A new social contract for the digital age

Samir Saran| Terri Chapman|Mihir Swarup Sharma

Digital  transformations  are  rapidly  altering  the  nature  of  work,  models  of employment,    contracts,    regulations    and    protections.    Increasingly,    the responsibilities  of the state are becoming the obligations  of,  and a  business case  for,  the  private  sector.  This  devolution  of  ‘governance  responsibility’  is happening   at   a   rapid   pace.   In   many   locations,   this   coincides   with   the decentralization  of  political  power  to  local  administrations.  A  new  social contract  between  citizens,  consumers,  employees,  the  state,  and  enterprise is  needed  to  delineate  a  new  understanding  around  rights,  responsibilities and  entitlements.  As  a  step  towards  defining  such  a  contract,  we  set  out seven norms for defining these relationships in the digital age.


Attribution: Samir Saran, Terri Chapman and Mihir Sharma, “A New Social Contract for the Digital Age”, ORF Special Report No. 79, December 2018, Observer Research Foundation.

This report was first published as “A New Social Contract for the Digital Age”, in G20 Insights, 30 May 2018.


Challenge

The  disruptive  potential  of  rapid  technological  change  and  digitization  on employment,  job  creation  and  displacement,  employment  relations,  wages and inequality are immense and immeasurable.

Automation     is     challenging     predominant     conceptualizations     of     the workplace   and   workforce,   as   tablets   and   phones   replace   factories   and offices,  and  gigs  replace  full-time  jobs.  There  is  every  reason  to  suppose that,  in  a  business-as-usual  scenario,  this  trend  will  not  just  continue  but accelerate.

In  this  evolving  economic  structure,  an  individual  is  a  citizen,  but  also  a consumer, a capital-owner, an entrepreneur, an employer and an employee. The   borders   between   these   roles   are   no   longer   sharply   defined;   the traditional      relationship      between      employers      and      employees      has fundamentally  changed.  The  historic  model  of  employer-provided  social assistance  must  be  adapted  to  account  for  this  new  dynamic,  and  a  new point of provision of social protection needs to be identified.

Non-Atlantic G20 countries have extensive experience in grappling with the realities  of  informality  and  non-standard  forms  of  employment.  It  is  useful therefore  to  examine  the  contours  of  the  support  that  these  states  are attempting  to  provide  workers  as  an  approximation,  however  imperfect,  of the benefits traditionally provided by formal-sector “regular” employment.

Erstwhile responsibilities of the state are now an obligation of, and business case for, the private sector. The needs of individuals today are disparate and   heterogeneous,   and   may   no   longer   be   met   just   through   large investments  in  physical  or  social  infrastructure,  and  are  increasingly  being addressed   through   niche   solutions   best   offered   by   private   enterprises. Mediating  this  new  dimension  of  the  relationship  between  individuals  and the   private   sector   will   require   a   clear   delineation   and   devolution   of responsibilities and recourse.

At  the  same  time,  the  atomization  of  work  has  constrained  the  extent  to which  individuals  can  organize  and  make  demands.  The  collectives  and unions  that  traditionally  acted  as  arbiters  for  the  interests  of  a  substantial stakeholder   group   are   increasingly   ineffective.   Therefore,   there   is   an additional need for a new guarantor of the relationship between individuals and    the    private    sector    that    provides    for    purpose,    paychecks,    and protections.

This  new  guarantor  is  unlikely  to  be  any  single  agent,  actor,  rights  group, government  agency,  enterprise  or  regulator  as,  (a)  the  highly  amorphous emerging work landscape will demand flexibility, institutional innovation and informality,  and  (b)  swiftly-evolving  technology  will  continue  to  challenge the   capacity   of   legislation   and   laws   to   remain   meaningful.   Therefore elucidation  of  principles  and  norms  that  must  govern  the  new  operational relationships becomes compelling. These, in part and whole, must guide the plethora of relationship and laws that are defining the new workspace.

As a starting   point,   there   are   seven   norms   that   should   be   central   to governing these new relationships.

Proposal

1.  From the Job Security to Economic Security: A new ‘formality’

Digitization  is  enabling  unpredictable  transformations  in  work  across  G20 countries  and  beyond.  One  result  of  this  is  that  the  relationship  between employers and employees has fundamentally changed, and so too have the responsibilities  borne  by  employers.  While  a  future  social  contract  may  not be  able  to  credibly  promise  job  security,  it  should  be  able  to  guarantee social and economic security. That is, the financial security (paychecks), and social security (protections) that were previously provided by full-time jobs, must now be provided through alternative means.

The experiences of emerging G20 economies in contending with informality and  constructing  approximate  securities  for  the  informal  workforce  should inform such transformations in more advanced G20 economies.

Norm: A new ‘formality’ must ensure social and economic security.

Corollary: Responsibility for economic and social security must be explicitly assigned.

2.  From the Factory to the Cloud: A New Point of Provision

All  G20  states  have  some  form  of  welfare  system.  The  predominant  model for providing this is by linking benefits – whether forced saving or access to pensions   and   healthcare – to employment   status.   The   binary   between employment and unemployment is, however, quickly becoming irrelevant.

Indeed, an individual can simultaneously have a low-paying open-ended job with   employment   protection,   a   more   lucrative   part-time   job   with   no employment  protection,  and  an  entrepreneurial  venture.  Welfare  systems based  on  a  job/no-job  binary  and  the  workplace  as  the  point  of  provision are too restrictive to account for the variation and variability in employment that  are  characteristics  of  work  today.  Social  benefits  should  no  longer  be linked   to   a   specific   job   but   available   to   individuals   regardless   of   their employment status.

In  countries  such  as  India,  this  has  long  been  the  subject  of  government plans – see for example the 2006 Report on Social Security for Unorganized Workers.[i]  There  was  an  initial  attempt  to  turn  these  recommendations  into law  in  2008,  another  such  effort  is  currently  underway.[ii]  These  endeavours essentially follow the trail blazed by South Africa, which wrote rights-based social protection for all workers into its constitution in the 1990s.

Moving away from a fixation on employment status and employer-provided assistance would enable a large ‘formalization’ of workers who currently fall through   the   cracks   of   a   rigid   system   that   does   not   account   for   the complexities  and  dynamic  nature  of  work.  This  would  require  a  new  form and mechanism for the provision of rights, as well as a different, diffuse and accessible point of provision.

Norm:  Entitlements must be linked to individuals rather than to jobs.

Corollary: Entitlements, like rights, must be available to individuals regardless of their formal employment status.

3.  From Atomization to Solidarity: Constructing Co-operative Networks

Labour  unions  and  other  collectives  that  previously  provided  platforms  for organizing   and   arbitration   for   a   substantial   share   of   the   workforce   are becoming   less   important   as   the   workforce   becomes   more   atomized. Collective   organizing,   bargaining   and   mobilization   –   the   mechanisms through  which  workers  has  historically  made  demands  –  is  exceptionally difficult to exercise for fragmented contract workers and the self-employed.

Employment  status  shapes  the  extent  to  which  labour  laws  are  applicable, the  access  that  workers  have  to  labour  unions  and  to  each  other.  The individualization   of   labour   therefore   affects   the   power   of   workers,   by constraining their ability to connect and organize.

State    policy    and    private    sector    choices    should    actively    aid    in    the construction    of    cooperative    networks    rather    than    hoping    that    new technology   lets   individuals-as-workers   create   them   for   themselves.   The private sector will have to accept that, while an organized workforce is one better  able  to  bargain,  an  atomized  potential  workforce  is  one  that  will  not be able to innovate or increase productivity through learning by doing.

Norm: Enabling  mechanisms  of  solidarity  must  be  a  priority  of  the  public and private sectors.

Corollary: The  individualization  of  labour  should  not  result  in  the  loss  of mechanisms for collective bargaining.

4.  From Static to Dynamic Careers: Enabling Individual Transitions

New  forms  of  employment  may  not   meet  the   expectations  of  aspiring young  people  or  of  the  existing  workforce  that  is  being  forced  to  adapt  to changing  technology.  Young  countries  such  as  India,  where  more  than  half of the  population  is  below the  age of 25, must find  ways  of  employing and protecting  its  young  workers  –  but  will  also  need  to  find  ways  to  manage and  meet  their  expectations  and  ensure  purpose.  Similarly,  advanced  G20 economies  with  ageing  populations  may  need  to  examine  how  to  meet  or moderate  the  expectations  of  life-long  workers  who  are  being  rendered unemployed or unemployable by technological change.

One aspect of this is that the nature of employment as it pertains to the life- cycle    has    changed.    The    traditional    (and    often    preferred)    model    of employment means that we move from education into work, and then into retirement,  with  few  transitions  in  between.  The  emerging  model  looks profoundly different, in which we move in and out of education, and in and out of jobs, with an average tenure of employment of around 4.2 years.[iii]

The  job  security  of  the  previous  model  must  be  replaced  by  a  security infrastructure  defined  by  ample  learning  and  skilling  opportunities  that  can assist  individuals  in  the  transitions  inherent  in  the  new  model.  States  will have to recognize that youth populations without the purpose provided by occupational  choice  will  seek  other  and  potentially  more  divisive  forms  of identity.

Norm: The public and private sectors must play a central role in supporting lifelong learning and career transitions.

Corollary: Skilling,  upskilling  and  reskilling  efforts  must  be  both  recognized and provided by employers.

5.  From the Digital Divide to a Digital World: Universalization of Access

Internet  access  and  use  are  becoming  essential  for  exercising  one’s  full citizenship,   as   public   goods   and   services   are   gradually   being   provided online;  and  also  for  income  generation,  as  opportunities  too  are  gradually requiring   some   level   of   digital   fluency.   Without   the   universalization   of access  to  the  internet  and  devices  –  and  the  ability  to  use  them  –  the  risks of  increasing  inequality  within  and  between  G20  countries  and  beyond  are stark.

The public and private sectors must therefore ensure the universalization of access  to  the  internet  and  ensure  quality,  security  and  affordability.  The provision of access should be seen as a public good, which can be provided in co-operation with the private sector. It is the responsibility of the state to incentivize  the  private  sector,  and  to  develop  the  necessary   regulatory enablers.

Norm: The  public  and  private  sectors  must  ensure  the  universalization  of internet access and digital literacy.

Corollary: Digital  divides  in  quality,  affordability,  access  and  security  both between  advanced  and  emerging  economies  and  within  countries  must  be addressed.

6. From Subsidies to Opting In: A New Responsibility for Wage Earners

Previously,  individuals  in  many  economies  relied  on  services  such  as  health and education being provided or subsidized by their employers. Workers in informal or gig-based sectors now have to make an active choice to access such  services.  Without  effective  incentives  (as  well  as  affordable  access), there is a risk that individuals will increasingly forgo these options.

This  is  profoundly  changing  the  relationship  between  wage  earners  and their  dependents,  as  the  option  for  accessing  basic  services  can  now  be forgone.  The  obligation  of  wage  earners  has  therefore  changed:  as  the ecosystem  of  support  for  dependents  dissolves,  individuals  must  seek  out or  opt  in  to  basic  services.  This  will  be  a  challenge  both  for  advanced economies with ageing populations, and young populations alike.

Norm: The state must provide effective incentives to individuals to opt in to increasingly choice-based basic services.

Corollary: Basic  services  must  be  accessible,  affordable  and  attractive  in terms of quality.

7. From Regulation to Devolution: A New Role for the Local

Increasingly, the private sector  is charged with  activities in  the provision of public  goods  and  services  that  were  previously  the  domain  of  the  state  – especially   as   the   notion   of   “public   good”   expands.   Simultaneously,   the collective    organizing    potential    of    an    atomized    workforce    is    being constrained,    requiring    a    new    guarantor    of    the    relationship    between individuals  and  the  private  sector.  Individuals  themselves  will  participate  in the  new  economy  under  many  different  guises  –  as  entrepreneurs,  savers, investors  and  workers  –  rendering  the  management  of  these  economic interactions    complex    and    difficult    to    manage    by    detached    national regulators working in silos.

At the most basic level, greater responsibility in governing this relationship, which   is   underwritten   by   a   new   dynamic   should   be   given   to   local government,  which  is  best  positioned  to  arbitrate  the  above  relationships. Within  the  confines  of  a  national  policy  framework,  local  government  can ensure compliance, audit, provide licensing and address grievances inherent in the new relations outlined above.

Norm: Local governments  must be  empowered to  mediate  the relationship between the private sector, employees and citizens.

Corollary: Local   government   must   ensure   accountability   of   the   private sector in its area of operation, and recourse for individuals and employees.

CONCLUSION

Digital  transformations  are  redefining  models  of  employment,  employment contracts  and  relationships,  regulations  and  social  protections.  Automation is  changing  both  the  workplace  and  work  itself,  as  workplaces  shift  from factories to phones, and full-time jobs transform into gigs. This necessitates a   restructuring   of    the   dominant   model   of   employer-provided   social protection,  and  the  definition  of  a  new  point  of  provision.  Non-Atlantic experiences    in    contending    with    informality    should    be    drawn    on    in approximating   the   social   security   (protections)   and   economic   security (paychecks) normally provided by formal, full-time jobs.

The  private  sector  is  taking  on  a  more  profound  role  in  the  provision  of public   goods   and   services,   enabled   in   part   by   new   technology-driven solutions.   Simultaneously,   the   individualization   of   the   labour   force   is challenging  the  mechanisms  through  which  individuals  can  express  their needs  and  demands.  These  two  phenomena  demand  a  new  guarantor  of the  relationship  between  the  private  sector  and  individuals,  the  devolution of responsibilities, and clear recourse.

No  single  agent  is  positioned  to  provide  this  role  of  guarantor,  since  it requires   flexibility   and   innovation.   Thus   instead   of   a   structure   imposed externally  or  from  precedent,  a  new  normative  framework  for  governing these  relationships  is  needed.  The  above  norms  are  a  starting  point  in outlining a such a framework.

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