For any developed economy, the social safety protection of the labour force forms a key pillar. Behind the economic buzz is the quiet provision of adequate retirement security, sufficient medical insurance and safety at work. This safety net, woven together by the government, employers and employees, is often overlooked in daily work, but it is a life-saver when someone falls.
For a long time, the social safety net for platform workers was not held tightly. Firms deemed the delivery workers or private-hire drivers more as contractors and not employees whom they need to provide the full insurance. For these new platform firms, profits are prioritised over the retirement savings of workers. Because they are a new business model, regulations have not caught up with them. Finally, things are changing. Singapore has recently announced greater protection, including Central Provident Fund (CPF) payments and insurance, for the platform workers here.
A move in the right direction
The platform economy sprouted more than a decade ago, blossomed and grabbed global attention, and is now firmly rooted in many economies. The pandemic over the last few years has also fed the demand for private transportation, online shopping and food deliveries. Numbering more than 73,000 workers, the platform economy in Singapore can hardly be regarded as niche and small.
As platform firms mature, so should the protection of their workers, many of whom are unable to job-hop easily to traditional corporations. By requiring platform companies to provide workers with the necessary protection, Singapore is moving in the right direction. In fact, the move is long overdue.
Platform companies used to have an unfair advantage in operating costs, as they did not have to provide health insurance or CPF contributions. Now, the move will level the playing field.
Consumers may face higher prices for their delivered food, parcels or rides. This is not palatable in a high-inflation environment. But the current situation is similarly not palatable for platform workers, who go without sufficient retirement protection, while consumers and platform firms benefit from lower associated costs.
Protecting the workers is better, even if customers and platform firms have to absorb some of these costs. Goh Swee Chen, Chairperson of the Advisory Committee on Platform Workers, mentioned a survey where 91 per cent of respondents were willing to pay more to offer platform workers better protection. The median amount was listed as 10 per cent more, which in normal circumstances would be greater than the price increase that customers face.
No doubt the new requirements would make it harder for some platform firms in making ends meet. The public would also grumble about price hikes. But overall, this is a small cost to pay to provide equity for platform workers.
Providing stronger protection
The new requirements include compulsory CPF payments for platform workers below 30 years old and an opt-in option for the rest. There are some inadequacies. I worry that the requirement will lead to platform companies shying away from hiring people who are under 30, just so they can save on the employer’s contribution for CPF. They may also lean towards hiring people who are less likely to opt-in for CPF contributions—those who are poorer and unable to contribute part of their income towards CPF.
A solution would be to make it default for all platform workers, not just the ones below 30, to contribute to the CPF with the option to opt out. Research by Nobel Prize winner Richard Thaler has shown that the default option matters. In the United States, when the system changed such that when people contribute to their retirement savings by default (opt-in), and they had to opt out if they do not want to contribute, the retirement savings contributions rose dramatically.
The shifts in the costs
One thing is certain. The new requirements will raise prices. The added costs could be borne by the companies or customers, but it defeats the purpose if workers’ wages are cut just so the firms do not spend more on each worker. In announcing price hikes, companies can be transparent in stating how much of the increase goes to the worker, and how wages and prices are adjusted for inflation. This helps in avoiding profiteering by firms who use the new requirements as a basis for raising prices steeply.
Better now than later
Singapore’s moves in protecting platform workers could be a role model for other global economies. We need to protect the platform workers. By the design of their job, the workers tend to be poor and less educated, with less transferable skills for other companies or industries. Hence, the government ought to protect them, even if that means customers face higher prices and platform firms face lower profits.
It has been reported that the new policies will start in the latter half of 2024 at the earliest, and the CPF co-contribution percentage will start from a lower point and take five years to be the same as other sectors. We should make the changes earlier rather than later.
The changes will not slow down the economy. Consumers, who may feel the pinch of the higher price, will still continue with their online shopping or food delivery because consumption patterns are hard to change. Consumers will spend, so even when the prices go up, the economy is not likely to slow down. True, the people making online orders may be hurting, but as a country, we should also protect the lower-income employees who deliver online orders.
In fact, the whole move is a good thing for the country. Singapore’s Silver Support Programme provides retirement safety for the bottom one-third of retirees, who typically had lower incomes during their working years. If CPF contributions for this lower-income group could come in earlier, the government expenditure in this area will also be lower in the future.
Grumbles aside, a stronger safety net for platform workers will be beneficial in the short and long run. We should not deny our platform workers this protection.
The article is an edited version of the first one published in The Straits Times.