At a recent conference, I listened to Andrew Inwood from CoreData. He raised a couple of terms that I have been pondering ever since, particularly on what they will mean to the finance industry.
These terms were:
- Gig Economy
- Peak Employment
- Peak Tax and Peak Super
So what is the gig economy? It’s individuals working on a task-by-task basis for different employers concurrently. Think Uber and Freelancer.com. Its emergence continues a longer-term trend in the Australian economy of transitioning away from a “job for life”. Last year in Australia, job creation was already at 2:1 casual to full-time jobs (ABS).
Where does this change come from?
This change is being driven by both employees and employers. Firstly, there is a growing desire for greater flexibility by employees within Australia. This is then equally met by employers who are actively seeking greater flexibility in their employees/contractors to meet fluctuating demands. Think of examples such as sales call marketing or a website project. Both tasks require people with specific skills but without the need for full-time jobs and the corresponding permanent wages.
How will the finance industry adapt?
As more and more people/positions/industries are included in this sector of the workforce, I cannot help but see this change significantly impacting the finance industry. Funding commitments are structured for decades, so how will this rise of “casual” employment be accommodated in terms of the willingness of lenders to fund mortgages? Will this drive innovative mortgage and loan products? How will borrowers adapt to irregular income streams, and could this open up brokers to further litigation for mis-advice?
The winners and losers
As with this type of structural change, there will be economic benefits as we “utilise our resources” more efficiently to get the same outcome (i.e., GDP). However, the gains from these changes typically will come at a cost to others.
As I see it, the winners in this shift will be:
- Those with specific skills that can work remotely and hence attract work globally
- Companies that easily facilitate this workforce flexibility; and
- Those who do not want to work full-time but find it hard to promote their skills (e.g., parents returning to work).
The losers from this shift are undoubtedly those that enjoy the security and stability of full-time employment, specifically in the service-type sectors (e.g., administration). Similarly, another loser from this trend stands to be the government. With lower permanent wage costs, there will be less tax paid (PAYG, GST and stamp duty) and less superannuation amid an ageing population. It’s not hard to see the consequence of this scenario and where the term Peak Tax has its genesis and the issues that a growing budget deficit causes for governments and tax payers alike.
In Australia, we have a highly educated workforce that is connected globally, so while individuals get early gains from these changes, it will be interesting to see if the government can facilitate a broader, more global workforce to attract larger gains to Australia, advancing Australia’s prosperity and avoiding a growing wealth divide internally.
I certainly did not see this coming before I attended the conference.
Paul Walshe is the managing director of Fair Go Finance, providing personal loans to everyday Australians and a dedicated service to brokers.
As a current board member of the National Credit Providers Association, Paul is committed to establishing understanding and acceptance of the micro-lending industry in Australia.
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