July 15, 2024


Savvy business masters

Commentary: COVID-19 will hit gig workers particularly hard

NEW YORK CITY: Investors in the gyrating US stock markets might be forgiven for feeling seasick this week.

On Wednesday (Mar 4), share prices rose more than 4 per cent after the Super Tuesday primaries and approval by the House of Representatives of a US$8 billion package to combat the coronavirus outbreak.

It is easy to see the reason for cheer: US$8 billion is far more than the US$2.5 billion initially suggested by the White House, and it will be mostly directed to hospitals and medical research.

However, before investors become too excited, they should note what is sadly missing in this bill: A commitment to plug the holes in America’s medical and social safety net that have been exposed by the disease, known as COVID-19.

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This matters. If these holes go unfilled, and the virus keeps spreading, this could exacerbate the potential economic pain. And, as US Federal Reserve officials know only too well, it is foolish to rely on monetary policy to cushion this blow — notwithstanding Tuesday’s decision to cut rates by 50 basis points.


To understand why America’s weak safety net matters, consider an issue that has sparked hot debate in recent years: The rise of the so-called “gig” economy, in which workers are paid piecemeal for contingent work, often linked to tech platforms, such as ride-hailing and food delivery.

A worker coughs into her arm as she accepts pizza from a delivery driver at the Life Care Center of

A worker coughs into her arm as she accepts pizza from a delivery driver at the Life Care Center of Kirkland, where two of three confirmed coronavirus cases in the state had links to the long-term care facility on Mar 1, 2020. (File photo: REUTERS/David Ryder)

Tracking the size of contingent activity has always been notoriously hard. However, economists estimate that about a quarter of American workers currently do gig work, considerably higher than in previous years, and nearly half of these rely on it as their primary source of income.

In some ways, the gig economy has been positive for US growth. The creation of new tech-related gig jobs has helped to push unemployment down to 50-year lows. It also seems to have kept a lid on wage growth and inflation, enabling the Fed to keep rates low.

But the dark side of this arrangement is insecurity. Contingent compensation is unpredictable. Gig workers generally lack access to company-funded unemployment insurance, sick pay and medical benefits.

In Europe, this is offset by public safety nets; not so in America, for the most part.

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Well-paid gig workers, such as software engineers, can cope with this insecurity by purchasing private insurance. But many gig workers are low paid and sacrifice this to join the pool of 27.5 million Americans who lack health insurance.

Others buy cheap policies that require them to pay the first several thousand dollars of medical bills themselves.

This creates obvious medical risks with the coronavirus. The cost of testing and treatment will deter some Americans from seeking care if they fall sick.

Tales of sky-high bills are buzzing in the media. A Miami man says he received a US$3,270 bill for a voluntary coronavirus test; an American evacuated from the outbreak’s epicentre in Wuhan China received a US$3,918 bill for mandatory quarantine in San Diego.

Woman in face mask in the United States COVID-19 coronavirus

A woman in a face mask walks in the downtown area of Manhattan, New York City, after further cases of coronavirus were confirmed in New York, US, Mar 5, 2020. (Photo: REUTERS/Andrew Kelly)

The lack of sick pay may encourage unwell gig workers to keep working. And many low-paid gig jobs cannot be performed at home. Delivering a pizza or driving an Uber car still requires a human.


If the coronavirus sparks a lasting downturn in travel, tourism and the retail sector, it will hit low-paid contingent workers particularly hard. Indeed, United Airlines cut domestic flights by 10 per cent and the threat of more could shatter confidence.

This matters in a country where so many households live pay cheque to pay cheque that nearly one-third of American families could not meet an emergency US$400 bill from existing resources.

What can be done? Congress could make coronavirus testing and quarantine, and perhaps treatment, free for all US residents who lack insurance. New York state has taken a first step by waiving co-payments for testing.

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But much more is needed. Laurence Boone, chief economist at the OECD, has suggested that governments should use “temporary direct transfers” of cash to support vulnerable households, if the virus spreads.

That would deliver far more impact and reassurance than the vague pledge of US$1 billion in loan subsidies to small companies in Wednesday’s bill.

But American leaders must start a proper debate about creating a better longer term safety net for gig workers. California is doing this in a piecemeal and imperfect manner. However, federal action is needed. Congress could start by considering some sensible proposals on portable benefits from senator Mark Warner and the Aspen Institute.

But none of this was included in this week’s House bill. And Fed chairman Jay Powell knows rate cuts are not enough but is wary of wading too directly into policy matters. Therein lies a potential tragedy.

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