The rapid rise of "virtual workers" — Canadians who do contract work online — threatens to lower wages and undermine social benefits such as employment insurance, minimum wage and maternity leave.

That's the stark message in a new federal study whose conclusions raise questions about whether improvements in traditional workplace programs and protections, created in a previous era, will help a young generation that more frequently takes digital jobs on contract.

"A growing online marketplace for work could make self-employment the dominant form of work in Canada, potentially leaving large numbers of Canadians with uncertain job security," says the report by Policy Horizons Canada.

"The unbundling of work and its migration to virtual space could…increase vulnerability among Canadians, contributing to the growing rise of the 'precariat.'"

Armine Yalnizyan, senior economist with the Canadian Centre for Policy Alternatives, says more young workers are doing temporary work that may exclude them from workplace-based social benefits, such as EI. (CBC)

The study suggests that by 2030, most Canadians will get some of their income through "virtual work," that is, short-term contract jobs performed online. And in the borderless online world, Canadian workers would be in tough competition with low-wage countries.

"The descent to the bottom has started as workers around the world compete to offer the lowest bid to win online work," says the report by the little-known federal think-tank.

"Lower wages and difficulties in taxing virtual work bring about underfunded social programs in some countries."

Called 'shock troops'

Ottawa and the provinces seal a deal Friday on an improved Canada Pension Plan that will deliver more money at retirement, partly to compensate for the gradual disappearance of private-sector pension plans as firms trim their costs.

An improved CPP would most benefit a young generation of workers who pay the new, higher premiums for decades. But "virtual workers" are contractors, often with unstable incomes, who must pay both the employer and employee cost of their CPP premiums rather than split them with employers.

Nor are they protected by minimum wage and other labour laws and they can access only limited employment insurance programs such as maternity leave and paternity leave and compassionate care benefits if they voluntarily choose to pay premiums.

Labour economist Armine Yalnizyan says temporary work is more common among workers age 15 to 24 – involving one in three young workers in 2015, versus one in four in 1997 — when data was first collected.

"Right now it looks like they are the shock troops of a new development, which is moving toward more temporary employment," she said in an interview.

"The trend toward more temporary work is pretty solid. And we know that temporary workers get paid at a fraction of what permanent workers do."

Transnational collaboration may be needed to avoid a global race to the bottom ... - Policy Horizons Canada's May 2016 report

Yalnizyan says it's not yet clear whether that trend will continue through to the retirement of Canada's youngest generation of workers. But she says free-trade deals that enable companies to tap the global labour market may continue to undermine the job security of Canadian workers.

The Policy Horizons study says workplace benefits — such as employment insurance, a program created in an era of widely available full-time work — may have to be redesigned.

"Access to social programs may need to be separated from employment status as full-time employment ceases to be the norm," it concludes, suggesting a minimum-income scheme may be a solution.

Popular hub for virtual workers

"Although it would take some working out, including the funding mechanism, a minimum income could also help reduce the impact of technological unemployment on further exacerbating inequality."

The CEO of an Edmonton-based virtual-work company, David Schwede of Canadian Virtual Gurus, says his business has quadrupled since January as more firms seek labour savings.

Schwede's company has a pool of about 1,000 virtual workers who receive a minimum of $17 hour, but does not pay half their CPP premiums or any employment insurance premiums because they are independent contractors.

The payroll savings are attractive to businesses coping with uncertain times, and Canada's low dollar has helped to attract customers from Australia, the United Kingdom and the United States, he says.

"We're a very popular hub for workers. We speak English, we're all relatively well educated," Schwede says.

The company offers web design, bookkeeping, social-media marketing and other services that can be provided through the Internet, and so far is holding its own against low-wage competitors in the Philippines and elsewhere.

Edmonton-based Canadian Virtual Gurus says business demand for virtual workers has quadrupled since January this year. (canadianvirtualgurus.com )

Horizons Canada cites reports estimating the virtual workforce at 112 million people globally in 2015, with revenue at $4.8 billion US. The market is growing by about a third each year.

"Virtual work could lead to a worldwide convergence of wages for similar tasks, potentially lowering Canadian wages over time," it concludes.

"Transnational collaboration may be needed to avoid a global race to the bottom and to develop effective social policy instruments in the virtual international workplace."

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