DISRUPTION has proved to be an inescapable constraint for many businesses and industries across the world. Piggy has noted that disruption is not only driven by technological changes. In fact, shocks that have a bearing on customer behaviours and norms can lead to massive disruption.
For example, the impact of the outbreak of Covid-19 led to social distancing and this disrupted several business models. Billions of people around the world were under orders to stay at home, as governments grappled with the global pandemic.
The good news is that not all is necessarily negative for some companies and individuals. The crisis also presented a real financial opportunity.
Some companies that help users get things; namely in-home delivery start-ups were overwhelmed by demand. In a country like Zimbabwe where the formal unemployment rate is estimated at over 90% and the economy is largely informal, it has become clearer that the days of full-time employment are gone. The future of work has changed.
Enter the gig economy
In a gig economy, temporary or flexible jobs are common, and companies tend to hire independent contractors and freelancers instead of full-time employees.
The gig economy is growing rapidly and undermines the traditional economy of full-time workers who rarely change positions and focus on a lifetime career.
That said, in many cases, gig economy workers in developing economies lack access to basic unemployment insurance and pension systems.
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The dysfunction of formal labour markets, plus the growing gap between those with and without access to social insurance safety nets is a central factor in the dramatic rise in global inequality, lack of social mobility and economic insecurity.
These problems in turn have contributed to social protests that have destabilised democracies.
One solution could be developing social insurance schemes for informal and self-employed workers. Several examples exist, but to date these have been mainly small-scale or experimental.
The Netherlands, for example, has a system of portable, flexible social insurance accounts, which involves workers paying into accounts that they can draw down if their incomes decline because of loss of work, retirement, or health problems.
In designing and implementing social insurance policies and programmes for the large number of workers, who are unprotected, policymakers will need to take the following factors into consideration:
- Given the small size and low profitability of many businesses, employer-contributed social insurance is often insufficient or in some cases unfeasible as a means of funding programmes;
- State support cannot be so generous that the benefits and income exceed those of low-income formal workers. Excessive support could incentivise formal sector workers to defect to informal employment or self-employment;
- Informal sector and gig workers will need to make minimum contributions to their own accounts. But getting workers to do so, as individuals often discount the future, will require incentives to nudge them into contributing at least a minimum of their salaries to social insurance accounts;
- Participation in flexible, individualised social insurance programmes should be voluntary rather than compulsory. While this will likely create leakage in the system, with some individuals choosing not to participate or contribute, a compulsory programme would impose a financial burden on lower-wage gig worker;
- Setting the minimum and maximum contributions at appropriate levels is essential. If the contribution is too low, it will fail to enable the consumption-smoothing function of social insurance. If the minimum is set too high, it will discourage contributions, especially from poorer workers; and
- For the opening and oversight of accounts and for mobilising worker participation, national governments, and international finance institutions (IFIs) should seek to build alliances between private businesses, informal sector associations and labour unions. On the financial side, the need to overcome distrust of the state means that banks, insurance companies and other financial institutions may have to guarantee the oversight and professional management of these accounts.
In conclusion, the government will need to subsidise individualised social insurance schemes. Workers in gig sector employment often lack the income to be able to fund adequate private accounts to cover health and/or unemployment insurance and pensions.
Without the capacity of firms to contribute co-pays, governments will need to step in.
However, fiscal constraints can limit the ability to extend individualised social insurance programmes. There is need for regulators and private players to work with the government to design innovations and interventions in social insurance schemes that are relevant for the Zimbabwean market.
On the Zimbabwe Stock Exchange, Piggy likes EcoCash Holdings given its aggressive approach of rolling our market-relevant offerings in the payments and insurance space.
Buy! Get more tidbits on the stock market by joining a PiggyBankAdvisor WhatsApp Group (+263 78 358 4745).
- Matsika is the managing partner at Mark & Associates Consulting Group and founder of piggybankadvisor.com. — +263 78 358 4745 or [email protected]/ [email protected]
