Opinion: How to support the self-employed through the pandemic

Submitted by pmassetti on Thu, 03/26/2020 - 11:21

Financial Times (25.03.2020) Disruptions caused by coronavirus have exposed the gaps in the welfare system

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Under pressure to fill in the gaps in his plans to support workers through the virus outbreak, Britain’s Chancellor Rishi Sunak will on Thursday unveil help for the self-employed. He is not alone in searching for ways to aid those in precarious work. Across the developed world, governments are struggling to adapt welfare states to protect the ranks of gig economy workers. Social benefit schemes designed for an era of stable mass employment are not up to the task of coping with the pandemic. One-sided flexibility in labour markets, which allows companies to hire and fire at will, may promote dynamism during economic good times but puts all the risk on to workers. Amid the disruption of Covid-19, there is little protection for self-employed and gig economy workers whose incomes have disappeared as they are forced stay at home in the interest of public health. The countries that have reacted best so far are those that already have the most sophisticated welfare systems. Norway has guaranteed 80 per cent of self-employed workers’ average incomes, based on tax returns over the past three years. Denmark has guaranteed 75 per cent. The Scandinavian “flexicurity” model that combines dynamism with protection is, once again, a model. Other countries, such as the UK, must play catch-up. Mr Sunak is said to be looking at a similar scheme for subsidising self-employed incomes. Getting these systems up and running will take time and is administratively difficult. Even existing processes are under pressure. Almost 500,000 people have applied for Britain’s universal credit system, which provides income support to low-paid workers, over the past nine days; the Department for Work and Pensions has had to move thousands of workers and draft in more to help process the backlog. Some governments are using ad hoc payments. In the US, the stimulus package agreed by Congress includes only a one-off payment of $1,200 for the self-employed who, ordinarily, do not qualify for unemployment benefits. Germany, where precarious minijobs have proliferated since the labour market reforms of the early 2000s, is offering grants of up €15,000 to the self-employed and freelancers over the next three months. Applications and transfers will take time, even once the systems are up and running. Still, credible promises are essential. Uncertainty is debilitating and the self-employed can use these guarantees to help secure credit to tide them over for the intervening period. Companies, too, must think before they act. Coronavirus has been a stark reminder of the class inequalities in the gig economy: Uber, for example, is encouraging its salaried employees to work from home while drivers are told to keep working unless infected. For countries that cannot follow the Norwegian model, the simplest and most effective measure will be an unconditional temporary basic income. This could be sent to all registered adults for the duration of the lockdown. Otherwise, no lockdown will last: people will not stay at home if it means starvation and homelessness. The money can be taxable and claimed back once work resumes. Flexibility is here to stay. When the crisis abates the ability to hire easily will be vital. Even today, drivers and retail staff are in high demand, providing some jobs growth as others are laid off. Yet reform is urgently needed. Many in secure employment are being made more aware of those they depend on. That will increase demands for permanent changes to ensure gig workers are properly protected. For now, governments must extend support to all.