Solving the unemployment conundrum …digital platforms will bridge the gap

The growth of digital platforms in Africa could offer new opportunities to bridge the current gap between often-insecure informal work and formal employment, digital analysts have said.

Portable benefits, which move with a freelance worker from gig to gig, are what they argue could drive this transition.

Olga Morawczynski, a Senior Program Manager at the Mastercard Foundation and David Porteous, Founder and Chair of the consulting firm BFA and Co-founder and Chair of the Digital Frontiers Institute, note that: “There are already about 300 active digital platforms in Africa, employing close to five million workers. They include e-commerce company Jumia, which was established in Nigeria and now operates in 14 countries on the continent.

“The rise of such platforms has intensified the debate about the demise of traditional employment contracts and the persistence of widespread informal employment in Africa. This shift increases the risk of lower wages and lower-quality work. It also restricts workers’ access to critical benefits, including sick leave, health insurance, workers’ compensation, and employer-funded retirement savings plans.”

They add that: “Although informal work sometimes provides an adequate income, it often traps workers in a cycle of low productivity and even poverty. In most parts of the world, government policies fail to support and protect the growing number of freelance or gig workers, forcing them to navigate a regulatory grey-zone.

“Furthermore, informal employment deprives governments of substantial tax revenues. According to the International Labour Organisation, 85% of workers in Africa are employed informally, and therefore do not declare their income or register their businesses. This loss of potential revenue affects countries’ ability to invest in education, health, and basic infrastructure, all of which are vital for boosting the workforce’s productivity and sustaining broader economic growth.”

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Gig workers, they noted, are increasingly putting pressure on employers to rethink outdated models of compensation and benefits. Uber, for example, has recently lost a series of lawsuits in the United Kingdom – instigated by drivers seeking access to basic benefits like minimum wage and holiday pay.

“In an effort to appease their workers, platforms are experimenting with additional incentives for contract workers. For example, drivers working for ride-hailing company Lyft in the United States get a voucher giving them a discount when they visit a doctor, while TaskRabbit workers are provided with liability protection of up to US$1million. But these perks are still a far cry from the health-care and retirement benefits that companies traditionally offer their full-time employees.”

In Ghana, government’s effort at digitising the economy and bringing the informal sector into the mainstream to aid planning, boost efficiency – and for tax purposes, is expected to see more people become freelance workers, moving from gig to gig and demanding portable benefits.

A growing number of experts and policymakers are therefore looking at the feasibility of portable benefits, which are not tied to a particular job or company. Employers would pay a certain percentage toward universal benefits for all work that they commission, regardless of the nature of their contract with the worker. For example, if an independent worker drives one hour for Uber, and walks a dog for another hour on Rover, each platform would contribute an equal amount toward his or her benefits. This would enable independent workers to accumulate and manage their benefits, and eventually acquire a safety net like that of a full-time contracted employee.

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“With digital commerce estimated to benefit at least 80 million young Africans by 2030, opportunities for gig workers will increase. And if access to a range of valued benefits, from health insurance to pensions, is made conditional on registering their business and paying taxes, they will have a powerful reason to formalise their work.

“Digitisation could enable the formal sector to offer a spectrum of benefits for workers and responsibilities for employers. African labour-market regulators and tax authorities can play a significant role in recognising and incentivising progress along this spectrum. This means taking stock of which benefits workers value most, and then designing effective policies that encourage digital platforms to offer them. Moreover, such policies should ensure that benefits are portable and tied to the worker rather than the platform, so that people can choose the ones which suit them,” they said.

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