Social Europe

politics, economy and employment & labour

  • Themes
    • Strategic autonomy
    • War in Ukraine
    • European digital sphere
    • Recovery and resilience
  • Publications
    • Books
    • Dossiers
    • Occasional Papers
    • Research Essays
    • Brexit Paper Series
  • Podcast
  • Videos
  • Newsletter

Social Benefits In The Age of Uber

Jean Pisani-Ferry 3rd November 2015

Jean Pisani-Ferry

Jean Pisani-Ferry

When it comes to compensation, the company you work for often matters more than how good you are at what you do. In 2013, the average employee of Goldman Sachs, the investment bank, earned $383,000 – much higher than what the best-performing employee in most firms can hope to take home.

Pay differences across companies are considerable. Research by Jason Furman, US President Barack Obama’s top economic adviser, and Peter Orszag, Obama’s former budget director, has found that rising pay differentials are the prime cause of widening US wage inequality in recent decades. They account for a larger part of the rise in overall income inequality than wage differences within companies or capital income.

At the other end of the spectrum, many labor-force participants are on temporary contracts, work for small firms, or are self-employed. Some combine different jobs at the same time. If, as expected by many, the so-called sharing economy develops, their number is bound to grow. These workers do not benefit from job security and generally earn much less.

Emerging countries offer the example of blatant inequality between employees in the formal sector – companies like Petrobras in Brazil and Infosys in India – and those who work in the informal economy. But even in advanced economies, where social protection is broad in scope, access to benefits is far from equal. Employees of large, profitable firms tend to enjoy better health-care coverage, more generous pensions, and easier access to training. Moreover, some benefits – for example, parental leave – are conditional on seniority within a company.

These are disturbing facts. Talent and effort should be rewarded, but two people of equal capabilities and dedication should not be treated differently just because one happens to be an insider, with a secure job in a big, successful company.

Such differences are questionable not only in terms of fairness; they are also economically inefficient, because they tend to limit labor mobility across firms and sectors. Employees may think twice before leaving a company if they are set to lose valuable perks as a consequence. This prevents potentially positive matching of the skills needed by employers and the available supply of them. It also makes hiring first-class talent excessively difficult for small companies.

Public policy should not prevent successful companies from paying more and offering better working conditions. But it should ensure that all participants in the labor force, whatever their status, enjoy equal access to essential benefits; and it should aim at minimizing the losses that impede mobility across firms, sectors, and types of employment.

Obama’s health-care reform was an important step in this regard. But social-welfare reforms should go much further. For fairness as well as for efficiency reasons, rights and benefits should be attached to individuals, not to companies or employment status, and should be fully portable across sectors and jobs.

To attune its social-welfare system to a changing economy and reduce inequality among individuals, France is currently considering a system of so-called Individual Activity Accounts (IAAs). My colleague Selma Mahfouz chaired a committee that prepared a blueprint for such a system.

Put simply, every new labor-force entrant would be equipped with a lifelong individual account, thereby accumulating points in the same way airline travelers accumulate miles. They would earn them by working in both the private and public sector. Physically strenuous jobs would yield more points than office jobs. Pro bono community service would also generate points – perhaps more than paid jobs.

Points earned could be spent on lifelong education and professional training, which would thus become independent from employment status. Every person could decide to draw on her IAA to prepare for, or when making, a job change.

Other financing could also be mobilized toward the same end. For example, an employee could decide to shorten the duration of his unemployment benefits and invest the corresponding points to benefit from better education opportunities.

But financing education should not be the only purpose. Points could also be used to help finance volunteerism or care for elderly family members. Points earned through hard toil could be spent on retiring earlier. Many more examples of partial fungibility could be imagined.

Such a system would have three additional benefits. First, it would help improve access to information. Employees nowadays are often lost in the complexity of the various social benefits to which they are entitled. The creation of IAAs and the adoption of a single unit of account would go a long way toward making things simpler, especially if all relevant individual information is available to users via a single smartphone app.

Second, IAAs would empower employees, especially the least skilled, who often perceive themselves as being in a state of subjection. Together with information, the possibility to invest their social benefits, rather than only consuming them, would strengthen their autonomy and freedom of choice.

Finally, the same accounts could serve as vehicles for public policy. For example, early school-leavers could be endowed with points for later use in professional training. More broadly, instead of assisting people only when social risks materialize, public policy could support individuals throughout their working life, by adopting a more effective bespoke approach that fits peoples’ needs better than coarsely tailored schemes.

This may sound utopian; in a way, it is. But at a time when every digital service becomes more and more personalized, why should social policy remain confined to the philosophy and solutions of the twentieth century?

© Project Syndicate

Jean Pisani-Ferry

Jean Pisani-Ferry is a Professor at the Hertie School of Governance in Berlin and currently serves as the French government's Commissioner-General for Policy Planning. He is a former director of Bruegel, the Brussels-based economic think tank.

You are here: Home / Politics / Social Benefits In The Age of Uber

Most Popular Posts

Russian soldiers' mothers,war,Ukraine The Ukraine war and Russian soldiers’ mothersJennifer Mathers and Natasha Danilova
IGU,documents,International Gas Union,lobby,lobbying,sustainable finance taxonomy,green gas,EU,COP ‘Gaslighting’ Europe on fossil fuelsFaye Holder
Schengen,Fortress Europe,Romania,Bulgaria Romania and Bulgaria stuck in EU’s second tierMagdalena Ulceluse
income inequality,inequality,Gini,1 per cent,elephant chart,elephant Global income inequality: time to revise the elephantBranko Milanovic
Orbán,Hungary,Russia,Putin,sanctions,European Union,EU,European Parliament,commission,funds,funding Time to confront Europe’s rogue state—HungaryStephen Pogány

Most Recent Posts

reality check,EU foreign policy,Russia Russia’s invasion of Ukraine—a reality check for the EUHeidi Mauer, Richard Whitman and Nicholas Wright
permanent EU investment fund,Recovery and Resilience Facility,public investment,RRF Towards a permanent EU investment fundPhilipp Heimberger and Andreas Lichtenberger
sustainability,SDGs,Finland Embedding sustainability in a government programmeJohanna Juselius
social dialogue,social partners Social dialogue must be at the heart of Europe’s futureClaes-Mikael Ståhl
Jacinda Ardern,women,leadership,New Zealand What it means when Jacinda Ardern calls timePeter Davis

Other Social Europe Publications

front cover scaled Towards a social-democratic century?
Cover e1655225066994 National recovery and resilience plans
Untitled design The transatlantic relationship
Women Corona e1631700896969 500 Women and the coronavirus crisis
sere12 1 RE No. 12: Why No Economic Democracy in Sweden?

ILO advertisement

Global Wage Report 2022-23: The impact of inflation and COVID-19 on wages and purchasing power

The International Labour Organization's Global Wage Report is a key reference on wages and wage inequality for the academic community and policy-makers around the world.

This eighth edition of the report, The Impact of inflation and COVID-19 on wages and purchasing power, examines the evolution of real wages, giving a unique picture of wage trends globally and by region. The report includes evidence on how wages have evolved through the COVID-19 crisis as well as how the current inflationary context is biting into real wage growth in most regions of the world. The report shows that for the first time in the 21st century real wage growth has fallen to negative values while, at the same time, the gap between real productivity growth and real wage growth continues to widen.

The report analysis the evolution of the real total wage bill from 2019 to 2022 to show how its different components—employment, nominal wages and inflation—have changed during the COVID-19 crisis and, more recently, during the cost-of-living crisis. The decomposition of the total wage bill, and its evolution, is shown for all wage employees and distinguishes between women and men. The report also looks at changes in wage inequality and the gender pay gap to reveal how COVID-19 may have contributed to increasing income inequality in different regions of the world. Together, the empirical evidence in the report becomes the backbone of a policy discussion that could play a key role in a human-centred recovery from the different ongoing crises.


DOWNLOAD HERE

ETUI advertisement

The EU recovery strategy: a blueprint for a more Social Europe or a house of cards?

This new ETUI paper explores the European Union recovery strategy, with a focus on its potentially transformative aspects vis-à-vis European integration and its implications for the social dimension of the EU’s socio-economic governance. In particular, it reflects on whether the agreed measures provide sufficient safeguards against the spectre of austerity and whether these constitute steps away from treating social and labour policies as mere ‘variables’ of economic growth.


DOWNLOAD HERE

Eurofound advertisement

Eurofound webinar: Making telework work for everyone

Since 2020 more European workers and managers have enjoyed greater flexibility and autonomy in work and are reporting their preference for hybrid working. Also driven by technological developments and structural changes in employment, organisations are now integrating telework more permanently into their workplace.

To reflect on these shifts, on 6 December Eurofound researchers Oscar Vargas and John Hurley explored the challenges and opportunities of the surge in telework, as well as the overall growth of telework and teleworkable jobs in the EU and what this means for workers, managers, companies and policymakers.


WATCH THE WEBINAR HERE

Foundation for European Progressive Studies Advertisement

The winter issue of the Progressive Post magazine from FEPS is out!

The sequence of recent catastrophes has thrust new words into our vocabulary—'polycrisis', for example, even 'permacrisis'. These challenges have multiple origins, reinforce each other and cannot be tackled individually. But could they also be opportunities for the EU?

This issue offers compelling analyses on the European health union, multilateralism and international co-operation, the state of the union, political alternatives to the narrative imposed by the right and much more!


DOWNLOAD HERE

Hans Böckler Stiftung Advertisement

The macroeconomic effects of re-applying the EU fiscal rules

Against the background of the European Commission's reform plans for the Stability and Growth Pact (SGP), this policy brief uses the macroeconometric multi-country model NiGEM to simulate the macroeconomic implications of the most relevant reform options from 2024 onwards. Next to a return to the existing and unreformed rules, the most prominent options include an expenditure rule linked to a debt anchor.

Our results for the euro area and its four biggest economies—France, Italy, Germany and Spain—indicate that returning to the rules of the SGP would lead to severe cuts in public spending, particularly if the SGP rules were interpreted as in the past. A more flexible interpretation would only somewhat ease the fiscal-adjustment burden. An expenditure rule along the lines of the European Fiscal Board would, however, not necessarily alleviate that burden in and of itself.

Our simulations show great care must be taken to specify the expenditure rule, such that fiscal consolidation is achieved in a growth-friendly way. Raising the debt ceiling to 90 per cent of gross domestic product and applying less demanding fiscal adjustments, as proposed by the IMK, would go a long way.


DOWNLOAD HERE

About Social Europe

Our Mission

Article Submission

Membership

Advertisements

Legal Disclosure

Privacy Policy

Copyright

Social Europe ISSN 2628-7641

Social Europe Archives

Search Social Europe

Themes Archive

Politics Archive

Economy Archive

Society Archive

Ecology Archive

Follow us

RSS Feed

Follow us on Facebook

Follow us on Twitter

Follow us on LinkedIn

Follow us on YouTube