Precarity, a Key Determinant Affecting Tourism's Claim to Contribute to Inclusive Growth and Sustainability
Poverty, and its twin 'sister', inequality, are becoming increasingly entrenched in many societies despite decades of attempts to improve living standards by a host of agencies such as the United Nations, the World Bank, the Asian Development Bank, Oxfam and many others. According to OXFAM (Jan. 2022) just 10 billionaires own as much wealth as the poorest 4.6 billion people (60%) in the world, collectively earning $1.6 billion per day. I would like you to remember these figures throughout this article. The major thrust of the UN's Sustainable Development Goals (SDGs), is poverty alleviation with targets set for 2030 to achieve global progress in tacking these issues, in recognition that income and welfare disparities threaten the economic and political stability of countries.
It has become increasingly clear that growth by itself is insufficient to relieve persistent inequality and poverty, and that under the umbrella of neo-liberal capitalism, growth without regulation to protect basic rights can negate attempts at poverty reduction. This is the context of the emergence of the concept of ' inclusive growth' as a strategy for policy makers to improve living standards.
The UN 2015 SDGs include two specific inclusive growth objectives:
• Goal 8—Promote sustained, inclusive and sustainable economic growth, and full and productive employment and
• Goal 10—Reduce inequality within and among countries (United Nations, 2015). Before we can answer the question – "Where does tourism fit into this global picture?" we need to look at the overall situation from a macro-economic perspective to define
i. 'inclusive growth';
ii. neo-liberal capitalism;
iii. 'the fissured economy'
iv. The precarity class; and
v. The impact of COVID19 on Precarious Employment
1. Definitions of 'inclusive growth'
• Focus on the links between economic growth, inequality and poverty reduction.
• Inclusive growth is "growth coupled with equal opportunities" (Rauniyar & Kanbur, 2010).
• Inclusive growth – directed at "people from different groups - gender, ethnicity, religion - and across sectors (e.g. agriculture, manufacturing industry, services), to contribute to, and benefit from economic growth" (de Haan & Thorat, 2013, p. 8).
• A capability approach - "Improving and enhancing the quality of life and capabilities of all individuals by striving for a level of equitable parity within a community" (Hasmath, 2015, p. 3)
• Involves two dimensions. Sustainable growth that:
i) will create and expand economic opportunities; and
ii) ensure broad access to these opportunities so that all members of society have opportunities to participate in and benefit from growth (McKinley, 2010).
• A triangular poverty–growth–inequality structure that requires coordinated interventions to raise income levels ,spread income growth across all sectors, and decrease inequalities through more even distribution of wealth, goods and services (e.g. in health and education) generated by economic activity (Bourguignon et al, 2007).
Criticism of inclusive growth
• Improving equality requires more than just a focus on expanding growth in the hope that the 'trickle-down' effect will increase incomes for the poor, and must include substantial structural changes
• Inclusive growth is similar to the inclusive business approach since both are limited to economic dimensions and ignore fundamental root causes of poverty and inequality (Scheyvens & Biddulph (2017).
• Some definitions too narrow, Inclusive growth should move beyond economic indicators on redistribution and inequality to include social opportunities (Ngepah, 2017).
• A neoliberal capitalist push for growth
2. What is Neo-liberal capitalism?
The dominant economic model driving western developed country democracies.
• Capitalism has replaced feudalism and communism in these countries.
• Neoliberal capitalism most commonly used to refer to market-oriented reform policies such as "eliminating price controls, deregulating capital markets, lowering trade barriers" and reducing state influence on the economy, especially through privatization and austerity, and decreased spending by the state (Boas et al, 2009).
• Golden et al (2009) see neoliberalism as essentially hyper-capitalism.
• Noam Chomsky et al (2011p.1) defines the US form as "capitalism with the gloves off ".
[Taylor C. Boas, Jordan Gans-Morse (June 2009). "Neoliberalism: From New Liberal Philosophy to Anti-Liberal Slogan". Studies in Comparative International Development. 44 (2): 137–61; Frances Goldin, Debby Smith, Michael Smith (2014). Imagine: Living in a Socialist USA. Harper Perennial. ISBN 0062305573 p. 125; Chomsky, Noam and McChesney, Robert W. (2011). Profit over People: Neoliberalism and Global Order. NY: Seven Stories Press].
• Its macro-economic ideas are aimed at ways of reducing the size and influence of the state, with the belief that, as the state has less responsibility its financial requirements diminish, resulting in lower taxation rates which is considered good for economic growth (Harvey, 2010) and that resulting economic benefits would trickle down to the poor and reduce inequality.
• In its simplest version, neoliberal capitalist theory reads: "markets good, government bad." (Jones et al, 2005).
• But rather than reducing poverty there are increasing levels of inequality in many countries (Hills, 1995; Wilkinson and Pickett, 2010).
• The Wilkinson/Pickett theory highlights the fundamental reason that neoliberalism leads to income inequality — neoliberalist policies limit government regulation and allow business owners and investors to run their businesses in a manner that maximizes profit for themselves and their stakeholders, with little regard for their workers.
• Case in point: President Trump lowered US corporate tax rate from 35% to 21% in Dec 2017, promising that increased profits from reduced taxation would flow through to workers with increased wages( UBTPC, 2018).
• But the reduction in the corporate tax rate was not accompanied by any legislation to enforce worker benefits, consistent with the neoliberal ideology that any state intervention in the market will worsen economic performance.
• The reality: Wages continue to stagnate, with only 4% of companies passing increased profits into workers' wages.
• In real terms (costed for inflation), US wage levels are at their lowest in 40 years, but corporate profits are at their highest. [US Urban-Brookings Tax Policy Center is an independent Thin Tank, Washington DC]
• A diagnosis of the future of capitalism by Collier (2018) describes deep new rifts that are dismantling the social fabric of many countries where the sense of ethical obligation to others that was crucial to the rise of post-war social democracy has been lost. He asserts that so far these rifts have been answered only by the revivalist ideologies of populism and socialism, leading to the seismic upheavals of Trump, Brexit, and the return of the far-right in Germany, Italy and most recently, Spain. Unregulated application of fundamental forms of neo liberal capitalism have created the fissured economy, which in turn has led to the rise of the precarity class.
3. What is 'the Fissured Workplace'?
In western countries, the biggest cost to many companies is their wage bill, so when they look at how to increase profitability, wages are carefully scrutinized. Neoliberal capitalism encourages companies to shed permanent staff for casuals, outsourcing, piece-work, etc.
This is what Weil (2019) has termed the fissured workplace, the cracks upon which today's economy largely rest, and it leaves so many without fair and decent wages, a career path, and a safe work environment.
Corporate efforts to cut labour costs have spawned a new lexicon: casualisation, outsourcing, offshoring, franchising, independent contracting, labour hire, gig work.
• Offshoring is the practice of transferring labour-intensive activities from USA, UK, etc., to developing countries where wages are far less, e.g. the massive rise of garment manufacturing in countries like South Korea, Japan, China in the 1970s to 2000, and as they became less competitive with increased living standards, more recently to countries like Bangladesh, Vietnam and Cambodia.
• Outsourcing has been a major response by many companies facing intense pressure to improve financial performance for private and public investors. Sharply focusing their businesses on core competencies— that is, activities that provide the greatest value to their consumers and investors—and by shedding less essential activities. Firms typically started outsourcing activities like payroll, publications, accounting, advertising and promotion, and human resources. Over time, this spread to activities like cleaning services, facilities maintenance and security. Still in many cases it went deeper, spreading into employment activities that could be regarded as core to the company: housekeeping in hotels; cooking in restaurants; loading and unloading in retail distribution centers; teaching and lecturing in universities; even basic legal research in law firms.
Like a fissure in a once solid rock that deepens and spreads, once an activity like janitorial services or housekeeping is shed, the secondary businesses doing that work are affected, often shifting those activities to still other businesses.
• A common practice in janitorial work, for instance, is for companies in the hotel or grocery industries to outsource that work to cleaning companies.
• Those companies, in turn, often hire smaller businesses to provide workers for specific facilities or shifts. Their workers are not employees: they work 'piece-meal' (i.e. paid only for the task that they complete) or for a few hours at a time only when required.
• Because each level of a fissured workplace structure requires a financial return for their work, the further down one goes, the smaller are the remaining profit margins.
• This business–first approach is assisted by legislation in many countries that differentiates between 'employees' and 'contract labour'.
• The first requires employers to provide minimum wages or above, overtime, penalty rates, safe work environments, health insurance, workers' compensation, sick leave, maternity leave, annual leave, severance pay, redundancy compensation packages, and other conditions of service specific to individual industries (e.g. airlines require pilots to have 12 hours compulsory rest time between active flying).
• The second (contract labour) has none of these costs, and a recent 'innovation' is called 'zero-hour contracts' because they do not even provide for minimum hours of work within which to complete a task. You want the job, then you agree to take whatever the company offers regardless of how many hours it might take to complete.
The 'Gig Economy' is part of the fissured economy.
▪ The gig economy gets its name from each piece of work being akin to an individual 'gig' – although, such work can fall under multiple names.
o It has previously been called the "sharing economy" — mostly in reference to platforms such as Airbnb — and the "collaborative economy".
o However, at its core are app-based platforms that dole out work in bits and pieces — making deliveries, driving passengers or cleaning (hotels, restaurants, homes) — leading some to prefer the term "platform economy".
▪ Not all gig economy roles are based around a technology platform. Gig economy workers can also work for more traditional companies, which have changed how their staffing system operates.
o Delivery drivers for Hermes (in-line luxury goods store), for example, work on a piece-by-piece delivery basis, though their employer does not have the tech startup origins often associated with this type of work.
How many people work in the Precarity economy?
Figures vary because thousands of companies no longer have statistics on their workforce since they are NOT 'their' workforce. In the US, Gallop estimates that 36% of the national workforce - more than 57 million people – work in the Gig Economy, of whom for 48 million it is their only job. In Australia, the Austn Bureau of Statistics estimates that 2.6 million (Mar 2019) work in the Gig Economy - 20% out of 12.8 million.
• Of the total of 12.8 million, 62% (7.9 million) were full time and 38% (4,865,000) were part time - with part time employed ranging from 1 hour per week to 19 hours per week. (Unbridled politics at work - I hour's work per week means you are classified as 'employed'. 20 hours and you are classified as fully employed! So unemployment as a percentage of the total workforce is grossly under-stated).
• In such economies, the rich get richer (and smaller in number) while the poor get poorer and increase in number (the so-called Matthew Effect: Merton, 1968). The precarity class expands.
'The Fissured Workplace' – Its impact on the economy and society in Britain
The UK is trending towards the same situation as the USA.
▪ A report by Cribb et al, UK Institute for Fiscal Studies (2022), revealed more than 20% (about 10 million) UK workers were part of the fissured economy/precarity class, that the UK has one of the highest levels of inequality in Europe, and that among the world's richest countries, only the United States is more unequal. In May 2019 IFS launched a 5-year study into inequality in the UK (final report pending).
▪ Its Director, Nobel Laureate economist and Princeton professor, Dr Angus Deaton, warned that the widening gap between rich and poor is "making a mockery of democracy", and that inequality in UK could soon reach American levels.
▪ Deaton warned that unless there was a major change in policies, the UK was at risk of following the path of the US, where wages of white non-college-educated men haven't grown in five decades, where the number of poverty-related deaths from suicide, drug overdoses and alcohol abuse has risen dramatically, and where corporate governance is skewed to benefit shareholders over workers, undermining their wages for the sake of investors and corporate executives.
From the perspectives of CEOs and investors, fissuring—splitting off functions that were once managed internally—has been a phenomenally successful business strategy, allowing companies to become more streamlined and drive down costs.
• But from the perspective of workers, this lucrative strategy has meant stagnation in wages and benefits and a lower standard of living—if they are fortunate enough to have a job at all.
• As casualisation, outsourcing, offshoring, franchising, independent contracting, labour hire, gig work, etc, become more common and widespread, they give rise to the precarity class – teetering on the edge. Teetering on the edge …
4. What is 'the Precarity Class'?
Precarity is a term to describe the material, financial and psychological vulnerability arising from neoliberal economic reforms. It is derived from the adjective "precarious", meaning 'lack of security', 'uncertainty', 'dangerous', 'risky, dependent on chance'.
• Precarious Employment (PE) commonly defined as jobs that accumulate several unfavorable features of employment quality, such as employment insecurity, e.g. contractual temporariness, contractual relation insecurity, underemployment, and multiple job holding), inadequate income, limited rights and protection, e.g. lack of unionization, social security, regulatory support, and workplace rights (Kreshpaj et al, 2020). People in the precarity class are referred to as 'the precariat'.
• This an accurate description of millions of people in many countries who must contend with the fissured economy, the gig economy and chronic underemployment.
• Where it differs markedly from previous classes is that it cuts across 'normal' class and educational levels, and as many professionals, university graduates and highly skilled individuals are impelled into the precarity class as are lower socio-economic, educationally-less qualified individuals. (e,g US university staff hiring practices – 70% no longer tenured, given one semester -13 weeks - contracts).
• Precarious Employment (PE) is an important social determinant of health, associated with a multitude of poor health outcomes (Ronblad et al, 2019; Benach et al, (2014).
• PE is more common in already disadvantaged or vulnerable groups, which generates systematic, unfair, and avoidable differences in health.
• Workers in PE often find themselves in situations where their governments and employers do not provide access to sufficient social and health protections. Globally, only 45% of the population is covered by at least one social protection benefit, which means that 55% are completely unprotected.
• In short, neoliberal capitalist ideology has increased the precarity class, which is now a feature of most countries, i.e. it is a global phenomenon.
5. The Impacts of COVID-19 on the Precariat
A Precarity research team led by Matilla-Santander et al (2021) has noted: The world of work is facing an ongoing pandemic and an economic downturn with severe effects worldwide.
Workers trapped in precarious employment (PE), both formal and informal, are among those most affected by the COVID-19 pandemic. They have identified 5 critical ways that the consequences of the COVID crisis among workers in PE are manifested globally:
i. Precarious Employment has increased,
ii. workers and work in PE will become more precarious,
iii. workers in PE face unemployment and no pay without being officially laid off,
iv. workers in PE are being exposed to serious stressors and dramatic life changes that are leading to a rise in diseases of despair, and
v. PE appears to be a factor in deterring the control of or in generating new COVID-19 outbreaks.
According to the International Labour Organization (ILO), as of September 2020, 94% of the global workforce was affected by mandatory or recommended workplace closures, and millions of workers faced layoffs and reductions in their working hours. By the end of 2020, ILO estimated another 35 million people were in work-poverty worldwide. Increased inequality is evident in these figures - decline in employment greater for women than for men, for indigenous minorities, for lower caste workers in all countries, and- Workers trapped in precarious employment (PE), both formal and informal, are among those most affected by the COVID-19 pandemic (ILO 2020). As Guy Ryder, ILO director general, said, "The crisis has uncovered the huge decent work deficits that still prevail in 2020 and shown how vulnerable millions of working people are when a crisis hits." (ILO 2020).
6. The Tourism Industry and the Precarity Class
Tourism is a labour-intensive sector, involves the utilization of low skills and often small investments and can, therefore, offer employment for low-skilled workers, ethnic minority groups and immigrants, unemployed youth, long-term unemployed as well as women with family responsibilities (UNWTO & ILO, 2014). World Travel & Tourism Council – Where tourism creates the most jobs The tourism sector has a relatively high economic multiplier feeding into a vast and diverse supply chain including agriculture, handicrafts, transport, design engineering and construction, and other subsectors (Mitchell & Ashley, 2010)
It is self-evident that the benefits of tourism's direct employment opportunities and economic multiplier constitute a significant potential for poverty reduction in any economy. However, a review by Perry, Aronson, & Pescosolido (2021) concluded that while tourism growth could contribute to poverty alleviation and reduce poverty levels on a national scale, benefits could not always be ascribed locally, redistribution of wealth was very limited, and it failed to reduce income inequality.
Bakker et al (2020) stated that if tourism was to be supportive of inclusive growth, it had to create productive employment opportunities while also ensuring equal access to those opportunities. They identified a number "binding constraints" that prohibit the tourism sector from being a catalyst for inclusive growth, grouped into three pillars :
i. Constraints to growth of tourism opportunities (included e.g. Insufficient human resource capacity; Inadequate infrastructure; Safety, insecurity and health; and Restrictive business policy environments)
ii. Constraints to equal access to tourism opportunities (included unequal access to education; unequal access to finance; unequal access due to institutional barriers)
iii. Constraints to the equal outcome of tourism opportunities (included gender discrimination, wages inequalities (expatriates versus locals), lack of access to non-monetary outcomes such as childcare and housing).
All of Bakker et al's factors are important, with many of them amenable to action by individual operators or tourism industry associations, and solutions could go some way to addressing inequality and improved distribution of monetary and non- monetary benefits. In my view however, they will have limited effect because they depend upon voluntary uptake. The industry has a poor record on self-regulation. Far greater structural change is needed, especially a modification of some of the more exploitative forms of neo-capitalism that have led to the fissured economy and the rise of the precarity class.
Example: XXXXX Hotel Co. 5,000+ hotels, 800,000+ beds, 132,000 employees; average 15 full time employees per property; estimated 1 million+ outsourced and contract workers
Airlines: Qantas outsourced baggage handlers Jan 2022, 3000 employees lost their jobs, lost conditions of employment and lost security of employment.
7. Whither Tourism Inclusive Growth in the face of these macro economic developments?
Neo liberal capitalism is not conducive to inclusive growth because of its narrow focus on profits to the exclusion of other possible interests.
For the past 50 years, the ideals of Corporate Social Responsibility (CSR) have been buffeted by headwinds most famously declared in unequivocal terms by the eminent American economist and Nobel Prize recipient, Milton Friedman, (1970, p.11) that: "There is one and only one social responsibility of business—to use its resources and engage in activities designed to increase its profits."
▪ In many ways this is the catch-cry of neo-liberal capitalism as the dominant economic force in many western democracies and other forms of governance (Sofield 2019).
▪ The rise of the fissured workplace and the precarity society demonstrate unequivocally that those firms which pursue their labour requirements through casualisation, outsourcing, offshoring, franchising, independent contracting, piece-work, zero-hour contracts and gig work have no intent or capacity to accept the social responsibilities of "inclusive growth".
▪ Many Tourism businesses apply these labour practices.
For example, Robinson et al (2019, p.1008)) reviewed 14 industry reports from global, regional and national levels, and their findings indicated "that tourism sustains precarity vis-à-vis its employment practices" and that – "Contrary to academic and practitioner narratives championing humanist and sustainable tourism futures, tourism (employment) sustains precarious employment but also contributes to deep social cleavages and economic inequalities." They concluded that a recalibration of the three sustainability pillars (economic, environmental and social) was necessary in order to improve tourism's capacity to combat precarity.
Dwyer et al (2017) stated that: Much tourism involves 'business as usual', 'saluting while the ship sinks'. Given the forces that underpin continued tourism growth the 'business as usual' approach to tourism development can be expected to lead to more adverse environmental and social impacts. Despite the adoption of sustainability practices worldwide, such as CSR, Triple Bottom Line Reporting, Inclusive Growth, and Shared Corporate Value (Porter and Kramer, 2011), there is no indication that tourism's problems globally are being solved. It is argued that current corporate sustainability and corporate social responsibility efforts are doing no more than inching firms toward reducing their negative impacts, overlooking the need to restore and rejuvenate, or move towards becoming ''more sustainable (Ehrenfeld, 2008; Sofield 2019).
Much of the tourism literature on SDG 8 omits any mention of the rise of the Precarity Class and the role of the industry in vigorously utilizing Precarious Employment to strengthen profit margins, seemingly oblivious to the fact that decent work should be an integral part of CSR (Corporate Social Responsibility) actions. In some ways the issue is too big for the tourism industry or any other sector, to tackle by itself. Structural change is required.
The Precarious Work Research Program (Sweden, Belgium, Spain, United States, Chile, Canada) suggests that: "Now, possibly more than ever before, there is an urgent need for equitable and inclusive policy responses to guarantee Article 25.1 of the Universal Declaration of Human Rights and to prioritize decent work in the Sustainable Development Goals agenda.
Just as everyone has the same universal rights, having universal social protections would mitigate the impact of the COVID pandemic, and - What is really needed is a new social contract, where the work of all workers is recognized and protected with adequate job contracts, employment security, and social protection in a new economy, both during and after the COVID-19 crisis" (Matilla-Santander et al, 2021)
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