Precarious employment: when those who earn least take the greatest risk

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By Cormac Lucey

The foundation stone of modern financial theory is the capital asset pricing model. This argues that the greater the volatility of an investment, the higher the return that investors should seek to compensate for risk. Modern employment practices are turning this principle on its head. Today it is often those who are paid least who face the greatest employment risk, and those who are paid most who face the least.

Precarious work is defined as employment that is insecure and uncertain, often low-paying, and in which the risks of work are shifted from employers and the government to the workers. While the impact differs from state to state, precarious work underlies many of the insecurities that have fuelled populist political movements in Britain, America and Germany.

Ireland has been no exception in the development of precarious work. Casual labour has long been a feature of the construction and hospitality sectors but it has also been growing in sectors that previously offered more long-term and secure employment.

While the high-tech sector pays well, for instance, a great deal of the work is short-term and contract-related. Some software and consulting firms pass employment risk down the food chain and encourage recruits to work as contractors.

There are advantages for employees, with greater scope for tax write-offs, lower PRSI contributions, and scope for greater pension deductions — but these may be outweighed by job insecurity, greater difficulty in arranging mortgage finance, and associated worries.

Precarious work can also be accompanied by practices such as unpaid overtime and workers being “on call” outside the hours for which they are actually paid. In extreme cases, workers who contract almost exclusively for one employer run the risk of being accused by Revenue of having engaged in bogus self-employment.

The Think-tank for Action on Social Change (Tasc) examined precarious work in Ireland this year. It identified sectors in which the practice had taken hold, ranging from retail and childcare to communications, financial services and healthcare.

Third Level Workplace Watch, a group that campaigns for greater job security, is concerned at the casualisation of work in third-level education. It reckons that up to 40% of teaching hours are now delivered by part-timers, while most researchers are on temporary contracts.

In the media sector, traditional outlets are under increasing financial pressure as ad spending has begun to swing towards social media. This has been accompanied by a shift to short-term contracts and casual work.

Séamus Dooley, secretary of the Irish National Union of Journalists, says the media is now “a growth area for precarious work”. There are freelancers who are employees in all but name and unpaid interns doing work previously done by paid employees.

Even the organisation Fight Against Slavery advertised on Gumtree earlier this year for an unpaid intern, who would “meet with company boards to ‘discuss ethical standards’, oversee project management, set budgets and develop a strategic plan”. That’s a lot of responsibility for no pay at a body dedicated to combatting slavery.

Professor Arne L Kalleberg of the department of sociology at the University of North Carolina recently gave the annual Geary lecture at the Economic and Social Research Institute (ESRI) on the subject: Precarious Lives — Job Insecurity and Wellbeing in Rich Democracies.

He examined how people in six countries with different welfare and employment systems — Denmark, Germany, Japan, Spain, the UK and America — differed in their experiences of precarious work. Kalleberg also explored the outcomes such as job and economic insecurity, entry into the labour force and wellbeing.

Kalleberg divided the six nations into categories. The liberal market economies — the UK and US — showed a more relaxed attitude to the growth in casual labour and work precariousness. Here risk was individualised.

The co-ordinated market economies, such as Germany and Denmark, took a more interventionist approach to try to stem that growth. In these countries, individual risk was reduced by society and, to an extent, collectivised.

Japan and Spain fell somewhere between the two extremes. The most striking aspect of Kalleberg’s presentation was that the sharpest rise in the share of workers in temporary employment was not in the UK and America, which adopted the most liberal policy stances. Rather, it was in Spain, which had recently suffered the most grievous economic reverse. That suggests precarious work may be more a reaction to short-term economic setbacks than a long-term structural change in our labour markets.

In recent research on precarious work in Ireland, Ciarán Nugent of the Nevin Economic Research Institute found the proportion of Irish workers on temporary contracts had actually changed little over the past decade, remaining at about 9%. There has, however, been a significant rise in temporary contracts for younger workers, from fewer than 15% of jobs in 2004 to more than 20% by 2015.

Nugent reported that almost two-thirds of those would rather have a permanent job but could not find one. That’s 13% of all workers in this younger age cohort. For workers older than 30, the figure is closer to 3%.

This indicates that precarious work is primarily concentrated among younger people starting employment. It also suggests that, while the problem is much discussed, its incidence is so far relatively limited.

The Irish experience may also be consistent with the phenomenon of precarious work as a short-term response to a country’s weakened economic circumstances, rather than a structural change. Employers under pressure in the recession years might have had limited scope to reduce costs at the expense of older and more secure employees, but they could reduce the terms that they were extending to new employees.

Younger workers, who first entered the workforce between 2008 and 2012, would have been particularly affected. The hope must be that the subsequent recovery in the labour market tilts it in favour of employees — especially young ones — and away from employers.

Published in The Sunday Times (Ireland edition)

December 3rd 2017

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