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New jobs earn firms billions at expense of their staff

By Macharia Kamau | April 9th 2019
Youth at Subukia digital and innovation hub last month. Most jobless youths are using the hub to earn a living via online jobs. [Kipsang Joseph, Standard]

The Government’s online job creation initiative dubbed Ajira Digital may not have registered much success, though it exemplifies what the gig economy would look like.

The Government’s fronted programme aimed at recruiting a million people to do online freelance jobs, offering their services mostly to foreign firms and individuals that opt to outsource certain skills.

It would mean that a million young Kenyans would be working outside the conventional workspace, setting their own hours and working from anywhere. Players in the industry, term this emerging trend as gig economy and compare it to traditional freelance jobs and even self self-employment.

What the gig economy labour force however lacks is the interaction with certain institutions such as cooperatives, defined career paths, labour unions, and pensions, that would cushion their lives today, offer fall back plans in the coming years and even a bearable life in post-retirement.

Online and outsourced jobs have been tipped to grow, and for Kenya, play part in reducing unemployment.

New opportunities

Kenya’s technology entrepreneur Amolo Ngweno notes that technology will create a set of new opportunities in the gig economy, which are seen in areas such as shared-ride drivers, homestay hosts, e-commerce logistics, e-commerce sellers and small scale e-commerce producer.

This growth, however, portends a crisis in the coming years, with many of the people working these jobs being locked out of benefits that would accrue to season employees.

Ngweno, in a report co-authored with David Porteous - the founder and chair of consulting firm BFA, noted that the multinational firms that have developed platforms that have made the gig economy attractive might end up transforming workers into casual labourers that are picked from a sidewalk of a factory and given the job for a day, at low pay and no benefits.

The companies, a number of them listed in key markets such as the New York Stock Exchange, are also not paying taxes at the different markets where they operate.

The authors noted that while in the digital world toil away, “the rewards go to the platform providers. This next-generation gig economy hardly seems any better than the old one, as global platforms resist providing any of their workers with the protections and benefits of formal enterprises, as well as actively seeking to avoid taxation.”

They add that Governments should evaluate modalities of regulating online jobs, especially when it comes to ensuring that the people taking online contracts have some benefits, even if these are the social security products offered by the state entities.

“As an economy digitises, more people are needed to help the customer and the citizen transition into the digital economy…. In African countries, it’s probably realistic to ask governments to recognise that gig work is the main source of livelihoods for most and then mandate that platform providers open their systems to allow workers to register for government benefits and private services rather than creating a whole range of poorly enforced regulations,” said the duo in their report.

“Allowing workers to maintain a single identity through the different platforms would be an important way for individuals to carry their reputation, their financial history, and their benefits packages with them as they move from gig to gig. Governments could offer benefits such as health insurance and pensions directly through interfaces in the platforms and could require these platforms to open themselves to private providers as well.”

The gig economy jobs are increasingly gaining momentum in the country, especially among young Kenyans joining the workforce. Most of them are finding that technology can enable them to make a living without being tied to a desk or even have to show up at the office every day.

 “We are no longer having people who enter employment to retire. The gig economy simply means you can work from anywhere, at any time. We have to expand the horizon and start asking ourselves whether the term retirement is actually valid so that we can start empowering people from as early as we can afford it. The millennials are now well belted in the workplace,” said Tom Muchelle and human resource practitioner and member of the Institute of Human Resource Management (IHRM).

Mary Kipkemoi, a Strathmore University lecturer whose team worked with pension’s administrator Enwealth Financial Services in writing a report that partly evaluated how millennials are saving for retirement noted that while they might be inclined to save, they do not understand the options that they have.

“The gig economy in its nature is hard to control and regulate. So, we have a number of students in their third and fourth year who are getting jobs and making Sh60,000 or Sh80,000 off the web and this is spilling to outside university, with people making careers from these freelance jobs. The money is not tied to a saving plan such as pension,” she said at a recent forum by Pensions administrator, Enwealth Financial Services Ltd.

Save for retirement

Diana Nyakio of ICEA Lion Group said while there are no structures for workers in the gig economy to save for retirement, there are options to save for old age. Such include taking a route that a self-employed person would go, whereby they will usually take the initiative and have a retirement savings plan.

“For such a category, it is unlikely that they have registered for a pension scheme. However, pension savings are available to such individuals since they fall in the same category as self-employed individuals.

The Personal Retirement Savings has been available for individuals in business or self-employed or those who are employed but their employer has not set up a pension scheme for the staff,” she said.

She, however, notes that the level of disinterest in saving for retirement among millennials who make the bulk of people working for different technology platforms and associate retirement with old, still a far-fetched concept for them.

“Having personally interacted with a lot of millennials in my line of work, most of them do not appreciate savings especially when it comes to long term savings of which pension is one,” said Nyakio.

This could, however, be looked at an opportunity for business expansion (for the pensions industry). What may be lacking is aggressive marketing aimed at creating awareness of the existence of such products,”

“Maybe more awareness and a real-time talk on challenges that result in old age, worse still when one is broke.

Perhaps for millennials, retirement is so far away. They never see it coming hence no urgency to plan. This pension talk should happen more often to create strongholds of its urgency and importance to millennials.

Maybe, the industry could also introduce more lucrative interest rates (currently different firms give different rates ranging from four per cent to 12 per cent per annum).”

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