We’re undergoing a massive structural shift towards independent work which is piling risk onto individuals – but the new, digital age, safety net has already been created
The world of work has changed
I grew up in a time when, along with most of school and college friends, I followed a path of working for large companies, with layers of subordination focusing on climbing the corporate ladder to achieve status and further rewards. These jobs came with a wide range of benefits, including generous holiday and sick pay, health insurance, defined benefit pensions plus a wide range of other benefits like subsidised canteens, sports events and medical support. This was further supported by state protections on employment and minimum standards.
These benefits were the result of a grand bargain between employers, workers and the state during the growth manufacturing in the early 1900’s. Today, that grand bargain is disintegrating. If you’re a full-time employee, you’re still getting holiday and sick pay, but almost definitely not a defined benefit scheme – instead, you make the contributions you can afford. But, if you’re an independent worker – the fastest-growing segment of employment in the developed world (up 25% in the last 10 years) – then you’re completely on your own.
Economic risk has been transferred
It’s too simplistic to say that businesses have exploited workers to move them off the payroll and so absolve themselves of the need to pay benefits and boost profits.
First, we as consumers have forced a lot of the change in working arrangements. Our expectations around flexibility and convenience (the “on-demand economy”) mean that there are greater fluctuations in demand. Many companies (not all) have taken advantage of low and zero hour contracts to turn their workforce into an on-demand workforce. But we also saw platforms emerge that use technology to create solutions for peak demand and to remove the barriers between quality of service and scale, offering increased customer satisfaction at lower prices. The problem is that the gain in consumer surplus is coming at a societal cost elsewhere. Workers.
But, it’s also the case that many people choose to become independent workers because they like the flexibility and autonomy that comes from working for yourself. In fact, Demos in a study of UK independent workers, found that 80% were happy with their independent status.
But whether forced on them or whether by choice, it is categorically the case that the growth in independent work has pushed risks to individuals. With unpredictable incomes and no sickness cover, this independent workforce – which totals 5 million in the UK alone – is more economically insecure, subject to greater stress and at higher risk of financial hardship than those in full-time work.
The just-about-managing can easily become the not-managing
It doesn’t take much of a shock for the people who are just managing, to stop managing. In the UK 15% of people have no savings at all. It only takes something as seemingly trivial as a washing machine breaking down for a person’s life to go into a negative spiral. And, as we can all see with the Coronavirus crisis, hundreds of thousands of independent workers are going to be quickly burning through any savings they have and finding them themselves in a very precarious state. But this is not an article about coronavirus. Coronavirus is temporarily turning the spotlight on the problem, but this is a structural problem.
Government intervention can help…
I am in favour of government interventions in this area, but with a big caveat. This area is complex and nuanced and government policy should be too. As demonstrated by the AB5 legislation introduced in California – which immediately reclassified contract workers as salaried workers – bad legislation, even made in good faith, can be a wrecking ball. Millions of people take advantage of independent work to make ends meet – as well as in an overwhelming majority of cases preferring it to full time work. We need to legislate carefully, introducing sensible, incremental steps.
…But there is a better way
A heavy-handed government response would also ignore the facts on the ground, which is that private companies are coming together to put in place a new safety net. At Trezeo, a company I co-founded in 2016, we are working with debt providers, insurers and other partners to put in place the benefits and protections that are so badly needed by independent workers– such as accident insurance, sickness insurance, interest-free credit – that have been the sole preserve of the employed. The kind of government legislation we’d like to see is, for example, around benefits portability rather than an arbitrary redrawing of the lines of who’s a full-time employee.
Orchestrating the services that independent workers need
Trezeo sits at the heart of an ecosystem. On one side of the ecosystem sit platform companies, like Labour xchange. As labour markets recover from the current crisis, we believe that more and more platform companies will voluntarily sign up their members to Trezeo so that they can get access to a safety net that current crisis has demonstrated the urgent need for. But we also believe that many will do so in response to consumer pressure and we would ask people to vote with their feet and support those platforms that provide for their members’ welfare, creating a grand pact between consumers and workers.
On the other side are all of the services that independent workers would like to access, but can’t by themselves, such as affordable accident insurance. Trezeo acts as the orchestrator, in the case of insurance, by setting up group schemes and being able to enrol our members as an employer would its employees. And we do the same for credit, sickness insurance, access to online GPs and Physiotherapists, perks and, in the future, pensions and other benefits.
The reason why we’re confident that private companies – and hopefully Trezeo itself – can solve this problem is that we are accruing the network effects that will allow us to provide a safety net with increasing scale, better quality and lower cost over time. As a platform, we benefit from data network effects that allow us to better understand members needs and match them with the right services at the same time as we generate the multi-sided network effects that allow us to use growing member numbers to pull in more and more high-quality services, as well as more collective power to pull in more platforms.
Spreading hope (and the word)
The are many reasons, particularly at times like this, to feel bleak. Over recent years, we have created a lot of precarious employment and the coronavirus fallout is highlighting that.
But for these workers – and for the millions of other independent workers – we can create a different future. At Trezeo, we’ve been on a mission to re-create the safety net for our on-demand age and we’re getting closer every day. If you’re an independent worker or a platform company using independent workers, we’d love to work together. Together, we can remove the trade-off between personal freedom and financial security – we can, and should, have both.