Megatrends and the Future of Social Protection

Raphaela Hyee

Jasmin Thomas

The world of work continues to undergo significant changes. Technological progress, including advances in artificial intelligence (AI), as well as the effects of climate change and associated mitigation measures, are changing skills requirements. At the same time, new business models and evolving worker preferences, including the shift to telework in the wake of the COVID‑19 pandemic, contribute to the emergence of new forms of work that depart from the traditional norm of permanent full-time dependent employment. These broad shifts have important implications for the sustainability of social protection systems. For instance, new technologies that lower transaction costs and allow firms to outsource more have facilitated new forms of work, including platform- and other forms of freelance work. These new forms of working create new opportunities, but also new risks in terms of economic security (OECD, 2019[1]; OECD, 2018[2]). Similarly, ageing populations are already causing labour shortages across many OECD countries, not only resulting in upward pressure on wages, but also in additional incentives to invest in further automation (Araki et al., 2023[3]).

This chapter looks at long-term trends in the labour market, starting out with long-term trends in labour force participation and part-time employment (Section 3.1) followed by self-employment, with a particular focus on platform- and other forms of freelance work (Section 3.2).

Women’s labour force participation has continued to rise since 1995 across the OECD on average,1 from 58% to 66% in 2022 (Figure 3.1, left panel). It rose in all countries except the United States, where the labour force participation rate was already at 70% in 1995 (69% in 2022). Men’s labour force participation, in contrast, remained stable (81% in 1995 and 2022 across the OECD on average). It significantly increased only in Hungary – from the very low level of 68% in 1995 to 82% in 2022.2

Women’s stronger labour market attachment is also apparent in the decline of part-time work, defined as under 30 hours per week (see Box 3.1): while the share of women working part-time increased slightly at the beginning of the 2000s up until shortly after the Great Financial Crisis (GFC), it has been on a downward trajectory since the beginning of the 2010s, dropping from 23% to 20% over that period across the OECD on average (Figure 3.1, right panel).

There is no clear link between rising women’s labour force participation and a higher incidence of part-time work. Some countries, notably Austria, Korea, Finland, or Italy, did experience rising women’s labour force participation (in the range of 10‑15 percentage points) combined with rising part-time employment among women (in the range of 9‑14 percentage points, Figure 3.3).

This is consistent with a narrative of the rising incidence of part-time work being a consequence of increasing female labour force participation (a composition effect): as the share of working women rises, the additional women entering the labour force are more likely to have a lower number of desired working hours (OECD, 2019[5]).

However, other countries experienced an equivalent increase in women’s labour force participation combined with a decrease in part-time work. Examples include Canada, Switzerland, France, Mexico, or Israel, where labour force participation increased by 10‑15 percentage points, while the share of women working part-time decreased by around 4‑7 percentage points. Indeed, the countries with the highest increases in labour force participation (20 percentage points and more) had either low (below 5 percentage points, Spain, Ireland) or no increases in the incidence of part-time work (Hungary, the Netherlands), or even strong decreases (more than 10 percentage points, Luxembourg).

Men, in contrast, increasingly work part-time, although their part-time rate is still much lower than that of women (Figure 3.4, top panel). The incidence of part-time work among men rose in almost all countries with the exception of the United States, New Zealand and Portugal, from 6% to 7% from 1995‑2022 (Figure 3.4, bottom panel), with most of the increase taking place during and shortly after the GFC (Figure 3.1, right panel). Against the backdrop of stagnant labour force participation (Figure 3.1, left panel), this suggests a total decrease in the labour supply of men, on average, across OECD countries. Rises in part-time work were particularly striking in the Netherlands (8 percentage points), Finland (7 percentage points), and Korea, Germany and Austria (6 percentage points).

For both sexes, rises in part-time rates were driven by young workers (15‑24): across the OECD on average, the part-time rate increased from 18 to 24% between 1995 to 2022 for young men, and from 28 to 37% for young women, likely driven by rising post-secondary education enrolment rates (Annex Figure 3.A.1). The stronger effect for women is likely connected to women’s enrolment in post-secondary and tertiary education catching up with male enrolment: in all OECD countries, women are now more likely than men to start a post-secondary programme (OECD, 2023[6]).3

For prime‑aged men and women, however, the gender difference becomes apparent: prime‑aged (25‑54) women’s part-time rates decreased from 21 to 17% across the OECD average, and for older women (55‑64), part-time rates decreased from 29 to 24%, showing increasingly robust late‑career labour force attachment. Prime‑aged women’s part-time rates decreased in almost all countries, except Austria (+11 percentage points), Korea (+9 percentage points, from a very low level in 1995) and Italy (+6%, Annex Figure 3.A.1, bottom panel).

In contrast, part-time rates for prime‑aged men rose from the low level of 3 to 4%, and 7 to 8% for older men. Changes were small and positive in most countries, with the notable exception of Sweden (significant decrease in the part-time rate for late‑career men). Increases for prime‑aged men were highest in high income countries Finland and Denmark (+5 percentage points), Norway, Germany, Korea and Austria (+4 percentage points, Annex Figure 3.A.1, top panel).

Labour market slack did contribute to the rising propensity of men to work part-time during the GFC, but underemployment cannot explain the persistent increase in male part-time work. At the beginning of the GFC, the share of male part-time workers who could not find a full-time job increased from 19% in 2008 to 23% in 2009 and remained elevated until 2015, when it started to decline (OECD, 2024[7]). This labour demand effect is clearly visible in the overall incidence of male part-time employment, that increases steeply at the onset of the GFC and dips in the boom years leading up to the COVID‑19 crisis (Figure 3.1, right panel). However, the male part-time rate did not decline in line with underemployment during the economic recovery following the GFC. In 2022, the share of male part-time workers who could not find a full-time job was back at 16%, lower than before the GFC – in fact, at the lowest level since 2001, when the male part-time rate was 5.8%. Yet, in 2022, yet the male part-time rate was 7.4%, the same as at the height of the GFC.

The extent to which men reduced their working hours to share unpaid care more equally with their partners is less obvious from the aggregate results, but also more difficult to examine with readily available data sources. For instance, in Europe, the part-time rates of men with and without children evolve in parallel over the business cycle, with men without children being more likely to work part-time – this could of course be due to other confounding factors (such as men without children being younger).4

The EU-LFS (Eurostat, 2023[8]) provides survey evidence on reasons for part-time work, but a high share of respondents (more than half on average across countries) choose vague answers, including “other personal reasons”, “other family reasons” or “other reasons”. With this caveat in mind, on average across 27 EU countries, Norway, Switzerland, and the United Kingdom, around a quarter5 of part-time workers report working part-time because they could not find a full-time job – this share reaches 50% and more in Spain, Italy and Romania (2022). Around 17% of part-time workers combine work with education or training, significantly more men (25%) than women (15%). In contrast, more women work part-time to care for children or adults with care needs (19%), compared to only 7% of men. Given the incidence of non- and vague replies, as well as the introduction of a new answer category (“other family or personal reasons”) in 2021, it is difficult to interpret changes in these shares over time. Zooming in on prime‑aged men in countries where part-time increased the most and for which data are available results in a mixed picture. In Denmark, where the share of prime‑aged men working part-time increased by 5 percentage points, the share of men working part-time because of care responsibilities did not increase. In Germany and Austria, where male part-time rate increased by 4 percentage points, the share of prime‑aged men working part-time because of care responsibilities increased from 3% to 7% in Germany, and from 5 to 7% in Austria.6

Astinova et al. (2024[9]) decompose the decline of working hours in European countries across socio‑economic groups. They also find that the decrease in working hours is mostly driven by the young (connected to longer periods in education) and by men. In European countries and between 2003 and 2019, men’s average weekly working hours declined by 1.12 hours on average more than women’s. Men with children under the age of five experienced an additional decline of 0.5‑0.8 hours per week. Thus, of the overall trend decline in men’s working hours, less than half is driven by men with young children. They also show that the share of men with children under the age of five who say that they work part-time because of caring responsibilities increased somewhat between 2006 and 2019, although still only a quarter of part-time working men with children under five give that as the reason. Future research should explore men’s reasons to work part-time in more detail. For instance, time‑use data could reveal how much time part-time working men spend doing unpaid care work.

Another possible explanation for the increasing propensity to work part-time is an increasing preference for leisure – rising real wages as a result of economic growth could mean that workers increasingly value leisure as their wages increase. Using data on working hours over the past 150 years across 15 OECD countries, Boppart and Krusell (2020[10]) show that hours worked fell at a steady rate of about 0.3‑0.5% a year, consistent with steady productivity growth and a set of preferences that mean that the income effect of higher labour productivity dominates the substitution effect: as workers become richer through productivity growth, they prefer more leisure time to increased consumption. Astinova et al. (2024[9]) also show that countries with higher GDP per capita have fewer average working hours, pointing to a dominant income effect: as wages and thus income increase, workers opt for more leisure time.

The continued strengthening in women’s labour force attachment – both on the extensive as well as on the intensive (hours) margin – broadens the financing base for social protection systems across OECD countries. It may also help alleviate labour shortages that start to emerge because of population ageing, at least in the short and medium term, and until labour force participation rates of men and women are broadly aligned.

It also means that women increasingly acquire their own social protection rights, which will support their income security, especially in old age. this should ameliorate some of the pressures on means-tested last-resort pensions, given that an increasing number of older people (especially women) live alone, often without a survivor’s pension (see Chapter 4).

At the same time, the still high incidence of part-time work among women – consistently higher than among men – leaves them less economically secure than full-time workers (OECD, 2019[5]). Women work part-time in large part due to the uneven sharing of care and housework responsibilities (Chapter 4). This means women continue to accumulate fewer entitlements to contribution-based benefits, in particular old-age pensions, and might not acquire sufficient rights to out-of-work support such as unemployment or sickness benefits to lift them above the poverty line.

The increasing propensity towards part-time work among men has much the opposite effect, diminishing labour supply at a time of labour shortages, and weakening rights to contribution-based benefits, including pensions. However, if this trend is indeed driven by an income effect, this would mean that part-time working men would still make higher contributions, and therefore enjoy more economic security in the event of job loss than women who work part-time because of caring responsibilities and have more fragmented careers as a result.

If the income effect is indeed the driver, however, it could be the case that the increased labour force attachment of women is a transitory effect, driven by women catching up with men in terms of education and wages, and that they, too, might decrease their working hours in the long term when they reach a sufficient wage level.

A persistent trend towards part-time work would negatively impact the main funding source for social protection, the aggregate wage bill, already diminished by population ageing. The sustainability of pay-as-you-go pension systems in particular hinges on productivity growth compensating for negative population growth even if labour supply is constant (Aaron, 1966[11]). This means that even higher productivity growth would be necessary to preserve social protection funding if the incidence of part-time work increases in the long term.

Self-employment has been on a slow decline in developed economies throughout the second half of the 20th century and into the 21st century. For instance, the share of self-employed workers7 in the US labour force fell from over 20% in 1948 to 11% in 1973. This decline was driven primarily by the decline in share of the labour force in agriculture, as well as small craft and retail businesses (Steinmetz and Wright, 1989[12]). There was a slight increase in self-employment in most OECD countries during the 1970s and 1980s, mostly among self-employed workers without employees, likely connected to labour market slack weak labour demand (Gottschall and Kroos, 2007[13]; Blanchflower, 2000[14]). Since the mid‑1990s, however, the incidence of self-employment has decreased in almost all OECD countries, with the exception of Columbia, Costa Rica, Czechia and the Slovak Republic (Figure 3.5).

There are however concerns that the number of independent contractors or freelancers who work for few or even only one client, in particular those whose work is mediated by online platforms (so-called platform workers), is rising. They, like other self-employed workers, have limited access to social protection (see below), are not covered by employment protection or minimum wages, and are typically not allowed to engage in collective bargaining. Unlike other self-employed workers, they also operate with little or no business capital, and if they are dependent on a few or only one client (as often is the case with digital labour platforms), they also do not enjoy entrepreneurial freedoms, e.g. setting their own prices or working hours (OECD, 2018[2]).

Quantifying the extent of this phenomenon is complicated by several factors:

There are few dedicated surveys with a sample size sufficient to enable robust estimates of the share of gig- and freelance workers. In the United States, the Contingent Worker Supplement of the Current Population Survey (CPS) estimates the share of independent contractors and freelancers (including, but not limited to platform workers) to be around 6‑7% of total employment, with no growth in alternative work arrangements between 2005 and 2017 (Bernhardt et al., 2022[21]; Abraham et al., 2023[17]). It has, however, not been repeated since the 2017 wave.

Abraham et al. (2023[17]) contracted Gallup to administer a contract work module yielding around 60 000 respondents in the United States in 2018/19. They find that around 9‑11% of all respondents who initially state that they are dependent employees reveal themselves to be independent contractors following further probing. This almost doubles the share of contingent workers compared to the CPS Contingent Worker Supplement. Workers who misclassify themselves are more likely to have low education, and to belong to a racial or ethnic minority.

The 2016 Canadian Labour Force Survey included a question on whether the respondent had offered services on a digital, peer-to-peer ride service such as Uber or Lyft (0.3% had) or offered private accomodation services, such as via AirBnb (0.2% had) (Statistics Canada, 2017[22]).

Jeon, Liu and Ostrovsky (2021[23]) seek to identify freelancers, platform workers and others with unreliable or “gig” income by looking at unincorporated self-employed workers without a business number in Canadian tax data. They find that the share of workers who report such income increased from 5.5% to 8% between 2005 and 2016, that around half of these workers also had income from wage or salaried employment, and that income from self-employment was low, with a median of CAD 4 300.

Collins et al. (2019[24]) look at independent contractors who received income for work contracted by firms, or mediated by firms, in US tax data. They are able to identify online labour platfirms using employer names. They find that in 2016, about 1% of the workforce received income through labour platforms, and that most of these workers have income from other sources, with a median income from platform work of USD 2 500. Similarily, Bernhardt et al. (2022[21]) find that 1.4% of workers in California had income from online platforms in 2016.

Self-employed workers generally have less access to social protection than dependent employees. For instance, in 2020, only 11 of 36 OECD countries with available information offered self-employed workers the same unemployment protection as dependent employees; another seven offered partial access, i.e. with lower amounts and/or more stringent eligibility criteria than for dependent employees. In five countries, the self-employed had the option to join a voluntary unemployment insurance scheme, but membership rates were often low – under 1% of all self-employed workers in Austria and Korea, 3% in the Slovak Republic and 10‑15% in Finland8 (European Commission, 2022[25]; Park, 2020[26]). 13 countries did not offer any unemployment insurance benefits for self-employed workers (Denk and Königs, 2022[27]).Self-employed workers also contribute less to old-age pensions than employees and receive lower pension benefits when they retire. OECD research shows that, in 2015-2017 and on average across 15 OECD countries, the median self-employed worker’s pension was 22% lower than the median dependent worker’s (OECD, 2019[28]).

The COVID‑19 pandemic brought the lack of social protection coverage of self-employed workers back into focus, as countries had to introduce new programmes to support them at speed. Often, these emergency support measures lead to overpayments due to the difficulty setting up new infrastructures to establish previous earnings histories, they were also necessarily not balanced by contributions. As a result, a number of countries have extended, or are considering to extend the social protection coverage of the self-employed, e.g. Belgium, Ireland, Italy, Latvia, Luxembourg or Portugal (OECD, 2023[29]; Eurofound, 2024[30]).

One argument against unemployment protection for the self-employed is that running a business does – and should – imply risk, because self-employed workers control the success of their businesses in ways that employees do not. Providing them with unemployment insurance can therefore be prone to significant moral hazard – with no employer to confirm a layoff, it is difficult to establish whether a loss of income is caused by a (prior) lack of effort, or external circumstances leading to business failure (OECD, 2018[2]).

However, not all self-employed activity is equally entrepreneurial, some self-employed workers are economically dependent on one or very few clients, and moral hazard can also be a challenge for dependent employees. Careful policy design and complementary measures can mitigate moral hazard, e.g. making benefit receipt conditional on active job search and other activation measures, including monitored job-search and training (OECD, 2023[31]).

As countries seek to ensure effective social protection in a changing world of work, one pragmatic way to circumvent moral hazard problems would be to insure self-employed workers only for income losses during sector- or even economy-wide shocks, as opposed to idiosyncratic ones (Franzini and Raitano, 2020[32]). This would limit moral hazard (although seasonality needs careful consideration), and provide protection in future crises, as along with access to activation, training and employment support services. Only partially insuring the risk of job loss can also lower contributions relative to standard workers, an advantage given that the self-employed are necessarily liable for both employee and employer contributions.

Concerns about a rising incidence in platform work centre around workers being classified as independent contractors, although they may end up enjoying few of the advantages of self-employment – such as setting their own prices and working hours, and determine details of service provision such as working attire (OECD, 2018[2]). Some platforms intervene in gig-workers’ price setting, working time and work organisation to such an extent that they have been found to be the de facto employers by national courts. Many jurisdictions have “primacy of facts” principles that allow workers to be classified as employees if they meet minimum standards of dependency on and accountability. In European Union Member States, 320 judgements and relevant administrative decisions were issued between 2015 and 2022 (Eurofound, 2024[30]). Platform workers have been found to be employees by courts more often than not, e.g. food delivery drivers in Spain in 2020, as the platform was deemed to determine their working conditions, or Uber drivers in France, as drivers could not independently access clients, and while they could choose their working hours, the platform determines prices, monitors execution and imposes sanctions on drivers. Similarly, in the United Kingdom, a decision to classify Uber drivers as “workers” was confirmed on appeal in 2021 (Aloisi, 2022[33]). In cases of straightforward misclassification of dependent employees as independent contractors, labour law (when properly monitored and enforced) may thus be sufficient to ensure the adequate protection of workers.

Ensuring that workers are correctly classified also helps to prevent the erosion of social protection financing bases through regulatory arbitrage – employers lowering labour costs by choosing work arrangements with fewer social protection entitlements, and thus lower social security contributions. For workers, non-standard employment is especially attractive if contributions are lower than for standard dependent employment, while benefit entitlements are broadly similar. Where possible, both contributions and entitlements should therefore be aligned across employment forms.

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