Could Covid accelerate the gig economy?

A growing portion of Mike Treen’s work these days involves helping newly redundant workers navigate the byzantine and often perverse intricacies of welfare support.

Treen, Unite Union national director, said that although the full Covid-19 income relief payment is more than double the basic adult jobseeker support (dole), at $490 a week compared to $251, it stops as soon as people work even one hour, while the jobseeker support allows recipients to earn up to $90 gross a week before their payment is docked.

“That means it’s better off for some of our members to cease any form of employment relationship, even if they could be kept on at one to two hours a week, it actually discourages that option.”

For people who worked less than 30 hours a week, the Covid-19 payment drops to $250, so for those who could pick up a handful of hours’ work, the jobseeker payment may be better. Then there were the other inconsistencies to weigh: the fact that partners’ income reduces the jobseeker but not the Covid-19 payment unless their income is above $2000 a week before tax; the fact that rental and investment income affects the jobseeker but not the Covid-19 payment.

“The problem we have now is there’s a mad mixture of support mechanisms that aren’t necessarily fit for purpose,” said Treen. “If we’re going to have a prolonged period of significantly greater unemployment, we need a more permanent fix to the level of support that people need to survive it and the ability to do additional work or job-share.”

Susan St John, an associate professor of economics at the University of Auckland Business School, agreed. She predicted that unless something else was in place when people came off the Covid payment, which lasts 12 weeks, “it’s going to be appallingly disastrous for people as they fall down onto this ridiculously low jobseeker benefit and find that they can hardly earn anything and they might not even get it.

“The answer is not to have the Covid payment; the answer is to have a streamlined much better operating jobseeker benefit that’s more in tune with precarious work and the nature of the crisis that we’re in.”

Covid amplifying rise of gig economy

Nick Carter, partner in Christchurch-based recruitment and human resources company Brannigans, said the gig economy trend towards a casualised, flexible workforce, accelerated by digital disruption, had been happening for years but Covid has amplified it.

“Disruption was coming; at Christmas time it was three to five years away, I think Covid’s just brought that forward,” he said.

Business clients were starting to consider strategic projects with fixed-term contracts, like a Christchurch-based engineering consultancy that was seeking an international sales manager on a fixed contract to bring a new product to market.

The pandemic impact varied widely, with some sectors and pockets experiencing talent shortages, such as IT and engineering, and others facing surpluses.

His impression was that Christchurch businesses were best-prepared. “Most companies have been in the cloud since the earthquakes, so the transition has been a lot more seamless than some companies outside of Christchurch.”

Nationally, the workforce had also benefitted from the return of highly skilled expats bringing broad experiences and nimble mindsets, not just since Covid but for the past few years, he said.

The risk was that with border closures still keeping many migrant workers out, “we simply won’t be able to retrain and redeploy staff quick enough to plug those gaps in the short term”.

Infometrics senior economist Brad Olsen also saw the need to much more rapidly embrace micro-credentials and similar short forms of learning, and funnel people into training for roles that needed a longer training as soon as possible to minimise time lags.

Five worker groups

Infometrics has predicted that 80,000 more people could be out of work by September 2020, when the wage subsidy extension runs out.

“We continue to hear reports around the country of businesses who are rationalising their operations,” Olsen said.

Currently workers broadly fall into one of five groups, he observed: those in safe jobs, those who have lost their jobs already due to the pandemic, those who have taken a pay cut, those who have had their hours reduced, and the largest group: those unsure whether their jobs will survive beyond the wage subsidy.

“There’s probably quite a lot of interest among businesses in trying to get workers on a fixed term or more casual contract just so if economic conditions worsen…they can reassess their business position – that’s almost the exact opposite of what workers want but they’ll take what they can get.”

Olsen pointed to Stats NZ data suggesting that rental prices would decline at a faster rate than property prices. Combined with Infometrics analysis indicating that those more likely to lose their jobs were also more likely to be renters, this suggested that renters with no other strong ties to where they live may have a greater ability to follow jobs around the country.

Anecdotally, a substantial portion of Kiwis returning from overseas are settling in the regions. These twin trends could change regional labour market dynamics, Olsen said.

Threat or boon?

It was too early to predict the impact of those highly skilled returnees, but some people about to re-enter the job market already viewed them as a threat.

Elizabeth George, a professor in the University of Auckland Business School, said the other day her MBA class was discussing just this. “The debate was: ‘Oh, sh*t, have we committed to getting educated at the time when there’s going to be a whole lot of very skilled people coming back into the market? The more optimistic of them said, maybe that’s a good thing for all of us: a rising tide floats all ships kind of argument.”

Another unknown was how many returnees would stay long-term. The best-case scenario, according to George: “Maybe, if all the right decisions are made, New Zealand can get ahead of other countries because there’s this amazing coincidence of a lot of skilled people available at a time when we’re ahead of other countries in terms of the pandemic being contained a bit more.”

The challenge for companies was to ensure they avoided losing so many skilled workers that they would be caught short when business picked up – a predicament dubbed “corporate anorexia” during mass downscaling in the US in the 1990s.

Flexible laws for a flexible workforce

Employment lawyer Jennifer Mills of Jennifer Mills and Associates had also witnessed many businesses increasingly seeking part time and casual staff. She said policy settings and employment laws needed to be revised to support businesses’ increasing need for hiring flexibility in uncertain times.

“There ought to be a balance between job creation and providing reasonable security in employment for workers. In this environment, employers may be reluctant to hire if the law does not afford them sufficient flexibility to make hiring decisions,” she said.

For example, employment law in New Zealand currently constrained the use of availability provisions and fixed term employees, and trial periods had been limited to small employers.

“In our view, the problem is not flexible work arrangements,” she said. “Rather, it is the ability to exploit vulnerable employees with poor employment conditions. Although New Zealand has a high minimum wage compared to other nations, this protection does not apply to all workers; it only applies to employees … there is a growing underclass of workers who do not receive the minimum wage and other statutory entitlements, such as annual holidays and sick leave.”

Pay transparency, particularly in job ads, would allow people to self-select and avoid wasting time, she added. “We are of the view that every job ought to advertise a pay range, and perhaps a minimum number of hours.”

Not inevitable

A shift towards a gig economy is not inevitable, said Council of Trade Unions economist Andrea Black; especially in sectors not directly affected by border closures.

“While the wage subsidies are expiring the Government has introduced other support such cashing out of losses and interest free loans that are also available to help small businesses get through,” she said.

The CTU wanted the government to further accelerate its active labour market policies to match laid-off workers with vacancies in sectors such as horticulture; promote job creation in the public services where there are currently shortages, for teacher aides; move to temporarily reduce labour supply, for example by extending paid parental leave; explore social insurance as a mechanism for managing the transition between jobs for displaced workers; and implement the Welfare Expert Advisory report in its entirety, including raising and individualising benefits.

Maintaining fair pay and conditions was critical, she said.

“Now more than ever it is important that conditions are not wound back in a race to the bottom.”