From the widespread adoption of telecommuting to mass unemployment, the COVID-19 pandemic is radically altering — some might say undermining — labor relations across the globe. But if tech evangelists see the current moment as a chance to overturn long-standing norms and usher in an age of flexible, efficient employment, governments should be careful not to adopt short-term fixes without considering the long-term risks.
In China, the pandemic’s economic fallout has given rise to a new corporate buzzword: “employee sharing.” The idea first cropped up in February, when most cities were under varying degrees of lockdown or quarantine. As the outbreak stretched from days into weeks, stagnating offline consumption, employees’ inability to get back to work and unfunded local government mandates requiring firms to pay their employees for the duration of the shutdown left much of the private sector on life support.
The service and manufacturing industries were hit especially hard. In early February, Chinese restaurant chain Xibei reported that 20,000 of its employees were idle, and it only had enough operating capital to pay wages and other costs for an additional three months.
Meanwhile, online delivery and logistics platforms found themselves short-staffed as digital orders spiked. Xibei soon announced it had reached an agreement to “lend out” hundreds of employees to the fresh food delivery firm Hema Xiansheng. Xibei workers who agreed to undergo an interview, training, and physical examination and take temporary positions with Hema would have their wages paid by the delivery platform.
Other firms soon followed suit. Within a month, more than 4,000 people signed up for retail giant Suning’s “talent-sharing” plan, and Walmart announced it had recruited nearly 2,000 prospective employees after partnering with catering enterprises nationwide. E-commerce site JD.com and appliance manufacturer Haier also took on workers from businesses severely impacted by the epidemic.
Even the national government endorsed the model, with the country’s social security department permitting companies to share staff as long as the original employer was not “lending out employees for a profit.” Some observers have since suggested the practice could outlast the pandemic, heralding a new trend in human resources in which employees do not belong to a single enterprise, but are shared between multiple enterprises or across platforms.
Employee sharing did alleviate some of the difficulties faced by enterprises at the peak of China’s epidemic, while helping the country manage the associated spike in idle workers. However, if employee sharing is to go from exigency to a potential vision of the future, it’s important to understand the potential risks involved.
Shared employees may work at their new company for months at a time. They are subject to its management rules and must obey its regulations. This is a labor relationship and should be governed by a new labor contract.
That’s not what’s happening, however: Many shared employees do not sign contracts with the firm that has “borrowed” them. This poses problems for regulators. For example, if a worker sues a company with which they do not have a labor contract, how should the labor arbitration system or judiciary respond? And if a shared employee is injured while working at their new company, who is responsible?
Employee sharing is an outgrowth of “labor dispatching” and other flexible employment methods that have existed in China since the 1990s. Companies see these models as a way to cut costs and transfer labor risks from employer to employee. In return, they claim flexible employment gives workers more autonomy.
The truth is much bleaker. A combination of big data, ratings, rewards, and punishments allows platforms to exert utter control over their informal workforces while evading responsibility for social security payments and other welfare costs associated with formal employment. This leaves China’s 70 million flexibly employed workers to face the risks of workplace injuries, illness, and retirement alone.
The corporate sector has the leverage to make this happen in part because many manufacturing jobs have been offshored to Southeast Asia in recent years. Migrants who used to work in factories now do odd jobs for digital platforms, often without formal contracts. Indeed, many gig economy workers already work for several different platforms simultaneously — a kind of informal precursor to employee sharing.
The past decade has seen formal employment in China’s labor market steadily fall, while flexible employment arrangements have grown more common. The percentage of migrant workers signing formal labor contracts declined from 42.8% in 2009 to 35.1% in 2016. Meanwhile, freelancing, self-employed, and flexibly employed workers went from a combined 4% of the labor force in 2003 to 18.7% in 2017.
At a time of economic uncertainty, having a job, even an informal one, is obviously better than being unemployed. But if models like employee sharing linger on past the current crisis, they could further destabilize labor relations. For example, if sharing employees is seen as a viable method for cutting costs, companies may start laying off staff and slashing wages, knowing they can still access flexible pools of workers. If that happens, labor disputes are likely to explode.
Furthermore, unstable employment situations are a source of psychological pressure and anxiety, affecting not just workers, but their families as well.
The pandemic has resulted in a vicious cycle, in which the government lets enterprises bear market risks, enterprises pass these risks to workers, and workers spread these risks to society. Local governments must urge enterprises to extend leniency to workers affected by the pandemic. At the same time, officials need to provide enterprises with real relief, whether in the form of tax cuts, reduced social security contributions, lower rent, or financial assistance.
In the short term, instead of overturning the country’s entire labor system, policymakers should seek solutions in existing labor law. In the long run, they should pay more attention to the risks and vulnerabilities faced by workers in an increasingly gig-oriented economy.
If China allows manufacturing to decline in favor of the service sector, it will see the same hollowing out of society that has taken place in other postindustrial economies. That will make it difficult to safeguard today’s gig workers and provide them with steady, secure employment.
Translator: David Ball; editors: Cai Yiwen and Kilian O’Donnell; portrait artist: Zhang Zeqin.
(Header image: From Alashi/Getty Creative/People Visual, re-edited by Sixth Tone)