Social protection of atypical workers during the Covid-19 crisis

The Covid-19 crisis acts like a magnifying glass under which already existing problems within countries’ social protection systems become more visible than before. It puts the spotlight on weaknesses, especially the social protection of the atypically employed and the (solo) self-employed.

Across many countries, a number of social benefits have been expanded to better protect these groups during the crisis. This article firstly describes the development of atypical employment before the crisis and then provides an overview of measures introduced in five selected EU countries to counteract the negative income effects of the crisis. The countries include Germany, France, Finland, Italy, and the United Kingdom. In a follow-up article to be published in July 2021, we will further discuss whether the coronavirus crisis has exposed the need for social protection systems to be adapted in the longer term.

Non-standard forms of employment develop differently across Europe

In the Covid-19 crisis, non-standard or atypical forms of employment are disproportionately affected as shown by Carina Sperber et al. in a 2021 study. In all European countries, the different forms of paid work beyond standard permanent full-time employment have become more prevalent in recent decades. However, since the last economic crisis of 2008/09, the average share of traditional non-standard workers at the EU level has hardly increased except for part-time and very short-term employment. Traditional non-standard employment such as temporary work has even declined, particularly in Germany (see Figure 1).

In Germany, part-time employment is especially common. The share of regular part-time workers continues to rise while the number of marginal part-time workers who earn up to 450 euros (so-called “pure mini-jobbers”) has been decreasing since 2015. The share of employees working under a temporary contract (including fixed-term contracts, apprenticeships and temporary agency work) has also been decreasing since 2015 (see temporary contracts in Figure 1). This trend is confirmed by a study based on German establishment panel data. The share of fix-term contracts fell significantly between 2018 and 2020 as a 2021 study by Christian Hohendanner shows. Short-term employment contracts with a duration of less than three months are hardly relevant in Germany. In contrast, with 5 and 4 percent of all employed persons respectively, such contracts are much more common in France and Finland. In the United Kingdom and especially in Italy, solo self-employment (self-employed without employees) is a very common form of non-standard employment.

New forms of employment become increasingly important

In addition to the aforementioned forms of atypical employment, there are new work arrangements such as on-call work or casual work, mobile work using information and communication technologies (ICT) or freelance work under work contracts or service contracts. These new forms of work, mainly ICT-based mobile work, have grown exponentially during the Covid-19 pandemic and associated lock-down measures, although they are not a new phenomenon.

Analyses of such new forms of employment across the European Union, such as a 2020 Eurofound study, emphasise that standard employment is not simply replaced by non-standard work, but that employment is becoming increasingly diverse compared to traditional forms of atypical employment, it is more difficult to collect statistics on these new forms of employment. New forms of work are regulated differently across countries and they are also subject to different social protection provisions. They can be subject to general labour laws or specific rules, regulated by collective agreements, or not regulated at all. In Germany, on-call work, for example, is covered by labour law and, with the exception of “mini-jobs on call”, casual workers are subject to regular social protection contributions whereas “zero-hour contracts” in the United Kingdom can be considered as a precarious form of employment, as they, for example, do not guarantee a minimum number of working hours.

The rising importance of platform work across Europe

New challenges for labour markets worldwide are posed by the upcoming platform economy. The rise in activities within the platform economy is particularly striking, although platform-related jobs are still in the minority. Recent data published by the International Labour Organization in 2021 show that between 2015 and 2020 the number of active digital labour platforms worldwide increased, ranging between plus 28 percent for pure web-based online services to about plus 77 percent for delivery services and plus 100 percent for taxi platforms. The COLLEEM survey conducted in 2018 across 16 EU countries and discussed in a 2020 paper by Urzì Brancati et al.  attempts to estimate the number of workers performing platform work. However, since platform work is a relatively new form of employment and difficult to capture statistically, the survey may suffer from some bias and the results should be considered as approximations. The study estimates that about 11 percent of workers have provided services via digital platforms, either as their primary or as a secondary/marginal job. Figure 2 shows that more than 12 percent of the projected number of German workers have provided such services in 2018, 1.5 percent as their main job and 4.2 percent as a secondary job.

The other categories (“marginal” and “sporadic”) are defined as either having provided services via platforms at least monthly, spending less than 10 hours a week and generating less than 25 percent of their income via platforms (this is the “marginal” group), or having provided services less than once per month (this is the “sporadic” group).

Platform workers are a very heterogeneous group, and they rank between dependent employment and self-employment. The COLLEEM survey points out that these workers are mainly males or young couples; about half of them have a high level of education, which is significantly larger than in the general population; and a disproportionally high number of them have a foreign background. Average hourly pay varies widely, reflecting the fact that some platform jobs are highly specialised (e.g. professionals, software coders) while others are essentially low-skill jobs (e.g. delivery services).

Platform workers face a high risk of precariousness, particularly those engaged in low-skilled and online platform work. The main challenge for the better regulation of platform work is the unclear employment status of platform workers: Are they employees with the corresponding labour and social rights, or are they predominantly (bogus) self-employed workers? In several EU countries (e.g. in Germany) there are judicial case-by-case classifications of platform workers, but there is usually no general application of rules to all platform workers. Only very recently and for the first time in the EU, platform workers in Spain have been generally recognised by law as workers with employees’ rights. In a single case ruling from February 2021, the Federal Labour Court in Germany also classified platform workers as “employees”. Proposals to improve labour conditions for platform workers are high on the political agenda in the European Union (for a further discussion see the IAB-Forum article “Will the German social protection system need to be adapted after the Covid-19 crisis?” to be published in June 2021).

Unemployment insurance systems provide insufficient coverage for non-standard workers

Germany, France, Italy, Finland, and the United Kingdom have multi-layered social protection systems. Unemployment insurance benefits are usually the first pillar of the support system for the unemployed. Unemployment insurance benefits are typically financed by contributions from employers and employees or sometimes by state subsidies as in Finland. Unemployment insurance generally does not distinguish between different forms of employment among the insured group of workers. In principle, it is also open to fixed-term or part-time employees, provided that they pay contributions. However, in most countries, certain qualifying periods (minimum periods of employment) are a prerequisite for receiving insurance benefits. These vary considerably from country to country. In Germany, employees normally must have been employed for at least 12 months during the last 30 months to be eligible, whereas in France this is normally 6 months within the last 24 months. The duration of benefit receipt varies considerably: in the United Kingdom, flat-rate unemployment insurance benefits are only granted for 6 months; in Germany, insurance benefits are paid for a period of time between 12 and 24 months, and in France between 24 and 36 months. Individuals who have been employed only for a short period or who have a temporary contract run the risk of not being able to meet the eligibility criteria. In Germany, about one third of the unemployed whose employment ended in 2016 or 2017 were not eligible for unemployment insurance benefits and did not take up a new job within the subsequent month, as shown by the Gesine Stephan’s 2019 study. Even if these persons are entitled to unemployment insurance benefits, their level is not always sufficient to secure their livelihood, for example if they previously received low wages or worked part-time.

This does not mean, however, that this group of people does not have any social protection at all. Depending on their income in the household context, in Germany they are entitled to supplementary basic income benefits in the form of ALG II (unemployment benefit II). The calculations of the IAB show that, due to shorter qualifying periods in the past, more newly unemployed people would be entitled to unemployment insurance benefits than is presently the case. However, only a proportion of these unemployed persons would be able to cover their living costs with it. The other proportion would still have to claim supplementary benefits like ALG II  as the insurance-based unemployment benefit would not be sufficient.

Self-employed and platform workers have little access to social protection

Unemployed persons who do not pay contributions (whether voluntarily or involuntarily) are not covered by unemployment insurance. In Germany, these are individuals who are so-called “mini-jobbers”. In Finland, voluntary membership in an unemployment fund is a prerequisite for receiving wage-related unemployment benefits. In 2015, about 90 percent of all employees were members of an unemployment fund. The self-employed and platform workers are groups who are usually not eligible for unemployment insurance coverage. These groups include self-employed small-scale entrepreneurs and often also the solo self-employed as well as so-called “gig” or “platform workers”. Frequently, they have low incomes and are not sufficiently protected in the event of a sharp drop in income and lack of support from other household members. In most EU-countries self-employed people are traditionally not compulsorily insured against unemployment. However, voluntary membership in unemployment insurance schemes is possible in most countries. In Germany, voluntary insurance for those who set up a new business is possible. However, in 2018, partly due to restrictive access conditions, only a small share of those who started a new business took advantage of voluntary insurance as shown in the 2020 study by Elke Jahn and Michael Oberfichtner. In the United Kingdom, there are no possibilities for self-employed workers to gain access to the unemployment insurance. In Italy, so-called ”false self-employed” and self-employed not already covered by a specialised professional pension fund (e.g. those existing for lawyers, medical doctors, and other categories) are covered by a specific fund (so-called “Gestione Separata”). Unlike the German social insurance for artists – a special scheme that offers artists and writers insurance at a subsidised rate involving mandatory membership for artists – a similar scheme in France (so-called “Intermittents du spectacle”) also includes specific regulations in the event of unemployment.

Minimum income systems vary in their protective capacity

Unemployed persons who are not (sufficiently) covered by unemployment insurance benefits or whose entitlement has expired can apply for subordinated means-tested benefits in all countries considered here. While Finland, France, and Italy operate second-tier unemployment assistance schemes which are granting means-tested but wage-related benefits exclusively to the unemployed, Germany and the United Kingdom run universal basic income schemes which grant benefits, irrespective of the unemployment status, to all those who fall below a certain income threshold. The basic income scheme for job-seekers in Germany and the “Universal Credit” in the United Kingdom are two very comprehensive means-tested basic income systems, which also cover self-employed people with low income and low-wage earners on the household level. This broad accessibility has underpinned the protective capacity of universal basic income systems during the pandemic. This is most notable compared to more residual minimum income schemes in countries such as Italy where a rather selective “Citizenship Income” (the so-called “Reddito di Cittadinanza”) was introduced at national level only in 2019. In May 2020, the government had to introduce an “emergency income” (the so-called “Reddito di emergenza”) in addition to the existing “Citizenship Income” scheme due to considerable gaps in covering low-income families.

Many countries extended short-time work schemes to atypical workers

In the current crisis, short-time compensation or comparable benefits such as partial unemployment benefits or temporary layoffs have been the means of choice in almost all European countries to protect employees from income losses.

At the European level, a similar instrument for temporary “Support to mitigate Unemployment Risks in an Emergency” (SURE) was created. The financial support is provided in the form of loans granted on favourable terms from the EU to those Member States who request to receive financial support under SURE. When approved by the Council, SURE helps Member States to cover the costs directly related to the financing of national short-time work schemes, and other similar measures they have put in place as a response to the Covid-19 pandemic, in particular for the self-employed.

When programmes are financed from general tax revenues such as the British Job Retention Scheme, they have no direct link to the unemployment insurance system, as shown by Regina Konle-Seidl’s 2020 overview. In Germany, short-time work benefits are generally financed from the contributions to unemployment insurance, implying that workers affected by short-time work must in any case be in an employment relationship subject to social insurance contributions.

In contrast to the financial crisis of 2008/2009, many countries have extended access to short-time work benefits to more employment groups and economic sectors in order to cover workers who were previously not eligible. In Germany, for example, “temporary help workers” are now entitled to short-time work allowance. In France, the employment group “domestic workers” are now covered. In Italy and the United Kingdom, “on-call workers” were also included in the respective short-time working programmes (see Table).

In all countries, there were gaps in the coverage of small businesses and the self-employed even before the Covid-19 pandemic. During the crisis, all five countries therefore introduced temporary measures to better support these groups (see Table). In addition, four of the five countries under comparison have made temporary benefit extensions to the unemployment insurance system, in order to take the reduced chances of re-employment in the event of job loss into account (see Table).

In all five countries, temporary measures were put in place to bridge existing gaps in the lower-tier basic income systems. The aim of these measures is to facilitate access to social benefits for groups not covered by short-time work schemes or not entitled to unemployment insurance benefits in case of job loss. This was also the case in countries with a well-developed basic income system, such as the United Kingdom (the so-called “Universal Credit”) or Germany (the so-called “Grundsicherung für Arbeitssuchende”). The United Kingdom relaxed the upper limit for social benefits and increased the standard rate by almost 100 pounds. In Germany, limits on the assets which can be held by claimants  in the basic income scheme has temporarily been eased and the upper limit for housing costs has been suspended. In addition, the ”emergency child allowance” facilitated access to an additional child allowance for low-income families.

Conclusion

Many countries have reacted quickly and used a range of instruments to support those who have lost their livelihoods during the crisis. Almost all EU countries either relied on or extended existing short-time working schemes, or introduced such schemes. Some also made their unemployment benefit- and basic social protection systems more generous and eased access requirements. The ad hoc measures taken, and in particular the extension of short-time working benefits to some groups of atypically employed workers, have prevented the segmentation between employees in regular jobs and those in atypical employment from becoming even more pronounced. For the future, the question will arise as to which of the extraordinary crisis measures should be retained and even extended to the increasing number of workers in non-traditional forms of atypical employment such as platform- or solo self-employed workers. In a follow-up article to be published in June 2021 we discuss whether social protection gaps revealed by the crisis require more universal social protection systems to gradually replace wage and standard–employment centred social protection systems.

Literature

Eurofound (2020): New forms of employment: 2020 update, New forms of employment series, Publications Office of the European Union, Luxembourg.

Hohendanner, Christian (2021):  Befristungen im zweiten Jahr in Folge rückläufig. IAB-Forum Serie „Corona-Krise: Folgen für den Arbeitsmarkt“, 26 April 2021.

ILO (2021): World Employment and Social Outlook 2021 – The role of digital labour platforms in transforming the world of work.

Jahn, Elke; Oberfichtner, Michael (2020): Freiwillige Arbeitslosenversicherung: Nur wenige Selbstständige versichern sich gegen die Folgen von Arbeitslosigkeit. IAB-Kurzbericht, No. 11/2020, Nürnberg.

Konle-Seidl, Regina (2020): Short-time Work in Europe: Rescue in the Current COVID-19 Crisis? IAB-Forschungsbericht, No. 04/2020 (en), Nürnberg, 17 p.

Stephan, Gesine (2019): Anspruchsvoraussetzungen beim Arbeitslosengeld: Längere Rahmenfrist hat überschaubare Auswirkungen. IAB-Kurzbericht, No. 9/2019, Nürnberg.

Urzì Brancati, Cesira; Pesole, Annarosa; Fernández-Macías, Enrique (2020): New evidence on platform workers in Europe. Results from the second COLLEEM survey, EUR 29958 EN, Publications Office of the European Union, Luxembourg, 2020.