Author: Anandini Dabas
The world of work is rapidly changing. New technologies driven by the Fourth Industrial Revolution (4IR) are causing fundamental shifts in the labour market and creating a re-evaluative conjecture on what work is. The certainty workers possess on livelihood sustainability is now hinged on permanent-insecurity.
The largest contingent radically propounding ‘neo-work’ are millennials – either entering or within the labour market itself. While a large body of literature as well as statistical data is available on the gig economy and youth within the gig economy itself, the impact of this change on the evolution of government institutions has not been explored.
Consequently, we will analyse the intersectionality of the gig economy and millennials’ lateral preferences in the workplace on government institutions in South Africa premised on vertical system of management.
Today, a large segment of youth prefer the gig economy as a first option to vertical systems of management within traditional jobs, with most intentionally veering away from these vertical systems both in the public and private sector. The impact on South Africa’s government institutions is that a large percentage of workers and youth who have technological and specialised skills prefer to not work in government due to the archaic nature of systems, processes and structures.
As a result, the advancement and progression of technology and innovation in government institutions is largely hampered due to its slow response rate to the rapidly changing national and global working economy.
Rise of the gig economy and its impact on traditional notions of labour
The gig economy refers to a growing trend of economic activity related to short-term, project-based work that is undertaken by temporary contractors rather than permanent employees. The gig economy is primarily associated with the plethora of digital platforms that connect people in need of a service with those willing to provide it. This mode of work stands in stark contrast to the ‘standard model’ of employment – which has been dominant since the First Industrial Revolution – of permanent full-time employment of an individual by an organisation. The gig economy is composed of three features:
The gig economy emerged post the 2008 financial market crisis. One of the many consequences of the financial meltdown was the difficulty and inability of graduates and terminated workers to find employment. This, combined with private and public institutions driving a more financially streamlined trajectory, resulted in not only increasing unemployment numbers, but also the rise of the gig economy/“insecure-enterprise”.
The gig economy emerged as an option for people with skills to offer their services online to generate a form of revenue – be it out of need or as a supplementary form of income. Insofar as the gig economy is a feature of developed countries, it is rapidly gaining popularity and traction across undeveloped-developed economies due to its lateral and individual-centric nature.
For example, the gig economy in United States and the United Kingdom doubled in size between 2016 and 2019, recording 57 million and 4.7 million workers respectively, with the former contributing over $1 trillion to the US economy annually – nearly 5% of GDP – more than major industries such as construction. Statistics South Africa’s employment figures reveal that temporary employment – both of choice and necessity – rose to 3.9 million from 2.6 million between 2017-2018.
Among its strengths, the increasing popularity of the gig economy can be ascribed to the individual-preferential nature of the system.
Flexibility, macro-management and innovation – drivers of the gig economy for individuals
The gig economy has erased many determinations of a vertical system due to dissatisfaction with its inflexibility, limited collaboration and poor work/life balance. Workers are not only advocating lateral preferences of management, but many have left permanent employment to tap into the benefits of freelancing for greater autonomy from a hierarchal managerial structure.
An increasing volume of research is establishing a positive correlation between workplace satisfaction and flexibility – workers are most productive when they experience work satisfaction. A study by the University of Chicago of 4500 workers revealed that 50% of millennials hold workplace flexibility to be more important than pay, and felt that flexibility is more important for work satisfaction than income and hours worked.
This trend was corroborated by Stanford University who found that of a sample of 50% of workers that worked from office and home respectively, those who worked from home were happier, less likely to quit and more productive.
Furthermore, a study by Australian recruitment firm Hays revealed that:
In terms of work/life balance, people are becoming more lifestyle-driven than remuneration driven, with many choosing to spend time with their families, and focusing on health, physical and mental-well-being. Compared to permanent employees, an assessment of freelancers revealed that:
- 84% are living their preferred lifestyle
- 13.7% are happier than before
- 68% are healthier than before
While many of the above examples are of developed countries, the same trends were witnessed within Ethiopia and Kenya. Professor Christopher Blattman and Professor Stegan Dercon tested the assumption of a full-time job as an ‘escalator out of poverty’. Approximately 1000 applicants worked across five businesses – a beverage bottler, a garment factory, a shoemaker and two industrial greenhouse operations – for a year, with the findings revealing that:
- The majority of people with an industrial job quit within the first few months. They went back to their family farm, took a construction job or sold goods at the market ,with most earning about as much money as they would have in the factory, often working fewer hours
- By the end of a year, only a third of the applicants were still employed in the industrial sector
- Those who expanded their agricultural or market selling raised their earnings by a third and did not feel the need to resort to factory jobs
Thus, irrespective of the state of development or economic standing, an increasing number of workers globally are choosing a happier, more sustainable lifestyle with autonomy, flexibility and laterality being the drivers. The desire for laterality is corroborated by 81% of full-time freelancers working as independents in order to be their own boss, and 61% of part-time freelancers highlighting this as the most popular reason for working independently.
Millennials are becoming increasingly disenchanted with the traditional office-bound 9-to-5 job, and multi-tier and multi-level authority figures. They are opting for greater levels of independence, communication, innovation and overall well-being, hallmarked by lateral systems of management.
Institutions that have shifted from a predominantly vertical to lateral system of management have yielded greater results and achieved greater levels of employee satisfaction and well-being. The advancement of the tertiary sector in South Africa being a prime example of this. While the emergence of the gig economy was created by self-starting individuals leveraging digital technology, organisations also began re-orientating their outlook to the benefits of the gig economy for organisational benefaction.
Cost-saving, specialisation and innovation – drivers of the gig economy for organisations
As the gig economy continues to gain momentum, companies in the public and private sector, and government itself, will need to embrace this growing labour trend in order to remain relevant and competitive. They will require new technology, tools and processes to maximize its benefits. Independent contractor work streams are set to become a fundamental component of talent strategies and will bring about disruption and innovation in the labour economy.
For the public and private sector, the first benefit of an effective flexible workforce is a reduction in labour costs. Approxiamately 59% of US businesses are using some degree of flexible workforce, which can result in 15% decrease in labour expenditure.
The South African government, after a period of steady labour absorption, is streamlining its overall staff complement. An integrated system of permanent/flexible labour will not only bring in specialised skills and needed innovation but also decrease government labour expenses, government’s largest, decreasing the fiscal deficit significantly. Furthermore, under an integrated data-driven function, each contingent worker will be more closely monitored and as a result, be more productive.
The second benefit of the gig economy on organizations is the rapidity at which new skills can be applied and integrated. Competition requires innovation and speed, yet developing fully-employed workers is often expensive and time-consuming. Contract labour can tap into experienced workers that already possess needed skill-sets, while maintaining a permanent core team.
For example, on average it takes 2.7 days to hire a freelancer from a talent marketplace, rather than 34 days through traditional recruitment methods. According to a UK study, 88% of businesses reported a noticeable, negative impact on performance because of this inefficiency. Such a lengthy process is restrictive for today’s fast-paced business environment, where agility and responsiveness are essential for a competitive advantage.
For specialised skills and once-off projects, government can tap into the benefit of contracts workers while retaining a core team. This will ensure that government values are adhered to and strategy executed, while meeting annual Key Performance Indicators (KPIs), and pursuing innovation and specialisation in the workplace.
Third, when an organisation is growing in a product area or geographic region, contract workers can be added to fit that expansion. If growth is not as high as projected, surplus workers can be released. Additionally, there may be times during the year when a higher volume of labour is needed due to spikes in customer demand. Short-terms contracts can easily meet this need without compromising financial projections and off-setting revenue.
Fourth, hiring permanent employees can be hit-or-miss. Companies often implement a probation period to ascertain whether an employee is fit-for-purpose. However, organisations can better assess the capabilities of a potential contract employee by letting them prove themselves on the job and later converting them to permanent status if the need arises. In the US, 87% of companies reported a cost of between $15 000 and $25 000 to replace each lost millennial employee. This expenditure can be mitigated by flexi-labour.
Fifth, the nature and intensity of some jobs eventually lead to fatigue or burn-out. Rather than having a high staff turn-over rate, the insertion and integration of contract labour acts as a relief for permanent staff and ensures longevity and sustainability of permanent employees. Choosing to incorporate freelancers into the workforce yields greater productivity, prompted by two factors: hyper-specialisation and accountability. Many employees report feeling overworked and stretched across tasks, often working on those outside of their skillset and knowledge. Rather than hiring one generalist to complete all tasks and demands of a business function, government can designate tasks to various freelancers who specialise in that area. Each would work only a few hours a week, concentrating only on one task and ensuring that KPI’s are met. Dividing work into ever smaller tasks allows companies to consistently improve the efficiency of productivity.
Fifth, due to the nature and intensity of certain jobs, workers can become fatigued or burned-out. To avoid a high staff turnover rate, the insertion and integration of contract labour acts as a relief for permanent staff, and ensures their longevity and sustainability. Choosing to incorporate freelancers into the workforce should yield greater productivity, prompted by two factors: hyper-specialisation and accountability. Many employees report feeling overworked and stretched across tasks, often working on those outside of their skillset and knowledge.
In government’s case, rather than hiring one generalist to complete all tasks of a function, government can designate tasks to various freelancers who specialise in needed areas. Each would work only a few hours a week, concentrating only on one task , ensuring that KPIs are met. Dividing work into ever smaller tasks allows companies – and government potentially – to consistently improve efficiency of productivity.
The gig economy has radically changed the way of work and the world of work. Government can tap into the large pool of talent and opportunities to help realise its goals. Investec envisages a workplace where companies are comprised of giggers:
“In the future world of the gig economy, people will cluster together in sensible ways and then uncluster and reconnect in various gigs to deliver a very agile value chain which is loosely coordinated by a leadership function that tries to coordinate it without too much management control, but enough to manage the risk in a very, very fluid environment. That’s the future world…. People are going to be, in effect, independent self-proprietors selling their labour.”
The gig economy has benefits for both organisations and individuals. While there is a dual-benefit for both parties to accept and implement features of the gig economy, how will the gig economy affect South Africa’s government departments, who have predominantly vertical system of management with minimal laterality?
Impact of gig economy and lateral work preferences on the South African government
With the rapidly advancing gig economy spurred by the rise of digital talent marketplaces, the workforce is undergoing major transformations. This labour trend will offer unprecedented work opportunities for individuals disenchanted with the rigidity of full-time work, as well as those unable to secure employment amidst a challenging labour market. Increased workforce participation can address dysfunctions in the labour market, providing previously inaccessible skills and knowledge to companies around the world.
The South African government is the largest employer in the country, with 1.3 million employees as at 2019, excluding local government. However, much of government’s processes and systems are inherited from the apartheid era, premised on the presidential and parliamentary system of government, combined with a Fordistic way of work. The gig economy stands in contra-position to the current internal modus operandi and President Cyril Ramaphosa is taking steps towards re-alignment.
In a bid to rein in expenditure, minimise ageism and absorb youth with technological skills into government, President Ramaphosa is offering early retirement packages to staff without penalty. This move seeks lower the mean age and cost of public servants. This will also minimise training costs associted with upskilling and reskilling older employees. Specific incentives for those aged 40 to 50 may be required, as they are in the most difficult position when it comes to reskilling and adapting to new occupations. In addition to a younger, smaller, more agile workforce, introducing flexi-labour can aid in minimising the fiscal deficit.
Beyond this streamlining, President Ramaphosa founded the Presidential Commission on 4IR (PC4IR) to ensure the infiltration and application of STEM (Science, Technology, Engineering and Mathematics) education and skills across every government department.
Interestingly, while there is concise effort by the Presidency to implement key features of both the gig-economy and 4IR, government is already a key player in the gig economy, albeit unconsciously. A glance at the National Treasury’s annual spend reveals that government departments outsource various skills, from the semi-skilled to the highly-specialised.
For example, government outsources catering and transportation services, particularly to SMMEs run by females. Secondly, government departments rely on the part-time functions of semi-retired staff to assist when there are spikes in workload. Third, government is a large supporter of consulting firms, leveraging services from strategic redirection to project development and execution.
Given that government has been a long-standing player of the gig economy, why is not seen as the face of the gig economy nor enjoying the fruits the gig-economy espouses?
The gig-economy is predicated upon a collaborative system that meets the interests of both the organisation and the individual. In the instance of the former, the full suite of the gig economy’s benefits is enjoyed when a lateral system of management and governance is well instituted and functional.
As the external environment changes, a strict change management system needs to be implemented for an organisational structure comprised of laterality and an integrated labour mix. While external functions may attract millennials and skilled personnel to government jobs, there is likely to be high staff turnover due to this undesirable and unsatisfactory way of work. Even in a climate of high unemployment and decreasing economic growth, workers and especially young ones, seek greater autonomy on how they spend their time.
Rather than working for financial remuneration in an adverse environment, workers are choosing to work for less so their work environment is more rounded. The propensity of millennial freelancers especially is indicative of this trend. Government needs to consider offering flexible arrangements to maximise employee engagement, satisfaction and productivity.
While there are changes to the organisational machine to decrease mean age, introduce STEM skills, innovation and usher in 4IR, without apt organisational re-structuring, efforts to reform government will go unrequited. Parallel to upgrades initiated by government, if the verticality of the current system does not change, government might be able to attract but not retain key talent it needs to ensure it is a relevant, reliable and distinguished employer.
If the correct organisational systems are put in place, government can enjoy numerous benefits from on-demand labour. The ability to swiftly scale the workforce in response to changing workloads, access to a wider pool of hyper-specialised talent, and increased productivity can help it achieve its KPIs, lower expenditure and enhance productivity. While government has initiated steps to offset this chain reaction, an internal re-organisation is required to enjoy the benefits of neo-work.
This article was originally published on LinkedIn. Find it here.
Interested in learning more about how the gig economy is affecting ways of work in private and public sector? Contact our Strategy team at strategy.team@letsema.co.za or connect with Anandini on LinkedIn.
