economicsofinformationsociety.com. http://economicsofinformationsociety.com/future-of-work-re-defining-work-part-3-bad-jobs-good-jobs-and-what-governments-could-do-about-it/
Phuah Eng Chye (8 December 2018) “Future of work: Re-defining work (Part 4: Creating jobs from information and its ecosystem)”. Economicsofinformationsociety.com. http://economicsofinformationsociety.com/future-of-work-re-defining-work-part-4-creating-jobs-from-information-and-its-ecosystem/
Phuah Eng Chye (22 December 2018) “Future of work: Re-defining work (Part 5: The economic paradigm of participation)”. Economicsofinformationsociety.
Phuah Eng Chye (16 February 2019) “Future of work: Job destruction, income constraints and information”. Economicsofinformationsociety.com. http://economicsofinformationsociety.com/future-of-work-job-destruction-income-constraints-and-information/
Phuah Eng Chye (2 March 2019) “Future of work: Transition to information society”. Economicsofinformationsociety.com. http://economicsofinformationsociety.com/future-of-work-transition-to-the-information-society/
Will McGrew (15 November 2018) “How job-matching technologies can build a fairer and more efficient U.S. labor market”. Washington Center for Equitable Growth. https://equitablegrowth.org/how-job-matching-technologies-can-build-a-fairer-and-more-efficient-u-s-labor-market/
Phuah Eng Chye, information society, organisation of work, future of work, labour roadmap, Will McGrew, Janine Berg, Valerio De Stefano, Jerry Kaplan, ILO, Monique Kremer, Robert Went, André Knottnerus, Maddy Savage
[1] Phuah Eng Chye “Future of work: The labour movement (Part 1: Labour 3.0)”.
[2] Phuah Eng Chye “Future of work: The labour movement (Part 3: Assessing the social media-based model)”.
[3] Phuah Eng Chye “Future of work: The labour movement (Part 4: Alternative models)”.
[4] Phuah Eng Chye “Future of work: Job destruction, income constraints and information”.
[5] Phuah Eng Chye “Future of work: Re-defining work (Part 5: The economic paradigm of participation)”.
[6] Phuah Eng Chye “Future of work: Aligning workstyles and policies to accommodate flexible employment”.
[7] Phuah Eng Chye “Future of work: Aligning workstyles and policies to accommodate flexible employment”.
[8] Phuah Eng Chye “Future of work: Re-defining work (Part 3: Bad jobs, good jobs and what governments could do about it)
[9] Based on article by Maddy Savage.
[10] Information to assist on finding work. On the contract terms and conditions
[11] E.g. education, training, work, apprenticeship, licensing, entrepeneurship and community activities
[12] Phuah Eng Chye “Future of work: The labour movement (Part 4: Alternative models)”.