What is Gig Economy
There has been a major change away from Japan’s traditional salaried job paradigm and toward more flexible work arrangements, which reflects the rise of the gig economy in the country. The unemployment rate in Japan rose to 2.80% in March 2023 from 2.60 % in February 2023. That is why it is understandable that many are trying to explore a different way to earn through gigs rather than the traditional way.
A gig economy is characterized by short-term contracts or freelance work, not permanent jobs. Independent contractors, online platform workers, contract firm workers, on-call workers, and temporary workers are all included. Individuals provide services on a per-job basis, generally called “gigs,” leading to flexible work hours but less job security.
Worker preferences are catalysts for the gig economy transformation
Notably, many are shifting to this because of technological development, an older population, and changes in worker preferences.
Growing Demands
Analysts have noted an uptick in this type of labor due to the rising need for flexible schedules, notably among older people and women in Japan since the country is facing a population decrease among the younger generation.
Another factor that impacts this is the desire of many to have a work-life balance. Through freelancing, many are separate from the traditional 9-5 working hours.
Gig workers are in high demand because they enjoy flexibility in scheduling and do not have to go through the traditional employment process to get a job. Workers may put in excessive time at the office because they are paid on a piece-rate basis rather than hourly.
Some have also brought up the inadequacy of safety nets, citing that workers’ compensation insurance does not cover overwork-related accidents. There is also the possibility of receiving less pay or having their contracts terminated for gig workers.
As these kinds of working conditions become more common worldwide, activists in other nations are beginning to take action on their behalf. There are efforts in Europe and the United States to change the system such that minimum wages and company pensions must be applied.
According to a government poll from 2020, roughly 4.62 million independent contractors were working in various fields. Consequently, a wide range of approaches to the workplace is emerging in Japan.
Support of the Government
As mentioned, while there is a growing number of freelancers in the country, there must be a system to safeguard their legal interests.
Freelancers may receive subsidies and other perks if the government follows through on its promise to create a strategy to boost the number of startup enterprises by a factor of 10 during the next five years, according to the experts.
The government has indicated that it is open to the idea of extending social security benefits to workers in the gig economy. It also promised to establish regulations that would standardize the terms of contracts between businesses and independent contractors.
One advantage of freelancing was that pay increased along with competence.
The Japanese government hopes to pass a law requiring businesses to properly explain details of work and payment amounts so that freelancers can work without worrying about issues like unilateral changes of outsourced work and unpaid or reduced reimbursement. The government plans to introduce a measure on the subject during the current parliamentary session that began in early January.
Legislative action is positive, but there are still obstacles to overcome before freelancers have enough protection.
One example of this is Uber Eats. A company launched in Japan in 2016. During the peak of the coronavirus outbreak, the demand for home delivery increased, which also increased the number of delivery drivers.
In 2022, The Labor Relations Commission of the Tokyo Metropolitan Government mandated that Uber Eats enter into collective bargaining with a labor union representing its delivery workers. It’s the first time a government agency has legally classified gig workers as employees entitled to protections under the Labor Union Act.
They recognized that delivery workers are essential to the company’s operations. Therefore the Labor Relations Commission implemented measures to regulate their activities, including an evaluation system, suspending their registered accounts, and other measures. The Labor Union Act states that they should cover delivery workers because they are outside an environment where they can independently negotiate restaurant delivery fees. Their relationship with the operator cannot be regarded as equal. This choice should be taken seriously by the operating company.
Uber Eats is not alone in having this kind of issue. Although the exact number of people engaged in food delivery has yet to be determined, it is estimated at over 150,000 and is only anticipated to grow. There is also a growing unionization movement among mail-order couriers who want to engage in collective bargaining.
Strategies for SMEs through Gig Economy
Japanese businesses, particularly local and foreign small to medium-sized enterprises (SMEs), have felt the brunt of these changes. The impact has been both challenging and beneficial.
On the one hand, SMEs benefit from lower costs due to the flexibility of hiring gig workers as needed rather than maintaining a full-time staff. It allows businesses to adapt quickly to workload fluctuations, which is particularly helpful for startups and companies with project-based work. Moreover, it enables SMEs to tap into a global talent pool, opening up opportunities for skills and experiences that may not be available locally.
On the other hand, the gig economy has also posed significant challenges. It takes work to maintain consistency and quality in a constantly changing workforce. The lack of employee loyalty, often inherent in gig work, could also affect long-term stability and growth. Additionally, Japanese labor laws and social security systems, designed around traditional employment, pose challenges to businesses and workers in the gig economy.
To adapt effectively to the gig economy, businesses should employ several strategies:
Embrace technology
Gig work is booming because of online marketplaces. Businesses should use these sites to find freelancers, organize tasks, and settle payments. Incorporating contingent workers into a team without a hitch requires an openness to new technologies and digital tools for communication and cooperation.
Maintain quality and consistency
A rotating door of freelance workers might make quality monitoring easier. Quality and consistency can be improved by instituting rigorous training programs and maintaining clear, explicit standards. Good gig workers may be kept around with the right amount of feedback and appreciation.
Focus on relationships
While gig workers may not be traditional employees, they are still essential to the team. Building strong relationships with gig workers can foster loyalty and improve overall performance.
Advocate for legislative changes
As the gig economy grows, related groups may lobby for employment protections and benefits changes. The introduction of better legal norms for companies that employ gig workers and the establishment of clearer guidelines for the rights and obligations of gig workers may be among these changes.
"Otsumami" - a bite size snack:
There is still work to be done legislatively before independent contractors have sufficient legal protections.
