Impact of Growing Practice of Hiring Freelancers on Wages and Retirement Adequacy

18 Mr Desmond Choo asked the Minister for Manpower in light of the increase in numbers of workers participating in the "sharing" economy with many being freelancers or self-employed (a) whether has there been a deflationary impact on wages in sectors with a high concentration of such workers; and (b) how can the Government help these workers to be financially adequate in their retirement.

The Minister for Manpower (Mr Lim Swee Say): Mdm Speaker, in June 2016, there were about 180,000 primary freelancers who operated their own business or trade as their main work without employing any paid worker, accounting for about 8% of our working residents.

Even though the share of these primary freelancers has remained relatively stable, at between 8% and 10% of the working residents over the last 10 years, their numbers could be growing in specific sectors, such as private hire car services, while dropping in other sectors, such as real estate. The emergence of "sharing economy" platforms may also enable more people to take up freelancing as a secondary source of income.

We have, therefore, initiated a new annual survey, starting in September last year, to gather more in-depth statistics on the changes in the freelancing landscape. This will help us better understand the profiles of freelancers, including whether they take up freelancing as a primary or secondary source of income, as well as the sectors and occupations they are in.

With the information from the survey, we will monitor more closely the workforce trends of the "sharing economy" and look into the issues that freelancers may face, including retirement adequacy.

Mr Desmond Choo (Tampines): I thank the Minister for the reply. I would just like to have two points of clarification. The first one, especially in the areas he had pointed out, in terms of Uber and Grab driving affecting the taxi companies, whether the income of the taxi drivers has been affected? And secondly, can the Ministry consider Codes of Best Practices for Government contractors to take on certain practices that help freelancers prepare for their retirement, including contributions to CPF?

Mr Lim Swee Say: Mdm Speaker, over the three-year period from 2014 to 2016, we looked at the median gross income of employed residents. On the whole, there is a broad-based real wage increase over the three years from 2014 to 2016 across all categories. One sector saw a drop of about 1% a year, and that was in real estate services. Another sector which saw a fairly stagnant median income is finance and insurance services. For all the other sectors, including transportation and storage, there was a broad-based real wage increase over the three years.

But having said that, I think past performance may not necessarily be an indication of future performance. What we are concerned about is whether, in time to come, the growth of this so-called gig economy will have a greater impact on more workers. And that is the reason why we have decided to initiate this new series of annual surveys.

I would only be able to better answer the question raised by the Member after the tripartite partners have had the chance to look at these survey findings for last year and, subsequently, on a year-to-year basis for us to analyse further in terms of what are the best practices, as the Member has proposed, as well as what we can do together to strengthen the retirement adequacy of these workers.

Ms Sun Xueling (Pasir Ris-Punggol): Will the Ministry look into increasing communication and education for these freelancing workers so that they are aware of the risk that is involved in terms of overall financial planning for them when they are engaged in freelancing jobs?

Mr Lim Swee Say: Mdm Speaker, the answer is yes. Over the years, MOM has always been worried about the retirement adequacy of these freelancing workers. This is because besides contributing to their MediSave account, they do not contribute to their OA and SA. We will always be concerned for them in terms of their savings for housing and retirement.

So, as I have said earlier, the tripartite partners intend to focus on this and see how we can reach out to more of them and, hopefully, put in place various measures ‒ maybe on the part of the freelancers themselves or their customers' service buyers ‒ to see how we can work together to strengthen their retirement adequacy.

Mr Zaqy Mohamad (Chua Chu Kang): I thank the Minister for talking about the survey. I just want to check whether the survey will also cover liabilities, because the gig economy is very different from that for traditional freelancers in which there are lots of established norms. If we look at Uber and others, for example, they do have other liabilities which they cater for as well and they are also at risk, but also in terms of income. I am glad the Minister has also mentioned and talked about the concerns about OA and SA contributions. Has there been a study today on the impact of the gig economy on the ability to service housing loans and insurance coverage and all that? Has there been a survey now or is that something that the Ministry will be looking into?

Mr Lim Swee Say: Mdm Speaker, we have not done a comprehensive analysis. However, if you look at, for example, home ownership, between the freelancers versus the full-time employees, there is no significant difference in the rate of ownership. For the freelancers, we may ask them through informal surveys, "How do you prepare for your housing and retirement?" They will say, "Look, since I do not contribute to OA and SA, I have saved for it myself." If you ask the taxi driver, "Do you save enough to pay for your housing?" He will say, "Yes, I have." "Are you saving enough for your retirement?" He will say, "Yes, I am." This is based on the present situation.

In a way, our concern about housing, medical and retirement needs of freelancers is not a new issue. It has been around for the last many years because freelancers have been around in the market for a long, long time.

But what we are concerned about are the changes that are taking place in the employment landscape. Firstly, whether this number will grow and, secondly, how the market dynamics may change over time with more portfolio workers.

And this is the reason why we thought it is timely now to start a new series of surveys to really go in-depth to understand the issues. We are not jumping to any conclusion at this moment because, firstly, we would like to know whether more and more of them are primary freelancers or secondary freelancers. Based on our initial findings from the first survey, it would appear that the number of primary freelancers did not increase significantly. Any increase might have come mainly from the secondary freelancers. In other words, with the growth of the sharing economy, workers who have their primary employment are now taking advantage of sharing platforms to earn additional income, which may not be a bad thing. But as I have said, I do not want to prejudge the outcome of our analysis at this moment.