Economic resilience of self-employed professionals out of work because of COVID-19
AlterContacts Project for the pan-European online Hackathon #EUvsVirus in April 2020.
The goal of our project is to create opportunities to cover basic needs (food, shelter, medical support) for self-employed people who lost their source of income due to the pandemic. That will be done by enabling the government to outsource remote office tasks to freelancers and self-employed through existing freelance platforms.
Economic recession, closures, shutdown of tourism, events and restaurant industries -- self-employed highly skilled professionals, including freelancers and small business owners, have lost both their current source of income and a prospect of finding new clients. There is not enough work for all. This social group is not eligible for loans, unemployment benefits, or subsidies; they do not have any state policy supporting them during the pandemic.
According to International Labour Organization estimates, we could see losses in labour income in the range of USD 860 billion to USD 3,4 trillion, where small and medium enterprises, the self-employed, and daily wage earners are hit the hardest.
At the same time, the nature of the gig economy and freelance work does not allow savings for longer than two-three months. According to an OECD report “at the beginning of the crisis, 40% of households in the OECD were three months away from poverty.” That means in the next month or two that will put highly-skilled self-employed professionals and families dependent on them at risk of poverty, losing ability to pay for basic groceries and rent.
On the other hand, the lack of capacity of public institutions and governmental services, to cope with the increased demand of data processing. During the time of pandemic, public and institutional services for data collection are severely impacted by the high amount of inflow due to the COVID-19. There is not enough personnel to keep up with the incoming information. That diminishes their capacity to provide accurate up-to-date information and insights which will impact the decision-making related to this crisis.
We propose the following solution: governments can provide easy-to-complete remote tasks in the form of the public database that freelancers and self-employed professionals can sign up to do online. The tasks can be time-bound or other pre-agreed measurement of work.
If the governments (EU level or national, regional) create a contingency plan, with a fund to cover a single flat-rate task retribution system, they can offer a paid contribution opportunity for freelancers and self-employed. The solution is not a replacement of subsidies. But it extends to the social group that normally don’t qualify for subsidies.
The retribution can be done in alternative ways to cash or currency, to avoid speculation. Rewards can consist of vouchers, points, tokens or similar exchange systems, limited to specific (screened & registered) suppliers and goods. One option could be the government-funded vouchers redeemable at the major food supply chains and other participating partners. Redeeming a voucher could also be possible online, for instance a PayPal voucher or points like Lifepoints. It can work both in the simplest form on paper but in some regions even through the blockchain.
The business partners that will allow redeeming vouchers can be offered tax relief from business income taxes on the remuneration (even when as vouchers) these users earn.
Watch the full (4-min) presentation of the project
Use existing systems to speed up integration
The back-end system is like a Job Board: employers, or task providers, register their need, and Task-Doers, or users, register to search for the skill they can do. There are government-hosted job boards. It would be sufficient to use a code in the system (public administration implementations of SAP and similar platforms, often have codes for contingency, or volunteering, charity or social services, or a field code not in use anymore, that can be re-utilized to Tag the Job Post with an attribute). That attribute is the identification as “Task Post”.
The App - this is where we need an app - helps the user Sort & Select from that list on the national job board, based on the Tag attribute. The App should also have mini-training modules, with capability to add more, selling them for a symbolic value, and virtual currency. There must be some digital team that can adapt their app or participate with their technology to go live.
The front-end may support simple point systems, but in any case is safer to implement some sort of virtual exchange mechanism. The point is to keep the system self-funded, avoiding drainage by speculation. At same time generate new value thanks to the tasks performed by the subscribers. This is not a business model so it does not require a capital growth mechanism. Governments could even drive projects using this method, at very low cost.
Eventually an implementation may use Akasha’s Ethereum blockchain foundation -or any of the existing blockchain startups, maybe from the hackathon- and create tokens (not coins). Tokens do not convert into money exchange, they can be used to assign symbolic value, traceability and certification of transactions. They could be used to symbolize exchange of documents in case of further development.
The Supply Chain
The agents at play in the virtual supply chain, must be registered businesses. Those businesses will contribute by creating a simplified version of their services, while adapting their offering for this special program.
Example: a supermarket chain agrees to participate in the contingency plan. This chain already has an online ordering system for the end client, and uses home delivery. For the contingency offer, they will deliver ONLY online orders and ONLY home delivery. No need to modify the operation of the stores, as that would be very expensive. Here we tap on the simplest part of the logistics: direct from warehouse to the home address.
We may speculate about future scenarios when smaller businesses can participate as “online cooperatives” to join the platform and use shared logistic services, or if the user -i.e. Taxi drivers- can provide logistic services. Keeping into account this is a temporary solution until the economy recovers, we keep the prototype limited to a specific use-case.
THE IMPACT ON THE CRISIS
The Pilot project can be done in The Netherlands where the share of self-employed people is the highest in Europe, over 20% of population, according to Eurostat.
The initiative will create temporary “jobs” for freelancers and self-employed people in need without the bureaucratic complication of the employment process. At the same time, the work of governmental and public organizations will get highly-skilled assistance with the extra tasks that were generated because of the pandemic. This would qualify as a special emergency public procurement procedures that the UN report on COVID-19 called for.
The COVID-19 has created extra work for public institutions and it goes on shoulders of the current employees who are already overwhelmed by the amount of day-to-day duties. As a result governments are lacking the up-to-date information they need to make the best decisions.
The size of the freelance economy has direct implications in the service economy. Missing the expenses of freelancers can impact the income of several other professions or occupations. And we are not talking about coffee bars or restaurants, but a whole collection of services that thrive thanks to the freelancing population.
It will create opportunities to earn, provide for the families, cover basic needs such as food and other household necessities. Eventually even the rent, if the government steps up to subsidize some of those costs in retribution for tasks.
Besides it will allow freelancers and self-employed stay engaged in work and active, protecting their mental health. The risk avoidance of having a social situation leading to potential unrest, is in itself difficult to seize and measure.
THE VALUE AFTER CRISIS
According to the ILO report on Social protection responses to the COVID-19 crisis, “this crisis has revealed the worrying consequences of coverage and adequacy gaps in social protection for some categories of workers, such as part-time workers, temporary workers and self-employed workers”
At the beginning of the new decade, entrepreneurship was seen as a key to European growth and competitiveness. So the survival of this layer of population is vital and primordial to maintain social stability. Some of the countries with the highest amount of self-employed professionals are in Europe. Freelancers and other independent professionals, are the capillary circulation of value that touches almost all families. If we leave them to try and deal with the crisis on their own, there is a possibility that once the pandemic is over, the economy will continue going deeper in the recession for the lack of economically active citizens.
By implementing this project, we will enable increased protection for freelancers and self-employed beyond the time of pandemic. This design is very scalable, uses existing networks and systems. May become the new way of supporting people in need also during other catastrophes.
Although very tempting, at the moment we refrain from thinking of it as a way to create a new way for managing freelancing work. There are already platforms dedicated to that point.
In reality this is a cybersecurity and logistics project with the participation of a few well-equipped partners in home goods and food distribution, blockchain and digital platforms. Equipped in the sense that they already have the means of delivering the process or tool required, shortening the time to deployment during the contingency.
Point is, it can be used again. Let’s hope we don’t need it.
WHAT WE NEED TO CONTINUE
To go ahead we need to clear out the following assumptions:
At least one Government agency considers it a viable initiative. Regulations may facilitate the design of the prototype in the test region or city.
Supply Chain Partners are interested to run the test. Wholesalers, retail, distribution and delivery of food and household goods.
Digital Platform is available. An existing platform, such as UpWork or Freelance.com can partner up with the contingency plan.
As a Think Tank we can facilitate the further design process.
One user: registered Freelancers who cannot sustain themselves more than three months.
For the sake of designing a prototype we chose to aim the scope to the Freelancers only. Freelancers should be already registered as such in the local national tax system, and can demonstrate that they may not have enough budget to sustain themselves for more than three months. Those two conditions guarantee transparency in legal terms and justification to qualify for the contingency plan.
One problem: delay in collecting and capturing the data from the medical services during the COVID.
One task provider: Secretary of health, or equivalent, or a regional hospital, with a budget to fund.
One partner: agreement with one of the local major food retailers, with capability to deliver at home.
The App should facilitate the access and engagement of the task giver and the task maker.
Skill development modules
It is necessary to add the possibility of creating and delivering small mini-education modules, like courses on demand. There are platforms that support the Courses function and all other required functionalities, such as simple profiles, task request posting, pre-agreement, delivery and invoicing.
Process for User Registration
Proposal is to pre-load the back-end with a list of potential users. For the prototype we propose to use the existing database from the local Chamber of Commerce. It is also possible to use the Tax registration database of all the Freelancers (or the equivalent name, depending on the country). That information will be used for communication purposes, to invite the person to check in the system and see if they qualify, and as back-end data used for validation of authenticity during the new user sign up process.
User receives an invitation letter AND an email (official email of the Tax registration). Alternatively can be announced publicly, but we prefer to avoid adding this variable to the prototype. For sure in the future when the plan goes live for a larger audience.
Follow instructions for sign up (secure, SSO enabled) and fill in the form to apply for the program.
The criteria is: registered Freelancers who cannot sustain themselves for longer than three months.
Data: a bank statement of the last three months, to validate the cash flow and the expected survival time. PDF input? Both business and Personal accounts?
If the user qualifies, then receives an invitation to download the App and finish fill up his profile. We opt for a simplified profile, specific for the system. This is a contingency solution. Although anyone may include their linkedin profile or website address, the type of skills requested here may be very specific.
To simplify the skill selection process, we can seed the skill sets as requested in the Task Posts. Then the users can choose from those skills, and add them to their profile for matching. Maybe we can add a notification when a new skill becomes necessary, so users can check out the opportunities in that new skill, and add that skill to their profile.
Use the App to keep yourself updated with learning modules, training possibilities and (paid) volunteering opportunities during the COVID recovery year.
Process flow for Task / work order life-cycle
1. From each administration department or section Discover work-task that is clerical in nature or can be delegated
2. Paraphrase or summarize in crisp but complete description of that task
3. Document into the task pool database with deadline date
4. Identify & sort the governance, data privacy & legal conditions if any
5. Categorize & add the attributes of the nature of the task ( Priority, type, skills required, zone or area of city)
6. Allocate owner, coordinator for the task
7. Match the required skill, regions or zone & Publish into the Job seeker's platform.
8. Track the shortlisted people who match the criteria and assess their current workload with work time preference for the task allocation
9. Once a task is allocated, seek a timely update and notify the owner.
10. Track & monitor the time remaining & status of task completion
11. Once a task is completed and submitted back, update the task submission status in the system, inform the owner of task completion & identify vigilance/compliance team for verification of accuracy & errors.
12. If successful verification, calculate amount to be paid. >> Intimate concerned payment team to initiate amount transfer/payment
13. If unsuccessful, reopen the task and allocate it to the same job seeker and also allocate additional help or mentor to help the jobseeker rectify the errors or gaps and go back to step 9.
Example scenario: the Netherlands
Risk analysis: there is a tendency in interpreting this initiative as a “job bank” and hence a replacement for employment agencies. That is not the case. The proposal to the user is not a job offer or employment contract, but a “rewarded activity” offered by an official organization. Much closer to “volunteering” rather than “working”.
In case the authorities are not comfortable with the above for any other reason, we can default to a construction where we take advantage of what is allowed. Here the law is on our side:
To protect the right of the self-employed (ZZP) professional, there are fiscal regulations that prevent anyone from contracting a ZZP if
The retribution represents more than 80% of the professional yearly income, and
The engagement goes on for a period of two years or more.
Otherwise it is perfectly legal to engage a ZZP in any kind of task, as long as there is a description and an agreement.
Yet in some other countries the government may be used to work only with other large entities and needs to relax the regulations to allow outsourcing directly to self-employed. In any way, this initiative can fill up the void between the need for extra temporary resources and the survival of people living in an economic emergency situation.