Time to act” Creating a new social contract for work in the 21st centuryContents Executive summary Setting the scene Introduction: Its time to act Section 1. The evolution of how we work Section 2. Platform work and social protection Section 3. Drivers of change Section 4. A new social contract: who pays? Conclusion: Time to discuss a new social contract References 2 3 6 8 10 12 15 18 20 X The Adecco Group 1Executive summary We are on a quest for change a change in the way we think about work in a rapidly changing world. It is time to reimagine the systems we use to support and enable diverse forms of work so that everyone has an equal opportunity to prosper. Its a quest for a new social contract for the 21st century. The rise of technology and, in particular, the platform economy where digital applications connect workers with employers has further enabled new ways of working and new opportunities. However, it has also highlighted significant gaps in the social contract for work, injecting fresh momentum into calls for a new social framework for all types of work. Governments, employers and social partners need to redesign society to ensure that all forms of work are secure and sustainable, so that there is adequate social protection for all workers. All stakeholders should work together to facilitate a gradual shift towards the individual, portable and transferable build-up of social accounts. This report is aimed at driving the debate to devise a new social contract that is fit for purpose in todays world, with a specific focus on work and security in the age of platforms. The Adecco Groups position is clear. Where there is a national system of building up social rights, workers should not lose these as they move between forms of work or economic sectors. When it comes to platform work, the correct classification of types of work is key. If there is a de facto employment relationship between a platform and a worker, it should be defined and classified as such, and all relevant rights and obligations should apply to both parties. The Adecco Group 2 “Time to act” EXECUTIVE SUMMARYSetting the scene “Platforms change the scale and speed at which new business models can emerge and grow,” says Matthew Taylor, President of the Royal Society and chair of the recent UK government review of working practices in the modern economy. The speed of change in the way we are working today is accelerating to the extent that it is now time for governments, employers and social partners in developed countries to act. Platform work is one example of an increasingly diverse and flexible labour market. In the EU and Japan, 42% of individuals are not in full-time open-ended direct employment. They work part-time, are in temporary work or self-employment. 1 In the US, that figure is 40%. More than 175 million people in those economies alone! “Forms of work are changing,” says Professor Paul Schoukens of the Institute for Social Law at the University of Leuven. “If social protection systems dont take that into account, and instead try to enforce what was designed many decades ago, things will go wrong.” The social contract for work, in particular social protection, has struggled to evolve with the labour market. It is often still funded through employer and employee contributions related to direct, open-ended, full-time direct employment contracts. Coverage for other forms of work falls short, leaving workers vulnerable. The Adecco Group 3 “Time to act” SETTING THE SCENEWhats at stake: The challenges of a new social contract for work EXECUTIVE SUMMARY The Adecco Group 4 More and more people are not in direct, open-ended, full-time contracts The emergence of new types of employment in the past few decades, including agency work and job-sharing, have helped to create a more diverse labour market. Its no longer accurate to describe direct, open-ended, full-time contracts as “standard” and everything else as “non- standard” (see box, “Diverse forms of work defined”). Social safety nets often fall short Even in the wealthiest countries, there are significant shortcomings in social safety nets for those who are not in permanent, full-time employment. At highest risk are informal, undeclared or unpaid workers without any contract. But many inside the formal economy, such as self-employed, temporary, and part-time workers, also face significant gaps in social protection. In the EU, 13% of legally recognised workers lack effective unemployment insurance and 8% do not receive sickness benefits if they are too unwell to work. In South Korea, only about half of workers are enrolled in the unemployment insurance system. And in the US, a recent LinkedIn survey found that freelancers biggest concern is finding adequate healthcare coverage. 2 The rise of the platform economy exposes the shortfall The European Parliament estimates that between 1% and 5% of adults in the EU has undertaken paid work in the platform economy. 3 The growth in this new phenomenon has raised the question of how to provide adequate social protection in an increasingly complex global labour market, including areas such as the gig economy. Other challenges will come to light as work diversifies further, including cross-border interactions between small entities, and as society tackles wider questions such as how to treat unpaid work for example in a family business, or that contributes to social value creation, such as caring for an elderly family member or volunteering. The quest for a new social contract stretches beyond the platform economy in todays diverse world of work. Could platform work be the catalyst that triggers improvements for all? W orkers and employers seek flexibility Diverse types of work meet the needs of companies in a competitive global economy. Volatile and complex economic environments are challenging traditional business models, 4 and companies are opting for flexibility: in some multinational enterprises, the share of flexible workforce (including contractors and freelancers) is up to 40%. Diverse and flexible employment arrangements give employers greater agility to access talent with the unique skills they need for a certain activity, potentially at a lower cost than direct, open-ended, full- time employment contracts. Another driver of growth in diverse forms of work is the workforce itself. Across the OECD, for example, only a minority of part- time workers say they would rather be full time. Flexibility is especially attractive for younger people: a survey by the Adecco Group and LinkedIn found that 82% of 1826-year-olds see freelancing as a career choice. 5 Different societies, different social contracts The social contract for work should empower, not constrain, a more diverse world of work, but one-size-fits-all solutions are not the answer. Political choices mean that social contracts vary widely from country to country and even within countries. People in diverse working arrangements in the UK, Denmark and the US, for instance, have different concerns.Our aim with this report In this Adecco Group report, we set out the challenges that developed countries face in providing social protection as workers and companies seek greater flexibility. One emerging trend is exposing the inadequacies of the current social contract and pushing reform up the agenda: the rise of the platform economy. This report is intended to raise awareness of the challenges facing policymakers in constructing social policies for work in a rapidly changing world. We hope to encourage a wide and inclusive debate in order to help create a new social contract for all forms of work in the 21st century. Diverse forms of work defined Many analysts and organisations, including the European Commission, follow the ILO and refer to direct, open-ended, full-time employment contracts as “standard” contracts. Other arrangements are regularly grouped under the titles of “non-standard” or “atypical”. Denis Pennel, Managing Director of the World Employment Confederation, says we need to evolve with the times. “The current language is based on a 20th-century view, and does not reflect the new world of work,” he says. “We also need to stop privileging what some people consider to be the most secure forms of work it doesnt make sense any more. Y ou can be exploited in a permanent, full-time contract, and you can be an agency worker with a decent, profitable job.” Bettina Schaller, Group Public Affairs Director for the Adecco Group, agrees.“Policies have been built around the idea that everybody in the universe has only one aspiration: to find a job and then to stay in that same job for the rest of their life,” she says. “However, a rapidly changing world offers highly attractive and flexible ways of working for individuals and businesses that policy must now support.” As such, this report will use the terms “direct, open-ended, full-time contracts” and “diverse forms of work/working arrangements”. The Adecco Group 5 Social protection encompasses the programmes designed to reduce poverty and vulnerability throughout the lifetime of individuals and in most developed countries it is a widely acknowledged right. The International Labour Organisation (ILO) defines these as the “policies and programmes designed to reduce and prevent poverty and vulnerability throughout the life cycle. It includes benefits for children and families, maternity, unemployment, employment injury, sickness, old age, disability, survivors, as well as health protection.” Social protection definedGiven the implications for individuals if it fails, social protection is widely recognised as an important responsibility of states. Several key UN treaties, including the Universal Declaration of Human Rights, describe it as a right, and international organisations and many countries are comfortable with using the language of rights for social protection from Japans 1947 constitution to last years European Pillar of Social Rights. Its time to act INTRODUCTION An important but unmet aspiration Calling social protection a right emphasises its importance: everyone in need should have a social safety net. In todays developed societies, the question is not whether basic resources exist they do. Instead, the questions are: what is an appropriate level of protection? And how do authorities implement it effectively? The first of these is a political decision, which inevitably varies across different countries. This report is most interested in the second a practical matter of policy execution that is often unnecessarily flawed. Even in developed countries, some social protections are not universal. In the EU, for example, a 2015 study found that about 13% of all workers were at risk of not receiving unemployment insurance if they lost their jobs, and 8% would not receive sickness benefits if they became too ill to work. 6 In South Korea, meanwhile where there is a constitutionally enshrined right to social protection just 53% of workers were covered by unemployment insurance in 2016. 7 And a recent Asian Development Bank study found that in Japan only 77% of potential beneficiaries of contributory social insurance schemes including pensions and unemployment and disability protection actually received any payments. 8 a 2015 study found that: 8% would not receive sickness benefit if they became too ill to work. 8 % The Adecco Group 6The problem of informal work A system built for one kind of work Most countries have social protection arrangements for formal employment relationships, which excludes those in informal work. Informal work makes up a substantial part of GDP: a 2015 analysis found that 12% of German and French economic activity, and 10% in Canada, involved otherwise legal activities kept hidden from the tax authorities. 9 The social protection implications are complex. This kind of work creates a class of highly vulnerable individuals in low-paid, informal employment the people who are most in need of social protection with limited or no access to a safety net. But this is not the only problem. In the US, for instance, the Enterprising and Informal Work Activities Survey found that in the second half of 2015 36% of US adults had performed at least some informal work. The proportion with a total family income of more than $100,000 per year from all sources (30%) was markedly higher than those with family income under $25,000 (18%). 10 Those in the lower income group need more effective social protection, and the higher earners should be paying their fair share to such schemes. Informal work stops both from happening. Christina Behrendt, Head of the ILOs Social Policy Unit, says that challenges are often engrained in national legal frameworks: “Some countries simply dont provide for the self-employed, or have minimum thresholds which exclude people in part-time work, or do not cover people who have a contract that lasts less than a set time.” Self-employed workers face particular challenges. In principle, they have a high degree of freedom but also the responsibility to arrange their social protection as they see fit. But with freelancers no longer being exclusively high- earning professionals, questions arise on the limits of this system. In the Netherlands, the government has indicated that it will start using two systems: one for the self-employed with an hourly rate below a certain threshold, and another for those above the threshold. 11 In the EU, the majority of those at risk of missing out on unemployment or sickness benefits are self-employed, while most of the rest are temporary workers whose contributions are too low to trigger support. 12 This is no longer good enough, says Ccile Jolly, Head of Projects on Work and Employment at France Stratgie a think tank attached to the office of the French prime minister. “We have to design social protection for all vulnerable workers, whether they are self-employed or salaried.” The Adecco Group 7 Some countries have started to make changes. Singapores government has committed to implementing the recommendations of a 2018 report of a work group made up of government officials, union leaders and employers on challenges facing the self-employed including in areas of social protection. 13 And a 2017 EU study found that in recent years 14 European states have made substantial reforms aimed at improving some aspect of social protection for the self-employed. 14 However, the same report complained of the high degree of differentiation in protection for those with different employment statuses. Other major economies are seeing little change. The US social security system, says David Autor, Ford Professor of Economics at Massachusetts Institute of Technology, “Is less generous and more fractured. Much of it is also much more antiquated than in many other developed countries: the programmes that do exist are there because theyve been around for a long time. Theyre not typically rethought or