Gig economy creates ripples
in Australia’s A$2.1 trillion pension pool
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[April 05, 2017]
By Cecile Lefort
SYDNEY
(Reuters) - When ride-hailing company Uber started in 2014, Sydney
resident Rosalina Kariotakis was among the first drivers to sign up,
becoming part of the "gig economy" where freelance work is transforming
the traditional job market in step with advances in technology.
Mobile or online platforms are at the forefront of a boon in casual work
for individuals who are seeking greater flexibility for less security -
many of them are giving up benefits such as sick leave, life insurance
and pension fund savings.
In Australia, this sea change is putting a strain on the country's
much-admired A$2.1 trillion ($1.60 trillion) system of retirement
savings - the world's fourth largest - which relies on mandated
contributions by employers.
"Our research shows that contingent and part-time workers are missing
out on A$150 million a year in super payments," said Damian Hill, chief
executive of REST Super, a superannuation fund with A$39 billion in
assets.
Australia is one of the few countries to have a mandatory retirement
system, also known as superannuations or supers, whereby employers pay a
contribution of 9.5 percent on top of the employees' wages.
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But digital companies including Uber, Deliveroo, Airtasker and Foodora,
which employ independent contractors are not obliged to contribute to
superannuations as the workers are seen as self employed.
Even Kariotakis, a former General Motors employee now in her mid-40s, is
nervous about the absence of retirement savings.
"It's a big problem," Kariotakis said, in response to how she envisages
her finances when she retires. "At the moment, we can't afford to put
money aside."
WORRISOME TREND
So as the gig economy grows, it signals a problematic trend for the
retirement savings pool in Australia which made superannuations
compulsory in 1983 to reduce the reliance on the national pension
system.
Even though the gig economy's "leakage" from the pension funds is a drop
compared with the A$136 billion of annual contributions paid by
employers in 2016, the dent on retirement savings could be significant
in years to come.
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![](../images/040517pics/busine35.jpg)
Rosalina Kariotakis, President of the Ride Share Drivers'
Association of Australia, is reflected in a mirror as she drives her
car she uses for the ride services company Uber along a street in
central Sydney, Australia, March 31, 2017. REUTERS/David Gray
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"When
people are self-employed, their tendency to set aside money for retirement is
secondary to their need to maintain cashflow for the business," said Martin Fahy,
the chief executive of Australia's superannuation industry body.
While
the scale of Australia's gig economy - a relatively recent phenomenon - is yet
to be reflected in official data, an increasing number of individuals are
freelancing for various digital outfits.
The Australian Industry Group, a major business lobby, said in an August 2016
report that 32 percent of the country's workforce had freelanced between 2014
and 2015 - meaning the digital economy is already creating irrevocable changes
in the country's labor market.
In the longer term, Kariotakis is hoping to see modifications to the national
benefits framework so that employers, such as Uber, are legally forced to pay
pension benefits.
Such changes are already being considered in the United States and Great Britain
where policymakers are looking to alter the definition of employees and
contractors to reinforce workers' rights in the modern economy.
"We'd like to have a situation where it doesn't matter whether it's an employee
or a contractor doing the work as long as they end up getting the same
benefits," said Professor Kevin Davis, a research director at the Australian
Center for Financial Studies.
"How you do it? I'm not sure."
(Reporting by Cecile Lefort; Editing by Shri Navaratnam)
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