Streamlining the Jordanian Gig Economy by EndJo

Streamlining the Jordanian Gig Economy: URGENT NEED FOR ACTION?

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This document was created and maintained with the financial support of the European Union. Its contents are the sole responsibility of Endeavor Jordan and do not necessarily reflect the views of the European Union.

TABLE OF CONTENTS Background

Context: Global Economic Trends

Developing Skills

Increasing Flexibility

Worker Vulnerability

Sectoral Distribution of Labor

Pervasive Unemployment

The Jordanian Gig Economy

Potential Benefits of the Gig Economy in Jordan

Economic Implications of the Gig Economy in Jordan

Key Takeaways

BACKGROUND The outbreak of the COVID-19 pandemic has placed the world under a global crisis that may lead to an unprecedented global recession. Countries are expected to adapt to a ‘new normal’, where governments have to diligently introduce expansionary monetary and fiscal policies in order to provide their citizens with essential safety nets. While the global economy is undergoing a freezing period, where the demand and supply have simultaneously and abruptly diminished, millions of individuals became susceptible to unemployment. In March 2020, the International Labor Organization (ILO) estimated that approximately 24.7 million may lose their jobs globally due to the total shutdown of different economic activities, exceeding the 22 million unemployed individuals in 2008-2009 due to the great recession. While this number was ILO’s worst-case scenario estimate, only one month later, over 26 million individuals filed for unemployment in the United States alone.1 In light of the crisis, this paper discusses the so-called ‘Gig Economy’, its importance, and what needs to be done to streamline it. The term ‘Gig’ was originally coined by art performers and the music industry: the event in which a singer, for instance, gets paid for a one-and-done performance. Gig workers in Jordan have existed for many years and were identified as temporary workers, freelancers, contractors, project workers, and seasonal workers. The prominent presence of these types of workers constitutes the ‘Gig Economy’, which is considered to be a phenomenon in the labor market. The Gig Economy is based on flexible, temporary jobs for which talents are mainly acquired through online platforms and word of mouth. From the labor side, the Gig Economy provides Jordanians with an opportunity to alleviate the damages incurred by the crisis by presenting an opportunity to access new means for diversifying sources of income, or securing a temporary source of income until a full-time job is landed. From the business side, the Gig Economy can be an opportunity for business owners to expand their outreach to new skillsets that were not previously accessible, which essentially supports companies in increasing efficiency of operations and promotes knowledge transfer. Indeed, the Gig Economy has its shortcomings. Due to the nature of their jobs, gig workers lack job security, and many do not have access to health insurance, social security coverage, and other types of social safety nets. Moreover, due to the fact that the phenomenon has emerged in recent history, its impact on the overall dynamics of the labor market remains ambiguous. Therefore, the Gig Economy is to be streamlined in Jordan, and the proper protection and regulatory frameworks must be put in place.

1 https://www.ilo.org/global/about-the-ilo/newsroom/news/WCMS_738742/lang--en/index.htm

CONTEXT: GLOBAL ECONOMIC TRENDS Developing Skills The world economy is currently experiencing a significant skill mismatch; around 1.3 billion workers are either over or underqualified for the job they are working. The consequences of this mismatch are significant as they can cost the world $8 trillion in unrealized GDP each year.2 Pairing the right workers with the right jobs and training workers for high-demand skills is a priority especially in emerging economies. Countries building new industries and trying to build prosperity need to find ways to bring together the needs of their industry and the skills of their workforce. Many countries and their workforces also face the challenge of automation replacing jobs and productive industries. While some countries with advanced economies and aging populations may be able to use automation to boost productivity, in other countries automation threatens to replace workers whose skills can be replicated by machines.3 As a result, a greater premium will be placed on workers who can consistently upskill and fill positions which

‘combine deep knowledge of their industry with the latest analytical tools to quickly adapt business strategies’ as well as those who can ‘facilitate seamless humanmachine interaction’.4 Workers across the globe recognize the impact of automation on their jobs, with 53% believing automation will change their work or make it obsolete within the decade. However, many workers, especially those with high levels of education and those who feel they have the opportunity to upskill, are optimistic about taking on these new roles complemented by technology.5 The emergence of technology can either be a threat or an opportunity with the right conditions. INCREASING FLEXIBILITY Another significant trend emerging from the coronavirus is that businesses have begun to integrate tele-workability into their permanent policies and practices. Growing investments in remote work technology and the waning stigma of working remotely have reduced the

2 Boston Consulting Group, “Alleviating the Heavy Toll of the Global Skills Mismatch”, https://www.bcg.com/ publications/2020/alleviating-the-heavy-toll-of-the-global-skills-mismatch 3 Chui, et. al “The Countries Most (and Least) Likely to be Affected by Automation”, Harvard Business Review. 4 Samans, Richard and Saadia Zahidi,“The Future of Jobs and Skills in the Middle East and North Africa: Preparing the Region for the Fourth Industrial Revolution”, World Economic Forum, 7. 5 PricewaterhouseCoopers, “PwC publishing results of global survey on technology, jobs and skills”, https://www. pwc.com/gx/en/news-room/press-releases/2019/global-skills-survey-2019.html 4

aversion to allowing current employees to work remotely. The recognized benefits of more work-from-home and remote work combined with the pandemic have led many companies to make permanent shifts in how they conduct business. Meanwhile, employees enjoy reduced or eliminated commute time and the associated costs as well as less restrictive schedules and surveys have shown that employees have felt that managers and HR departments have been responsive to the difficult transition.6 However, employees also report decreased productivity, increased competitiveness, and exhaustion from prolonged periods of online video calls and engagement.7 As remote work becomes a permanent part of life for many employees, finding solutions for these new challenges will be critical. WORKER VULNERABILITY While the growth of remote work and the digital gig economy have contributed to greater worker flexibility and new opportunities for employment, these changes have also brought on

greater worker vulnerability. With many embracing the flexibility of selfemployment through digital platforms, companies avoid providing benefits like health care and paid time off to gig workers, even passing on tax responsibilities. The costs of those services are then passed on to the individuals.8 On the other hand, workers also bear the financial responsibility for their work-related costs. Internet-based work requires constant and consistent internet connection and phones or computers, significant expenses especially in developing economies.9 Additionally, delivery and ride services require a car or motorcycle which can lead to workers taking on debt, sometimes through the platform itself. Platforms have further invested in institutionalizing this model. Notably, a group of platforms including Uber, Lyft, and DoorDash spent $200 million on a campaign promoting Proposition 22 in California. The measure passed a public referendum and affirmed the status of mobile platform gig workers as independent contractors while making

6 Halzack, Sarah. “Working From Home Means More Than No Commute”. January 29, 2021, https://www.bloomberg.com/opinion/articles/2021-01-29/forever-work-from-home-will-upend-shoppingdining-and-buying 7 Robinson, Brayn. “Is Working Remote A Blessing Or Burden? Weighing The Pros and Cons” June 19, 2020. https:// www.forbes.com/sites/bryanrobinson/2020/06/19/is-working-remote-a-blessing-or-burden-weighingthe-pros-and-cons/?sh=31473d4340a9 8 Voss, Dustin. “Wages in the gig economy and beyond”. London School of Economics. https://blogs.lse.ac.uk/ netuf/2018/10/25/wages-in-the-gig-economy-and-beyond/ 9 Anwar, Mohammad Amir and Graham, Mark. “Between a rock and a hard place: Freedom, flexibility, precarity and vulnerability in the gig economy in Africa” Competition & Change, 2020. 11. 10 Conger, Kate. “Uber and Lyft Drivers in California Will Remain Contractors”, November 24, 2020. https://www. nytimes.com/2020/11/04/technology/california-uber-lyft-prop-22.html 5

minor concessions in wage guarantees and worker benefits.10 These changes in labor law and practices create an environment where ‘a small pool of permanent employees exists with a large temporary workforce, which can be easily hired and fired.’11 In contrast, a February 2021 decision by the United Kingdom’s Supreme Court ruled that gig platforms like Uber must treat workers as employees and not self-employed.12 Flexible work and selfemployment have upended the relationship between the labor force and employers, making the gig economy a contentious legal issue as well as an economic one.

While the gig economy serves to increase labor market participation and acts as a cushion to the effects of the sudden rise of unemployment due to COVID-19, it is quite essential to realize that gig workers are susceptible to force majeure shocks due lack of social safety nets including health insurance and long-term pension plans. The latter is a pre-existing concern for part-time and informal workers in Jordan and around the world, and must be addressed whilst proposing a regulatory framework for the gig economy.

The quality of jobs and wages in the flexible or gig work economy is also dramatically polarized by skill level. Relatively high-skill workers like architects or consultants enjoy upward pressure in their wages as they can reach demand more effectively. Meanwhile, unspecialized workers experience the opposite as competition among many available and atomized workers pushes wages down. Wage pressures also affect traditional employees. Gig workers take on tasks and responsibilities as a part of a hybrid workforce for companies normally assigned to employees, putting a downward pressure on their wages.13 The wage issues and dynamics in the gig economy extend to the entire labor market.

11 Anwar and Graham, 5. 12 Russon, Mary-Ann. “Uber drivers are workers not self-employed, Supreme Court rules”. February 19, 2021. https:/ /www.bbc.com/news/business-56123668 13 Voss, Dustin. “Wages in the gig economy and beyond”. London School of Economics. https://blogs.lse.ac.uk/ netuf/2018/10/25/wages-in-the-gig-economy-and-beyond/ 6

THE JORDANIAN LABOR MARKET Sectoral Distribution of Labor The Jordanian economy suffers from a large imbalance between job creation and the supply of workers. Jordanian citizens are employed mostly in a few limited sectors: public administration and defense, education, wholesale trade, and manufacturing. On the other hand, non-Jordanian employment is concentrated in a different set of sectors, including: household employment14, administrative and supportive services, construction, and manufacturing. The above observations may have significant implications on the Jordanian labor market. First, an estimated 40% of employed Jordanians tend to work in sectors with relatively low added value.15 Second, many migrant workers work in the administrative and support service sector16, a highly tele-workable sector that is of high demand in the gig economy, rendering Jordanians susceptible to high competition in gig work in Jordan.

where Jordanians are mostly employed 2020

27% 36%

Public administration & Defence Education

13%

Wholesale Manufacturing

10%

Other

14%

where non-Jordanians are mostly employed

24%

36%

Administrative & Support Services Construction

7% 11%

Households

Manufacturing

22%

Other

14 Domestic workers providing cooking and cleaning services as well as child and elderly care 15 Jordan Department of Statistics. “Employed Persons Age 15+ Years by Sex, Main Current Economic Activity & Nationality”. http://www.dos.gov.jo/owa-user/owa/emp_unemp.show_tables1?lang=E&year1=2020&round=3 &t_no=27 16 Ibid. 7

PERVASIVE UNEMPLOYMENT With declining job creation and a growing population, unemployment has become a chronic problem for Jordan. The unemployment rate in Jordan increased to a record breaking 23.2% in 2020. Unemployment particularly affects youth and young adults.17

Unemployment rates among youth by age bracket (2020) 50.1%

41.4% 17.4%

(15-19)

(20-24)

Females also face a 30.7% unemployment rate compared to 21.2% for men. Although levels of education are relatively high in Jordan , the participation of educated youth in the labor market is still low. In fact, only 40% of graduating students every year are absorbed into the job market. In addition to high unemployment rates, economic participation stands at only 34.4%.18 Finding new forms of employment which suit the skills and abilities of Jordanians, in particular the youth, will be necessary to alleviate the growing burden of unemployment in the country.

(25-29)

Furthermore, Jordan is struggling with incorporating its workforce into the emerging trend of tele-work in the global economy. Economies with a large proportion of workers relying on in-person work will not benefit as much from the growth of online work platforms. According to a study conducted by the Jordan Strategy Forum, only an estimated 20.5% of employed Jordanians can work remotely.19 Jordan has a large supply of educated and unemployed workers who experience long waits to be absorbed into the workforce following graduation. Tele-work and platforms operating across

17 Jordan Department of Statistics, “Population Age 15+ years by Economic Activity Status, Sex, Broad Age Groups and Nationality” http://www.dos.gov.jo/owauser/owa/emp_unemp.show_tables1?lang=E&year1=2020&round= 3&t_no=18 18 Ibid. 19 Jordan Strategy Forum, “Tele-Workable Occupations in Jordan: Winners and Losers from the Lockdown”. http:// jsf.org/sites/default/files/Tele-Workable%20Occupations%20in%20Jordan%20(1).pdf 8

borders allow unemployed Jordanians to access employment and income from domestic and foreign sources. However, more of these roles must become teleworkable in order for the global growth in tele-workability to have an impact on the Jordanian economy. THE JORDANIAN GIG ECONOMY Potential Benefits of the Gig Economy in Jordan The diverse benefits of the gig economy provide opportunities for both workers and employers. Firms can save on hiring expenses, save time on vetting candidates, rapidly scale up, and access global talent. The gig economy also serves as an enabler for people of working age to become economically relevant and active. Jordan holds the second lowest labor force participation rate in the world with only 41.8% of the labor force participating in the economy with only Yemen having a lower participation rate.20 Online platforms offer solutions to these challenges as they provide job seekers the ability to swiftly penetrate the labor market and carry out various paid tasks and functions that secure additional sources of income, both primary and supplementary. Moreover, online platforms expedite outreach into others networks that are beyond the traditional reach of job seekers. (See Box 1: Examples of Gig Platforms in Jordan)

20 World Bank. “Labor force participation rate, total (% of total population ages 15-64)” https://data.worldbank. org/indicator/SL.TLF.ACTI.ZS?end=2020&locations=JO&most_recent_value_desc=false&start=1990&view=map 9

BOX1

EXAMPLES OF GIG PLATFORMS IN JORDAN Ureed.com is the largest online marketplace connecting businesses with experienced professionals in the MENAPT region. Since its establishment in 2017, Ureed has successfully expanded its operations into more than 50 cities. It has over 70,000 freelancers and service providers registered, and more than 12,000 projects completed by freelancers and service providers. Ureed works with a variety of successful brands and organizations and has provided support to many in the region, some of which include: PwC, noon, Google, IFC, Khan Academy, UAE’s Prime Minister Office and the Saudi Arabian General Investment Authority. The product portfolio of Ureed spans across different sectors such as: technology and programming, graphics and design, translation and writing, business and consulting, engineering and architecture and finally, audio, video and animation. Fanniplus.com is the unique platform connecting all stakeholders in the maintenance and facility management sector. It is the Uber Model of Profix which was established in 2014, and it served more than 15,000 residential clients, hundreds of commercial clients, and more than 50,000 work orders in 5 countries. The Fanniplus platform is a community for more than 20,000 service providers, who are looking for jobs, additional income, new technologies and special offers from suppliers. It works to connect manufacturers, suppliers, service providers and end-users. The Fanniplus platform offers training, qualifying and classifying service providers to enhance the quality of the provided services in collaboration with the Profix Academy. Kaderapp.com is an on-demand hiring platform targeted towards fast-moving jobs in the hospitality, retail, industrial and service sector. Kader aims to digitize and automate the recruitment landscape for casual jobs, and thus, creating a seamless and simplified hiring process for both businesses and gig-workers. At Kader, gig workers are vetted, screened, and interviewed to be enrolled into the platform to qualify as Kaderos (Kader Heroes). Kader matches Kaderos with hourly job opportunities based on their geolocation, qualification & availability. Kaderos use the clock in and clock out feature on the mobile application to register their attendance, monitor hours worked, rating, amount due and get paid directly to their mobile wallets. Both employers and Kaderos get to rate each other upon job completion. Kader has over 1,000+ vetted gig workers, 300+ active businesses and completed more than 25,000+ hours of work on the platform with a success rate of 96.5%. Kader has a wide network of reputable hiring partners such as Talabat, Nespresso, Al-Ameed Coffee and many more. 10

Gig work is also particularly advantageous for females looking to enter or reenter the workforce. Jordan ranked 138 out of 153 countries in 2020 for female participation in the economy.21 The lack of dependable public transportation, the lack of accessible and affordable childcare, and the reluctance of joining certain workplaces due to cultural stigmas, all play an integral role in keeping a sizeable segment of females out of the workforce. It is also very challenging for females who drop out to reenter the workforce as companies seek ‘up to date’ talents. The aforementioned problems can be remedied by allowing more females to join the gig economy: Females who drop out of the workforce, whether forcefully or voluntarily, can remain up to speed with market requirements by taking on gigs that are characterized by flexible hours and short-term contracts, until they are able to rejoin the market for a full-time job. In addition, having the option to work remotely will encourage more females whom have never joined the labor force due to the inability to join a workplace in person to become economically active, diversify her household’s sources of income, while enjoying the flexibility of the working hours. The key enabler for increasing labor force participation through the gig economy

is the investment in gig platforms. Such platforms expand the accessibility to skilled workers for the private sectors, as well as the public sector. Fortunately for Jordan, the government realizes the importance of the gig economy and is currently working on promoting it. In fact, the GrowJO initiative directed by the Ministry of Digital Economy and Entrepreneurship (MODEE) ‘aims to improve digitally enabled income opportunities and digitized government services in Jordan’. As a part of this initiative, GrowJO has a targeted program directed at fostering participation in the gig economy. GrowJO (GIG) offers matching funds to Civil Society Organizations and Non-Profit Organizations providing services to build gig platforms and foster widespread online employment with a particular focus on engaging underserved communities. LEGAL LIMITATIONS The close connection between legal working status and public economic guarantees makes institutionalizing gig work a top priority. Unlike workers in traditional forms of employment, gig workers do not receive economic protections like accident insurance or guaranteed social services like health care. Providing the same or similar guarantees to gig workers will give them the economic

21 World Economic Forum, “Global Gender Gap Report 2020.” 2020. http://www3.weforum.org/docs/WEF_ GGGR_2020.pdf 11

security to pursue more gig jobs and invest in growing their skills and establishing their specialization. The restrictions of the current legal landscape keep workers from transitioning to gig work full-time. Meanwhile, employers are less likely to make gig work a part of their business model when their legal responsibilities and tax implications are unclear. The distinction between an employee and a gig worker is not inconsequential. Under current local laws, employees have rights and access to significant protections and benefits which are not provided to gig workers. For individuals otherwise positioned to turn to the gig economy for work, the lack of employee benefits and clear labor status in the freelance economy can deter them from committing to gig work. (See Box 2: Legal Deep Dive)

BOX2

LEGAL DEEP DIVE The concept of gig economy workers is not a recognized concept per se under the Jordanian legislation. Work providers are either classified as ‘Employees’ or ‘Independent Contractors’. Gig workers are normally treated as ‘Independent Contractors’, meaning that their relationship with the company is usually governed by a service agreement or a consultancy agreement on an ad hoc basis, or ‘work on demand’. Under this arrangement, the gig worker would not be entitled to any labor rights, such as but not limited to, annual leave or other forms of leaves, overtime entitlements, medical insurance coverage, enrollment with the Social Security Corporation, and so on. The only protection that gig workers or independent contractors can benefit from, is the protection provided under the respective service agreement. As for employers, the main challenge they face when hiring gig workers is the lack of regulation for such forms of employment. The uncertainty behind their legal status might put off employers, as they might be concerned that such contactors might later sue them to claim for labor rights. The ambiguity under this form of legal relationship is one of the main factors that would discourage employers from hiring gig workers. Article (2) of the Jordanian Labor Law states that an employee is ‘Every person, male or female, who performs a job against wages and be a subordinate to the Employer and at his service’. According to this definition, employees are entitled for employment protection, regardless of the number of their working hours. The main two factors that set out an employee-employer relationship are (i) a consistent wage or salary; and (ii) supervision and subordination. Furthermore, in May 2019 the Jordanian Labor Law was amended to include the definition of a part-time work, which is ‘Work that does not require and does not reach the number of working hours stipulated in Article 56 of this Law’. Article (56) states that the maximum number of working hours is (48) hours per week. Therefore, a part time job is any work that is below the aforementioned threshold. However, the Law did not stipulate any specific number of hours that would qualify for part time employment. Under the Jordanian Labor Law, a part time employee is entitled for the same rights and entitlements as the full-time employee, meaning that the employee would be entitled to be enrolled with the Social Security Corporation, and entitled for all sort of leaves, medical insurance, and all of the other labor rights. Therefore, it is evident that the concept of gig workers is not recognized under the Jordanian legislation and as such, the minimum wage threshold does not directly apply on gig workers, unless an employeeemployer relationship was established and confirmed, taking into account the main factors of an employment relationship previously mentioned.

Addressing the Legislation Gap In light of the above, there is a clear gap within the Jordanian Labor legislation in the gig economy arena, and based on the research conducted on comparative law, the following is noted: 1. It is evident that the Jordanian Labor Law governs the relationship between the employer and the employee and that independent contractors are presumed to look out for themselves when negotiating contracts with different companies, which leaves us with little in between, the area where the gig economy exists. We recommend considering amending or reforming the labor law or introducing labor regulations to adapt to different new forms of employment, such as the gig economy. 2. There was a definition of ‘Temporary Work’ under Article (2) of the Jordanian Labor Law, which defines it as ‘work which completion requires a limited period of time.’ It is important to note that, ‘Temporary Work’ is not the same as a ‘Limited Term Contract’, and there was no other reference within the Jordanian Labor Law to any provisions relating to Temporary Work. As a start, we need to better understand what truly falls under Temporary Work and whether the parliament is in the process of drafting a specific regulation which shall be issued by virtue of the Jordanian Labor Law. 3. A new category of workers must be introduced to the Jordanian legal system, which basically falls between regular employees and independent contractors. This would require the parliament to revisit the Jordanian Labor Law and carefully tailor it to introduce this new category for gig workers based on recommendations and studies from the relevant ministries. Our initial suggestion for this new category mainly includes a new form of employment contracts under which the gig worker will be entitled to some of the basic labor rights, subject to specific obligations to be imposed on the gig worker in return, such as a minimum period of commitment for instance.

ACCEPTANCE OF ONLINE HIRING PRACTICES The Jordanian gig economy is also limited by one crucial factor; the propensity for companies to use online platforms to find and hire talent is low. With few available jobs and many applications, companies rely on closed referral networks that are inaccessible to many workers who either do not live in proximity to available jobs or do not have the necessary contacts to be considered for a position. This competition also drives a race to the bottom in wages, working conditions, and benefits. Companies continue to rely on word-ofmouth recommendations and in-person interviews, largely ruling out gig workers who are hired through online platforms and who often work remotely. This issue is reflected in the way unemployed workers pursue job opportunities. While around 73% of job seekers in Jordan apply to employers directly and make use of professional social networking sites, half also use personal networks and intermediaries like friends or relatives.22 A lack of information and potentially outdated corporate policies stifle the potential of extending firm hiring to digital gig work platforms.

Endeavor Jordan along with the Jordan Strategy Forum of 110 Jordanian companies, Jordanian firms that engage gig workers are overwhelmingly satisfied with the work of their gig employees and plan to hire gig workers again (see Box 3: Main Survey Results of

Perceptions of 110 Jordanian Companies on Gig Work). However, these firms are few in number as most prefer to stand by traditional hiring practices, with only 31% of Jordanian companies using online platforms for hiring. When asked, the three out of four firms that do not use online platforms reported that they prefer meeting candidates personally. In addition, 30% do not permit online hiring in their policies and procedures and 30% further cited a lack of awareness of online hiring platforms. Adopting corporate policies inclusive to the gig model has the potential to benefit both firms and workers seeking employment. Firms will access a new pool of talent for their projects and positions while workers can more effectively seek employment outside of their direct social and professional networks.

Jordanian firms who do engage gig workers report positive experiences. According to a survey conducted by

22 Jordan Department of Statistics. “Jordan Unemployed Persons Age 15+ Years by Sex & method of Seeking Work” http://www.dos.gov.jo/owa-user/owa/emp_unemp.show_tables1?lang=E&year1=2020&round=3&t_no=47 15

BOX3

110 JORDANIAN BUSINESSES SHARED THEIR EXPERIENCES A survey was conducted to identify the demand for such platforms on both fronts, and whether gig platforms are the best way to expand the outreach of businesses. Below is the profile of companies: No. of Employees

Sectors 14%

19%

6% 18%

29%

IT Education Commerce Manufacturing Management Services Other

1% 13%

According to the survey, there is increasing demand for short term tasks… Hired for short-term tasks Yes

19% 7%

50%

0 to 10 11 to 50 51 to 100 More than 100

24%

…however, not many businesses resort to online platforms to find the needed talent for a specific task Hired through a platform Yes

26%

36%

64%

74%

Relatively, the number of businesses using platforms is low but, those who did, show high satisfaction rates. Will online hiring increase in popularity amongst Jordanian businesses?

90% of the companies that hired through online platforms were very satisfied and would consider hiring through platforms again.

5% 5%

I was satisfied, and I would hire again through online platforms I was satisfied, but the nature of my business would not need it I wasn't satisfied, and I wouldn't hire through a platform in the future

90%

Only 31% of businesses are using online platforms to hire, what about the rest? What the reason behind NOT using online platforms for hiring?

76%

Preference of meeting candidates personally

32%

Online hiring does not comply with my business' policies & procedures

31%

Lack of awareness of the presence of these platforms Trust issues regarding personal details and privacy Not comfortable sharing my company's information online Online platforms are not user friendly Less control over workers

18% 13% 13% 11%

41% of businesses hire through “word of mouth”

41%

Word of mouth

12%

22%

26%

Ads

Social media

Other

It’s clear that the majority of businesses are adapting or will have to adapt to the “new normal”

Survey results show that more than 50% will adopt remote work, and 60% will adopt flexible working hours. Will you be adopting more remote work practices? Yes

Maybe

Will you consider allowing more employees to have flexible working hours? Yes

Will you consider hiring more part-timers?

Maybe

Yes

27%

39% 55% 18%

13%

60%

61%

The Coronavirus pandemic can potentially alter the hiring environment to align demand for gig work with the supply. Firms are more flexible than ever, allowing and encouraging employees to work from various locations and at unstandardized times. At the onset of the pandemic, 82% of Jordanian firms surveyed said they would or might adopt more remote work practices. Furthermore, 87% responded that they would or might consider allowing more employees to have flexible working hours. Traditional wisdom emphasizing the importance of a physical workplace has slowly been replaced as firms have been forced to adapt to online, remote work. ECONOMIC IMPLICATIONS OF THE GIG ECONOMY IN JORDAN The gig economy has been a prominent phenomenon in Jordan for many years. Analysts of the labor market have been concerned about the gig economy due to its disruptive nature, the questions it raises on informal labor, and the complications it poses on the government’s domestic revenues on the national economy.

to find a new source for their day-to-day expenses, and unemployed individuals to find a temporary income until a stable full-time job can be found. However, this disruption distorted the activities of the existing public transportation services whose operators have claimed that their businesses dropped by 80% after the introduction of these platforms. Multiple strikes took place between 2016 and 2019 after the ride-hailing platforms have swiftly penetrated the market and abruptly pulled the demand from “yellow taxis”. Regulation of the platforms took approximately 3 years, after which the platforms introduced a feature to incorporate yellow taxis in order to provide the market a fair competition. It is important to note that disruption is not beyond Jordan’s reach. The indicators in the graph below show that companies in the Jordanian market have the capability to embrace disruptive ideas.23

Disruptive nature of the gig economy Uber and Careem were the largest disruptive innovation in Jordan’s gig economy. These platforms allowed Jordanians with full time jobs to access an extra source of income, university students

23 http://www3.weforum.org/docs/WEF_TheGlobalCompetitivenessReport2019.pdf 18

Selected Indicators on the Enablers of the Gig Economy in Jordan (2019) 80 60 40

71 51.8

50.2

49.3 40

38.9

20 0 Legal framework's adaptability to digital business models Score (out of 100)

Leakage to the Informal Economy According to a study done by Jordan Strategy Forum in 2019, informal labor constituted approximately 41% of Jordan’s total working labor.24 The gig economy already has a foothold in Jordan and Jordanian gig workers are already providing services to firms in Jordan and beyond. Workers on Upwork, one of the largest online gig platforms in the world, have performed tasks, or ‘gigs’, in design and creative work, software development, and translation. Other areas of work include accounting, consulting, engineering, architecture, and customer service among others. According to McKinsey Global Institute, 15% of gig workers solely use online platforms to performs gigs.

Government ensuring policy stability

Rank (out of 141 countries)

Using the same estimate, while only accounting for three major gig platforms on which Jordanians sell their services (Fiverr, Upwork, Freelancer), it can be estimated that over 13,000 Jordanians are gig workers, or 1.4% of the informal labor in Jordan. At historically high unemployment rates, in addition to the wage cuts from which Jordanians have suffered, leakage from formal to informal labor is highly expected, and more Jordanians will be joining the gig economy. Implications on the Tax System According to Upwork’s statistics in April 2020, around 62% of Jordanian gig workers bill less than 100 hours of work per year, while 10% bill over 1,000 hours.

24 http://jsf.org/sites/default/files/Informal%20Sector%20in%20Jordan%20-%20Final%20Version.pdf 19

Earnings 12% 18%

41%

30%

<$100

$100-$999

$1k-$10k

>$10k

Billable Hours

10%

61%

29%

Hours 1000<

Hours 999-100

Hours 100>

Percentage of Individuals Recording Success Rate >80% 9%

Given the high number of individuals that have worked over 1,000 hours and/or have earned over $1,000-$10,000+, it can be evident that there is a notable portion of Jordanians who have adopted gigs in lieu of full-time jobs. On the other hand, given the large portion of low success rates, low earnings and low business hours, many individuals undertake gigs as an extra source of income. These facts pose direct challenges for tax collection in Jordan. For the case of fulltime gig workers, there is a clear impact on income inequality between those who work in a certain sector formally in Jordan whose income may be taxable, as opposed to those who perform the exact same work on informal basis. In addition, the ubiquity of high-income informal gig workers will hinder the government from gauging and capitalizing on the country’s tax base, thereby deteriorating Jordan’s tax buoyancy. The same applies to those who join the gig economy to access an additional source of income.

91%

<80%

>80%

KEY TAKEAWAYS Early-stage regulation is necessary to enable existing economic activities to transition to any newly introduced innovations market. The lack of early coordination with the private sector may lead to complications including unsustainable employee turnover rates that are caused by new beneficiaries replacing existing workers. While it is believed that embracing disruption is not beyond Jordan’s reach, careful attention must be paid to Jordan’s low scores and ranks in policy predictability and the extent to which labor market policies help unemployed people to reskill and find new employment. The former and the latter can be resolved when a regulatory framework is put in place to enable gig platforms to enhance their outreach, in addition to the necessary regulatory measures made to formalize and protect gig workers in Jordan.

Finally, given the expected rise in informal labor, institutionalizing the gig economy allows Jordanians to enter the formal labor with a guarantee of fair competition, while increasing the government’s domestic revenues. It is also quite evident that Jordanians in the gig economy lack job security, social security and health insurance coverage, particularly those who adopt the gig economy as their main source of income.

The growth the of the gig economy is inevitable. Jordan urgently needs to refer to the lessons learned from the Uber/Careem case, and swiftly amend the labor law in order to incorporate gig workers, particularly those registered on online platforms. Failure to do so will result in more distorted employment data, which essentially leads to poor budget allocation and inaccurate policies, thereby contributing to the aforementioned issue of policy predictability in the country.

ABOUT ENDEAVOR Endeavor is the world’s leading community of high-impact entrepreneurs. Founded in 1997, Endeavor is a global organization with a mission to unlock the transformational power of entrepreneurship by selecting, supporting, and investing in the world’s top founders. Today, Endeavor’s network spans nearly 40 countries and supports more than 2,000 entrepreneurs, whose companies generate combined revenues of over $28 billion US, have created more than 3.9 million jobs, and, in 2020, raised over $4 billion US in capital. Endeavor’s unique entrepreneur-first model and network of trust provide a platform for founders to dream big, scale up, and pay it forward to the next generation of entrepreneurs. Endeavor launched its operations in Jordan in 2009, and is leading the way in supporting high-impact entrepreneurship. Today, Endeavor Jordan supports 43 Endeavor Entrepreneurs, representing 28 companies, from varying industries. ABOUT SURGE Scale-up Roadmap for Growing Enterprises Program (SURGE), is a 3-year program cofunded by the European Union’s “Innovation for Enterprise Growth and Jobs” program “Innovate Jordan”, and implemented by a consortium led by Endeavor Jordan and includes Oasis500 and BeyondCapital. SURGE, which is implemented by a consortium led by Endeavor Jordan (not for profit) and includes Oasis500 and BeyondCapital, aims to foster the demand-driven growth and scaling of 45 HPGCs, 15 companies per year, throughout the three years. It will focus on strengthening their core business functions, and assisting them to identify and seize new market opportunities.

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