Independent Work or the New Dead End Jobs? New Work Arrangements in Today s Labour Market

Transcription

1 13 th Festival Economia Trento, June Independent Work or the New Dead End Jobs? New Work Arrangements in Today s Labour Market Stephen Machin London School of Economics 1

2 The rise of alternative work arrangements International labour markets have recently been characterised by rises in atypical work arrangements o Self-employment (freelance, contract workers, agency workers) o On-call jobs, zero hours contracts Drivers: o Technological change (digitalisation) o Fissuring of traditional workplace (Weil, 2014) o Preferences for flexibility (Mas and Pallais, 2017) o Weak labour markets (Katz and Krueger, 2017) o Labour market policies (Datta, Giupponi and Machin, 2018) 2

3 Source: OECD and IFS 3

4 Challenges for economists and policy makers To better understand employment conditions and status of independent workers o Need for flexibility vs. hour constraints o Protection against labour market risk Provision of social protection o Reform of social security to increase coverage of social insurance and extend social insurance benefits to independent workers Macroeconomic implications o Labour market slack may no longer be captured by unemployment alone o Larger reserve army of underemployed workers potentially undercutting wages o Intensive margin of employment and degree of employment protection is becoming increasingly important in European and US labour markets o Minimum wages may no longer be a wage floor 4

5 Three surveys of independent workers [Boeri, Giupponi, Krueger, Machin] Comparable surveys of self-employment, alternative work arrangements and the gig economy o Italy online survey of 15,000 workers, May 2018 o UK online survey of 20,000 workers, February/March 2018 o US online survey of workers, April 2017 Collected novel data on: o Demographics o Job characteristics, contractual conditions o Preferences for flexibility o Need for social protection 5

6 Three surveys of independent workers [Boeri, Giupponi, Krueger, Machin] Who works in self-employment, alternative work arrangements and the gig economy? Patterns of work Job satisfaction Reasons for working Rankings of benefits 6

7 How many self-employed and gig-workers? Self-employed as % of WAPOP % of self-employed who are also gigworkers Gig-workers as % of WAPOP Italy UK US Source: The data on self-employed as % of WAPOP are from OECD for Italy and UK, and from IRS and OECD for US. The data on gig-workers are from frdb Survey (Italy), LSE-CEP survey (UK) and Princeton Self-employment Survey (US). 7

8 Type of Gig-economy worker Italy Gig as First Job Gig as Second Job Gig worker but Unemployed Source: frdb Survey 8

9 Weekly hours for Self-employed Italy Weekly hours for Gig-economy workers Italy Weekly hours Weekly hours Source: frdb Survey 9

10 Desired hours of work for Self-employed Italy Desired hours of work for Gig-economy Workers Italy More hours Fewer hours Satisfied More hours Fewer hours Satisfied Source: frdb Survey 10

11 Reasons for working <35 hours - Self-employed Italy Training No available work Domestic commitments Illness/ Disability No need Source: frdb Survey 11

12 Reasons for declared hours of work - Gig-economy workers Italy Training No available Domestic work commitments Disability Illness/ No need Second work Other Source: frdb Survey 12

13 Job satisfaction - Self-employed Italy Job satisfaction - Gig-economy workers Italy Very satisfied Satisfied Neutral Dissatisfied Very dissatisfied Very satisfied Satisfied Neutral Dissatisfied Very dissatisfied Source: frdb Survey 13

14 Main reason for working in the Gig economy Italy Incidental expenses Complement income personal Complement income household Only option Other Source: frdb Survey 14

15 Income Insecurity Self employed Gig-workers Suppose you have an unexpected expense of 500 euros. Based on your current economic situation, how would you cover it? % % With the money currently i my checking/savings account or with cash Pay it with my credit card By starting a bank loan or a line of credit By borrowing from a friend or a family member By selling something I wouldn't be able to pay for the expense right now Total Source: frdb Survey 15

16 UK Distribution of weekly hours for self-employed Weekly hours Distribution of weekly hours for gig-economy Weekly hours Source: LSE-CEP Survey 16

17 UK Desired hours of work for self-employed More hours Fewer hours Satisfied Desired hours of work for gig-economy workers More hours Fewer hours Satisfied Source: LSE-CEP Survey 17

18 UK Reason for not working more hours (self-employed) Underqualified No available work Domestic commitments Illness/Disability Other Source: LSE-CEP Survey 18

19 UK Reason for not working more hours (gig-economy) Underqualified No available work Domestic commitments Illness/Disability Other Source: LSE-CEP Survey 19

20 UK Reason for wanting fewer hours (self-employed) Student Illness/Disability Domestic commitments Leisure Other types of work Other Source: LSE-CEP Survey 20

21 UK Reason for wanting fewer hours (gig-economy) Student Illness/Disability Domestic commitments Leisure Other types of work Other Source: LSE-CEP Survey 21

22 UK Job satisfaction of self-employed Job satisfaction of gig-economy workers Very satisfied Satisfied Neutral Dissatisfied Very dissatisfied Very satisfied Satisfied Neutral Dissatisfied Very dissatisfied Source: LSE-CEP Survey 22

23 UK Main reason for being self-employed Only option Can work from home Prefer work from home Better pay Complement pay Earn while studying Flexibility Other Source: LSE-CEP Survey 23

24 UK Main reason for being self-employed Gig-economy workers Only option Can work from home Prefer work from home Better pay Complement pay Earn while studying Flexibility Other Source: LSE-CEP Survey 24

25 Income insecurity How would you pay for an emergency expense of 500,00? Self-employed Gig-workers Put it on my credit card and pay it off in full at the next statement Put it on my credit card and pay it off over time With the money currently in my checking/savings account or with cash Using money from a bank loan or line of credit By borrowing from a friend or family member Using a payday loan, deposit advance, or overdraft By selling something I wouldn t be able to pay for the expense right now Total 2, Source: LSE-CEP Survey 25

26 Zero hours contracts Contracts with no guaranteed hours or times of work Around 2.7% of all workers are recorded as being on ZHC (LFS, 2017) o More likely to be younger, female and lower tenure o Work 10 hours less than average employee + work unpaid hours o Low pay, large proportion on minimum wage o Concentrated on accommodation/food, retail, education and health care industries Zero hours contracts: necessity or choice? o Stark dichotomy between workers who value flexibility provided by ZHC jobs, and workers who would rather work more and more regular hours 26

27 Desired hours of work for ZHC More hours Fewer hours Satisfied Source: LSE-CEP Survey 27

28 Reason for not working more hours (ZHC) Underqualified No available work Domestic commitments Illness/Disability Other Source: LSE-CEP Survey 28

29 Reason for wanting fewer hours (ZHC) Student Illness/Disability Domestic commitments Leisure Other types of work Other Source: LSE-CEP Survey 29

30 Main reason for being on ZHC Only option Better pay Complement pay Earn while studying Flexibility Other Source: LSE-CEP Survey 30

31 US - Hours constraints 40% worked less than 35 hours in self-employment last week 33% would have preferred to work more hours last week 15% were part-time for economic reasons (<35 hrs & couldn t find fulltime work, slack work/business conditions, or seasonal) twice as high among those with self-employment only In CPS, self-employed more likely than traditional employees to be parttime for economic reasons Traditional employment often entails implicit contract for full-time, steady work Source: Princeton Self-Employment Survey 31

32 Coverage of social security Usually self-employed workers not covered by contributory social protection against unemployment risk, and sometimes maternity and sickness Moral hazard (and adverse selection) stand on the way of social insurance for independent workers How strong is the demand for social protection among self-employed people and platform workers? Which type of insurance are they willing to buy? 32

33 Ranking of various benefits - Self-employed Italy Paid maternity leave Paid sick leave Workplace injuries insurance Family allowance Unemployment benefit Retirement savings Source: frdb Survey 33

34 Ranking of various benefits - Gig-economy workers Italy Paid maternity leave Paid sick leave Workplace injuries insurance Family allowance Unemployment benefit Retirement savings Source: frdb Survey 34

35 Ranking of various benefits UK Retirement savings UI Paid sick leave Health insurance Life insurance Worker compens. insurance Paid family leave Disability insurance Source: LSE-CEP Survey 35

36 Ranking of various benefits Gig-economy workers Retirement savings UI Paid sick leave UK Health insurance Life insurance Worker compens. insurance Paid family leave Disability insurance Source: LSE-CEP Survey 36

37 60 Rankings of Various Benefits US Retirement Savings UI Sick Leave Health Ins. Life Ins. Workers' Comp Family Leave Disability Ins. Source: Princeton Self-Employment Survey 37

38 Policy options Very difficult to extend compulsory unemployment insurance to the self-employed and the GIG workers (limited examples) o Voluntary schemes? Adverse selection o Unemployment insurance with no employer? o Means-tested benefits with volatile labour earnings? Problems of moral hazard even with sickness insurance Draw on subsidized occupational insurance? Change the status of gig workers and self-employed with just one contractor into dependent employment? Use the traceability of on-line matching to enforce social security contributions and prevent abuse? 38

39 Does spread of alternative forms of employment explain why do wages not grow during the recovery? 39

40 Annual average variations in wages Wages are not coping with productivity growth (and unemployment declines) Annual average variations in average wages Variations in Wages and TFP Bisecting line ES FR DE AT IT NL BE FI PT IE Variations in Wages and Unemployment DE 0,5 FR NL IT ES AT FI 0,0-8,0-6,0-4,0-2,0 0,0 2,0 IE PT 1,0-0,5-1,0-1,5-2,0-2,5 BE -3 Δ TFP -3,0 Δ Unemployment rate Source: Eurostat 40

41 Median hourly wage by type of Gig-economy worker Italy Euros Gig as First Job Gig as Second Job Gig worker but Unemployed Source: frdb Survey 41

42 UK - Zero Hours Contract (ZHC) Wages Median Real Hourly Wages All Workers Zero Hour Contracts Source: QLFS, ONS.

43 Labour market policy Minimum wages and zero hours contracts Are ZHCs inherently low-paid jobs (tasks, skills, flexibility ) or are minimum wage uprates responsible for increased ZHC utilization? o ZHCs can help employers buffer wage cost shock due to minimum wage increases o Transfer burden of insecurity onto employees, potentially worsening their employment conditions in spite of wage increase Study of causal effect of UK National Living Wage introduction on ZHC utilisation (1) o NLW increased minimum hourly rate for adult workers to 7.20 from April 1, 2016 o Context of English adult social care sector (care homes and domiciliary care) For a domiciliary care worker paid at MW, on NLW introduction the hourly wage went up by 7.5% and at the same time the probability of being on ZHC went up by 4.7% o Should there be a higher minimum wage for ZHC workers (Taylor Review, 2017)? Notes: (1) Datta, Giupponi and Machin (2018) 43

44 Distribution of ZHC jobs by hourly wage Number of ZHC jobs Number of jobs: Below 7.2 (Pre-NLW)= Below 7.2 (Post-NLW)= 8140 Between (Pre-NLW)= Between (Post-NLW)= Total change in ZHC jobs below 8.8 (Post-Pre) = 4996 ZHC jobs (+9%) Hourly wage Pre-NLW Post-NLW Source: National Minimum Dataset for Social Care (NMDS-SC) 44

45 Distribution of jobs by hourly wage Number of jobs Number of jobs: Below 7.2 (Pre-NLW)= Below 7.2 (Post-NLW)= Between (Pre-NLW)= Between (Post-NLW)= Total change in jobs below 8.8 (Post-Pre) = 2000 jobs (1%) Hourly wage Pre-NLW Post-NLW Source: National Minimum Dataset for Social Care (NMDS-SC) 45

46 Conclusions Alternative work arrangements have increased in recent years, even in countries in which traditional self-employment is declining (e.g. Italy) Evidence that the new self-employed are hourly constrained and would like to work more hours. Sizable heterogeneity in pay, but significant fraction of these forms of employment is characterised by low pay (especially some gig and ZHC workers). Strong demand for social protection, notably unemployment and retirement in Europe and health insurance in US There is a need to redesign social transfers and wage floors to keep up with the pace of change in the nature of work. 46