How COVID-19 has affected the jobs of offshore freelancers
- In the short term, overseas freelancers have been hardest hit by the economic challenges posed by COVID-19 as jobs have disappeared.
- In the long term, more remote working could also offer developing countries opportunities.
- But only if policymakers address the key challenges for remote cross-border work.
COVID-19 has accelerated the trend towards remote working as companies quickly adapted to lockdowns by asking employees who are able to do so to work from home. As a result, nearly 40% of workers worked remotely in OECD member countries during the pandemic, an unprecedented shift in the dynamics of work.
Eliminating the physical need for employees to be in the office has raised a number of questions about what the workforce will be like in the future. From an international trade perspective, one of the most pressing questions is whether remote working can lead to an increase in the use of offshore freelancers.
Hiring people from other countries for short-term projects is often cheaper or provides access to a wider variety of skills than hiring people from the local workforce. The internet connection and increased speed have made it possible to trade services across borders.
Online work platforms including Freelancer, Guru, Peopleperhour and Upwork have expanded the possibilities created by the improved connectivity. They have bundled the huge supply of freelance workers into virtual hubs and provided employees and employers with tools to build trust and enable remote working. For example, these websites have rating systems that allow freelancers and clients to choose each other based on ratings and comments from previous partners. Online work platforms also offer reliable payment methods, although there are still significant challenges to overcome.
Developing country freelancers have been particularly well positioned to benefit from these tools as their services are comparatively cheaper. The economist Richard Baldwin calls this phenomenon “telemigration”.
Data collected by the Oxford Internet Institute’s Online Labor Index, an economic indicator that measures the supply and demand of online freelance workers in different countries and occupations in real time, shows that the number of tasks published on online work platforms from 2016 to Increased in 2019 With the onset of COVID-19, the number of projects first increased and then sharply decreased.
Image: Oxford Internet Institute’s online labor index.
According to a recently published paper analyzing US online workers during the pandemic, the increase could be explained by an increase in the use of online workers to replace on-site jobs. The decline that followed was due to companies affected by the pandemic having to cut down on many tasks that were not considered essential.
With the effects of the pandemic still being felt, there is still no clear indication of how demand for freelancers will fluctuate in the short term. However, the recent loss of jobs makes it clear that, despite their relatively new form of job delivery, online freelancers still depend on a resilient non-digital economy.
However, it is likely that remote freelance work will continue to grow in the long run. A recent survey by Deloitte found that the pandemic could boost remote working in the long term. In addition, companies offering innovative freelance activities or increasing the productivity of freelancers (e.g. the technology company TransparentBusiness) are thriving and showing promising opportunities for future activity.
In order to realize the opportunities of freelance work abroad, we must first face three main challenges.
First, there are growing demands for fair working conditions as freelancers are largely excluded from social protection systems.
Second, foreign professional income tax systems need to be calibrated in a predictable and fair manner for all parties involved. So far, EU countries have spearheaded these initiatives by suggesting innovative ways to get income data directly from platform companies.
Third, all stakeholders must work to ensure that foreign professional activities result in wider development gains for the countries in which the workers are located. By investing in strategic digital skills training, countries have the opportunity to both involve their employees in the most capital-intensive professional activities and attract the digital foreign direct investment necessary to succeed in the digital age.
A White Paper developed by the World Economic Forum on Digital Foreign Direct Investment, polled more than 300 companies, found that the level of digital skills in the economy is the single most important factor motivating foreign investment in the digital economy.
It is up to governments, companies, social partners and other relevant stakeholders to work together to develop solutions that ensure fair working conditions, social protection, innovative tax systems and greater societal gains in the post-COVID-19 era.
One possible solution is to move to universal social protection that is neutral in terms of forms of employment and self-employment. This could include affordable benefits tied to the worker rather than the job, as well as “underemployment insurance” or social insurance that deals with volatile and episodic incomes.
Developing “government APIs” or digital reporting windows that platforms could use to report income data directly to tax and social security institutions would increase coverage and reduce the bureaucratic burden for platform workers.
Finally, promoting new forms of ‘social dialogue’, where workers’ voices are expressed through social media and other digital channels, could reinvigorate social dialogue and help policymakers and other stakeholders find collective solutions that are broader ensure social gain.