For This to Work
by Patrick I. Dick
The low silhouette of self-employment casts an awfully long shadow over the larger economic landscape. A quick internet search for “self-employment future” pulls up think pieces and reporting on the very nature of work, technology and the economy from journalistic and academic heavy-hitters like The Economist, INSEAD, and the London School of Economics and Political Science. The self-employed make up a fairly small part of total employment in advanced economies—about 16% in the EU 28—but the spectre of a future in which, thanks to technology and globalisation, they dominate labour markets looms nevertheless ominously.
That all the results of our search highlight technology (with no prompt whatsoever) is not surprising, but telling. Technology is, after all, changing the face of work from almost every angle.
The evolution of contractual labour arrangements will be very much human-driven, though. Technology-aided but driven by people and, consequently, demography in evermore equal, diverse and ageing societies. This means we can and should start preparing for it.
Hold your horses
There is plenty of room to be sceptical about whether we’ll end up with an economy entirely fuelled by robots and freelancers. As the economy becomes more and more complex, as technology is wont to provoke, so will too the skills needed to participate in it. That level of complexity and specialisation can quite simply only be achieved through stability and investment in know-how—two-things on-demand labour does not offer. It will continue to be in the interests of both companies and governments to ensure a considerable portion of employment is stable. Not heavily protected, necessarily, at least not to the extent that employment becomes burdensome and exclusive. But stable, nonetheless. This goes as much for banking, caring, and farming as it does for software, medicine or engineering.
That being said
There is some reason to think freelancing will make up a bigger part of the economy going forward, though. Much ado has been made about the "gig economy" and its cousins, the sharing economy and the freelancer economy. On the demand side, an increasingly competitive global marketplace pushes firms to slim down. On the supply side, digital platforms and co-working facilities have made it easier for freelancers to find colleagues and clients. As workforces age, a bigger part of them will be made up of people with enough experience to go it alone. And numbers suggest self-employment is a good strategy for integrating newcomers. After all, it’s entrepreneurs over 40 who launch the highest number of successful start-ups. CEOs with immigrant backgrounds aren’t far behind.
Furthermore, technology does lend itself to mobile and flexible work, there is no doubt. Governments have started to recognise small businesses—many of which are born in the form of “self-employment”—as a principal driver of job growth, and many correspondingly support them. And there are real benefits to a career of self-employment. The potential for a better work-life balance is an undeniable draw for many, especially in middle age. The freedom to do what one really enjoys is another. Plus, there is that certain sense of achievement when you file your VAT correctly.
Whatever the case, there must be something to it because people are already at it—without the support they need.
For this to work
For this to work, social security has got to keep up. Today’s social security policies were mostly adopted in a different time, a time when men overwhelmingly dominated a young workforce and when, for the most part, relying on employers for the provision (or at least the administration) of social benefits like paid holiday covered nearly all workers.
Most have been updated since, but there is still a tendency to depend on employers. Take maternity and paternity leave. Though self-employed mothers in many countries have some sort of income replacement available for childbirth and nursing, it doesn’t tend to be as generous as the options at the disposal of women working for someone else. Many countries offer nothing for self-employed fathers who would like to help out in those first crucial months (and beyond). Where income replacement is available, it doesn’t tend to be meaningful.
What about non-social benefits? In any economy, updating skills is essential. For an ageing workforce in a digital and highly-automated economy, even more so. Self-employed workers are often allowed to claim training as a business expense, and that helps. But they are still expected to foot the bill. And, like for holiday, that bill is magnified by foregone income. Meanwhile, employers who offer training only pay for the cost since training one worker does not necessarily meaning ceasing all activity. The employee in principle gets the training for free.
Social security systems shouldn’t send the navy for the self-employed, but a life raft would go a long way. The point is not to discourage employment—or fraud—by making self-employment more attractive. Benefits for the self-employed should be targeted and depend on contributions to social insurance, and fomenting stable employment should continue to be a priority. But there is a case for making self-employment fairer and more productive. When it comes to paternity leave, there is also a case to be made in the name of gender equality.
More than anything, though, there is a case to be made in favour of recognising that some self-employment is both beneficial for the wider economy and, it would certainly seem, here to stay.
About the author:
Patrick I. Dick, Consulting Editor for Population Europe.