The Gig Economy
Despite being financially comfortable and gainfully employed myself, one of the things I find myself becoming increasingly opposed to is the growing ‘gig-ification’ of work and/or what I see as the increasing abuse of workers (which are sometimes the same thing and sometimes two separate issues). So much has been said about this in the media I really don’t have anything to add to the general issue. I believe that generally:
a) Companies are increasingly outsourcing their responsibilities onto workers by making them contractors, freelancers, casuals, or other ‘piecework’ styles of pay. The company demand higher standards and effectively wields much greater power. I think that there are several benefits to this trend because it aligns workers with the firms really well. However, it does not align the firm with the worker (worker is expendable and easy to get rid of), and appears to lead to a significant decline in the workers’ financial position in the limited # cases I am familiar with.
Edit: Richard has pointed out below that I am confounding ‘worker/ employee’ with ‘contractor/freelancer’ etc. To be clear, my concern is that in many cases a ‘contractor’ is an ’employee by a different name’. You can read more about this in my second comment down below.
b) Companies are increasingly dodging their responsibilities with regards to things like sick pay and superannuation, especially with the contractor and piecework style workers, but also casuals. This is especially obvious in cases where casuals work for 30-40 hours a week, a rate which in my opinion should justify holidays and sick days (casual leave loading notwithstanding).
c) Workers have lost their ability to collectively bargain partly due to the decline of unions but also partly due to the increasing tenuousness of many jobs, which make it hard to take a stand because it is very easy and inexpensive to fire a casual or a piecework employee. (ironically, I’m also vehemently opposed to some unions who I think have effectively ruined the union movement for everybody, but that’s another story).
However, none of this is new, and in fact it’s been going on for years. I have two specific stories in mind:
The artist (new economy gig work)
First, a friend of mine is a… well, I’m not entirely sure what he does, but he’s a graphic designer of some sort and does drawings (?) of logos and various things for companies. He works for a leading firm in a large city. However he’s only been able to achieve employment on a piecework rate – he gets a flat fee per logo-thing that he does. If there’s no work, he doesn’t get paid. He doesn’t get superannuation, sick pay, holidays, or severance. (I think the company tried to make him responsible for contributing to his own superannuation but I don’t really understand the mechanics of that). However, also, due to the nature of his work, he can hardly go and work for a competitor – the market is competitive and there are only a couple of large firms. He thinks he would be fired if he freelanced for major competitors as a way of lifting his wage, and I am inclined to agree. He has been doing this role for about 3 years for around 5-8 hours a day, and he told me he earns about 50k gross before tax.
The thing is that he receives regular instructions from the company, updates about the business, must adhere to company policy and culture, he speaks to major customers, and so on. At least from my uneducated viewpoint (I have minimal knowledge of labour regulations) he looks like he’s being used as an employee albeit with none of the benefits.
I think that that is quite unfair, not least because he’s in a very marginal position if he ever gets sick or what have you. I’m not against flexible work arrangements – quite the contrary, i think 9-5 in most jobs is deeply inefficient and soul destroying – but I think it could be done a lot better.
The foreigner (old economy gig work)
I have a different friend who is married to a foreign citizen. His partner is in Australia on a partner visa and she has full working rights until a final decision about a permanent visa is made (takes about 2 years?). She has been rejected from 112 job applications over the past year, including Woolworths, cafes etc, despite having an outgoing personality and being very smart (she speaks 4 languages), because she is not a permanent resident. Now, this couple told me over the weekend that she finally got a casual job delivering catalogues for Salmat Limited (ASX: SLM). They were really excited about it and I was excited for them too (they are struggling on a single salary) but when I got home all I could think was a) how bad the job was from a financial perspective and b) how marginal Salmat appears from a regulatory perspective.
This is the job:
- Drive to warehouse, collect and manually load 2 x trolleys of brochures about 1.5m high in your car (say 30min round trip?)
- Drive home, fold brochures a certain way (2 hours)
- Walk/drive to specific area you are delivering in (30min round trip?)
- Deliver brochures (2 x 3-4 hour walks; there is about 80kg of brochures)
Total pay: $55-$57
And hey, $57 extra a week is great if you’re trying to feed and house two people on $40k a year, and one person is unemployed. But you’re looking at 10-11 hours of work, plus petrol and wear and tear on the car, etc (car stuff is specifically a work-related expense because you are transporting work-related materials). So in the end, Salmat gets labour for $6 an hour plus free transport. This has been going on for years and years, and I am entirely unsure how it is legal. Pundits often discuss how much Uber, Airtasker etc are going to struggle from regulation, but from where I sit Salmat looks as vulnerable as anyone – not least because higher wages could make the business unviable, because it will be too expensive to deliver catalogues.
I have two very simple solution that could improve the quality of life (at least in later life) of contractors and the security of the federal pension liabilities without requiring major change:
- Mandate minimum savings for superannuation from each fee paid (for freelance/piecework workers). If you can be expected to pay tax on everything you earn, it is not much harder to expect superannuation contributions too. There should be some sort of minimum check to see that the ~10% withheld for super doesn’t put people below a poverty line. The responsibility should be on employers (by ’employer’ I mean – the person that pays the contractor/pieceworker etc) to make the contribution to avoid corporate fuckery. It would be relatively simple for Airtasker, Uber etc to integrate some sort of superannuation function to their wages – all that has to happen is for 10% of the fee to be automatically siphoned off to a nominated super account.
- Mandate paid sick leave and holidays for employees on more than x (5? 10? 15?) hours work per week
The specifics are negotiable. But fundamentally in a prosperous country like ours, I think many of us would agree that if you are clearly an employee of a company, even if your title is ‘contractor’, (rather than a truly independent/piecework/consultant person), regardless of how many hours you work, then you deserve superannuation, holidays, and sick days in proportion with your work. I have seen a number of listed companies increasingly tout their use of ‘contractors’ to enhance performance and lift productivity and I think it is all bad.
Neither of my suggestions come close to fixing the issue but it would be a good start and could at least make these gig workers more secure in retirement. Security in the here and now is a much greater challenge.
I would be interested to hear thoughts on the matter in the comments or via email. Saying something banal like ‘the gig economy improves flexibility for workers‘ does not count unless you also specifically attempt to resolve the increased financial vulnerability (which has far-reaching implications for the pension/super balances in retirement, govt healthcare expenditure, and so on) as well. I would be interested to hear of circumstances in which gig-work has lead to an improvement in financial position for employees also.
I have no financial position in any of the companies mentioned. For clarity, I have also never had any kind of relationship with Salmat or any Salmat employees whatsoever – apart from my friend’s spouse who delivers brochures.
You have alas by your own admission moved into an area you know little about. “(I have minimal knowledge of labour regulations)”
Now, where do we start. Remember one thing about the unions. They are not remotely interested in the unemployed, only the people who pay their membership fees and exorbitant management fees for compulsory superannuation funds that the unions effectively control. The ex unionists feign concern for the unemployed when they get on the “gravy train” with a safe seat in one of our many houses of Parliament.
Why have many of our employers taken on different modes of employment, contracting, outsourcing etc etc? Because unlike most developing countries Australia has one of the most heavily regulated labour markets. In a world that is constantly and rapidly changing, our Fair Work Commission and its predecessors have added to the complexity and rigidity of our relationship between employer and employee. It is interesting to note that the very two parties in a relationship (employer and employee) have both delegated their negotiating to third parties, namely employer associations and unions. Why you may ask? Because like our Income Tax Act, the industrial regulations that have been created by those who are at a great distance from the “coal face” are simply too complicated for mere mortals like you and me.
There is a solution and the New Zealand government some years ago introduced it. As a result their country avoided the worst of the Asian Crisis.
Hey Richard, you’re right. I am out of my depth here, plus I’ve only ever been on the ’employee’ side of the equation (not business-owner/operator side) which is why I’m keen to get a few comments and different perspectives.
OK, so regulations are too complex. I’m open to that idea. Let me sharpen my query. In my view, companies could easily for example reduce wages but incorporate sick/holiday pay etc into what they pay contractors, so that overall wage packages stay the same but financial security improves for contractor. If contractor insecurity is as bad as I imply it is, contractors etc should jump at the opportunity – if they do not, then I am most probably wrong. I expect there would be a small cost to businesses in terms of extra admin, potentially offset by happier/more loyal employees. So in my mind, the cost of doing this is not a large issue.
What other regulations might be a concern? Is it too hard or costly to fire people, for example? (eg with severance).
I guess more specifically the question is,
“Is regulation around employee entitlements so heavy in Australia that it needs to be reduced?” I do not believe that having a large number of workers with no sick days, holidays, and no super contributions, for example, is a benefit to anybody.
10Foot, it is important to understand the terms used when talking about people who are at work. A “contractor” is not an employee; full time, part time or casual. A contractor is usually a “self employed” person who would normally have an ABN etc and supply services to more than one company during any twelve month period. There are providers of labour who have casual (sometimes full time) employees on their books but direct them to work at ABC Pty Ltd because of a temporary and sometimes long term requirement of labour, but ABC Pty Ltd does not wish to have the ongoing responsibility for that worker. Similar to the many industry group training schemes used for placing apprentices into member companies.
I have worked with and know many self employed people (contractors) who are very happy with their lot. Interestingly the companies using contractors understand that if they do not look after the contractors they work with, guess what, they leave and find work with another company which better appreciates their efforts and/or skills.
Many individuals much prefer to have more money in their hands today (no super contributions that I lose control of) to meet today’s costs of housing etc etc. Surely the individual should be able to choose what is best for them, much the same as doing your homework before deciding whether you are going to buy or sell shares in a particular company? Why is it that one collective believes they are the ones who will decide what suits/fits all ? Should the collective decide what best suits my medical requirements? This is all sounding very familiar.
Your last question is in regards to employees. But your qualification is about “workers”. If there are a large number of “employees” with no sick days, holidays, and no super contribution, then there are avenues available to prosecute the offending employers for breaking the law. And those employers will get no sympathy from me. For instance I am aware that many (not all) food service providers pay cash to their workers. All goes well until the worker lodges a WorkCover claim. Again, these offenders should be prosecuted to the full extent of the law.
Yes, you’re right, I have confounded the two terms. I apologise for that. There are a grab-bag of concerns that I kind of lumped into one post up there. To be more clear, my concern is not with contractors per se.
My concern is where contractors are functionally ’employees by another name’ where they:
a) work for a single business for 20-40 hrs a week (just say)
b) don’t receive holidays + sick pay, superannuation etc, and
c) could not reasonably expect to also work for a competitor. The graphic designer example in the above post I think encapsulates this nicely. However another example is Flight Centre increasing the use of contractors at its retail stores (this was in their recent annual report). Do you think if you were getting say ~20hrs/week (paid as piecework or whatever) a week at Flight Centre, that you could go and work for Helloworld or Escape Travel to pick up another ~20 hrs to supplement your wage?
I don’t think either travel agency would be happy to find you also contracting for a competitor. So my view is that the contractor is – at least on some occasions, in the examples I have given – an ’employee in disguise’ where the ABN creates a legal fiction that lets the business outsource (unfairly, imho) their obligations to the contractor, as well as maintain a larger than usual amount of power in the arrangement. It is hard to see why a business would do this unless it is specifically cheaper to use contractors.
And re: your comment “Many individuals much prefer to have more money in their hands today (no super contributions that I lose control of) to meet today’s costs of housing etc etc. Surely the individual should be able to choose what is best for them”.
In theory I agree. God knows it would be very difficult to survive in a large city on a marginal wage like my contractor friend. However, the *whole point* of superannuation is that people aren’t allowed to touch it because otherwise they could squander it. My view is that super contributions should be cast in iron because if contributions start getting dodged on a wide scale, it has large social consequences in 40-50yrs. So in general I think super contributions should be mandated for contractors/ freelancers, etc.
I remember years ago a young qualified architect who was working with me in a manufacturing business doing very simple repetitive tasks and in no way related to his skill set. At the time there was no work in Australia for up and coming architects. I suggested he should go to Hong Kong where they were screaming out for architects due to their building boom. An ideal opportunity for him to get the experience he so desperately needed for when he returned home to work in his chosen field. Did he go? No. Didn’t want to leave his girlfriend !! So there are many things that may motivate and de-motivate a person to act.
With regards to your graphic artist friend, I would definitely be talking with all and sundry with my CV in my hand about getting another job. It is his/her life. They need to get going and be prepared to go where the work is. I can assure you there are no lion taming jobs in the city where I live and probably not where you live. Thus, there is a requirement to get out and find the work. The experience your friend has already accumulated will be of great value to someone else. He just needs to find the next opportunity. It is out there.
“could not reasonably expect to also work for a competitor” This is a cop out. Socialists make these sort of comments thus expecting someone else to do their bidding. By the way your friend should understand that they will probably have at least five careers during their working life. This will occur due to the ever changing world of technology and business.
With regard to the Flight Centre contractor. If they are as so described, then they are free to work elsewhere, and should. When I was buying my first modest home as a single person, I had to work to pay the mortgage which at the time was 13.5% !! When my commission job was put on hold (thanks to a State Government) I drove taxis, delivered potato chips to fish and chip shops, poured beers at a local pub. Heavens, you just get on with it.
“I don’t think either travel agency would be happy to find you also contracting for a competitor” Another cop out. Truth be told your friend finds work a bit of bore and would prefer to have holidays twice a year. Six months at a time.
Contractors, labour hire, casuals etc are used because it gives the business flexibility that cannot be achieved through the traditional full time arrangements. The world we live in today is quite different to 20-30 years ago. We can now watch AFL on a Sunday !! Pubs are open on a Sunday. Tourists arrive all days of the week. But our Industrial Relations system still holds on to the idea that we should all go to a church and if not then pay double time. And when we are not at work (annual leave) we are to be paid more than we get when we are at work !! People overseas are amazed at our system.
With regard to the superannuation I agree with most of your comments. However,the biggest mistake by the ex-unionists was that they made the employer pay the whole of the cost/contribution. Thus, there is no buy in from the employee. No interest in Super until the kids have gone, mortgage almost paid off and they are in their 50’s. Then their interest in Super (retirement) is aroused. But alas, it is all a bit late.
Richard I apologise for the slow response, I took a few days to think about what you were saying (was also writing up Mayne Pharma). I think we will have to agree to disagree on this one.
I’m not trying to say that all businesses should have only full time employees or anything like that. What I am saying is that, due to the changing nature of work, it looks to me as though traditional employee entitlements/rights like leave and sick days are increasingly being eroded via mechanisms like contracting etc. While our system is imperfect, it is very generous as you noted and I think we should be very reluctant to let go of it.
Re. the Flight Centre/graphics designer contractor, I don’t see how the person is free to work elsewhere. They might be free to deliver fish and chips, but if I am designing graphics for one company for half the day, and the same work for another, competing company for the other half of the day, I find it really hard to believe both companies would be OK with that. So I still believe that the contractor is, at least sometimes, really an ’employee by another name’ – sans sick leave and holidays.
Of course, maybe my friend should just look harder, self-promote a little more and get another job. That’s not the point. My point is that I am not sure that this type of arrangement is a good one and I think it could be improved.
10 foot, something else I recently came by that makes sobering reading. No wonder the independent contracting movement is growing in this country.
If you want to know why 730,000 Australians are unemployed, and why one in five prime-age males don’t work, this is a good place to start.
Australia is 110th out of 137 countries for flexibility of hiring and firing and 109th for flexibility of wage determination according to the World Economic Forum Global Competitiveness Index Report released last week. As an observer noted on Friday, this places us behind developing nations like Botswana and Mozambique. Australia was 21st on the overall global competitiveness index.
Gday Richard, I have not seen that original survey myself (got a link?) but I think it would be quite possible to turn the results on their head and get a very different perspective:
Australia is 27th out of 137 countries for the economic protection of its employees and 28th out of 137 countries for the consistency of its employee wages. I think that comparing Australia to Mozambique is comparing a first world employee who does ‘a fair day’s work for a fair day’s pay’ to a third world employee who does whatever work they can find, for whatever sum of money the employer is offering. I have seen this kind of highly flexible wage arrangement first hand, and it leads to a lower standard of living, a lower quality of work, and a significant increase in employer abuses/reduction in employee happiness. Wages become so low that people are incentivised by other things than work – time with family, recreation etc, with the result being that it becomes difficult to attract hardworking labour full stop.
I am all for flexibility, but in general terms I do not believe lower wages are the solution. Corporations exist to improve society, not the other way around.
21st on the global competitiveness list is a solid achievement though, although I’m sure you would agree it is well below what we deserve.
Surely, if the first person has only the one income stream that company is deemed an employer, and therefore responsible for taxes, Super, WorkCover and whatever else? At least that is my understanding. I wonder if he and his ’employer’ have done the test at the ATO website about whether or not he’s an employee or a contractor? Would be interesting to see the results.
Hi Kathie, that’s very interesting and I wasn’t aware that there was such a test until I went looking after I read your comment.
I believe this is the link you’re talking about and I’ll leave it here in case others stumble across it: