the times | Thursday January 13 2022 41

CommentBusiness

Why employees having a bit on the

side could change the face of business

T

he Year of the Tiger in

China may resonate more

for international relations

analysts than for those

looking at China’s economy.

Economic growth, slowing for about

a decade, is now weaker than at any

time since the 1989 Tiananmen

Square hiatus and it might not take

too much to tip it into a recession.

The annual Central Economic

Work Conference last month noted

that China was “facing the triple

pressure of shrinking demand,

supply shock and weakening

expectations”. These are partly

cyclical and Covid-related, but they

also reflect rising structural

headwinds. The second quarter of

last year was the only one in which

GDP growth was satisfactory and

the government has emphasised

“stability” as its top priority this

year. To hit the growth target,

expected to be 5 per cent to 5.5 per

cent and usually announced in the

spring, the government needs to act.

Easier monetary and fiscal policies,

approval of new bond issuance to

finance infrastructure and a

relaxation of property sector

regulations have already begun.

Yet even if the government

succeeds in meeting the target, it

would be no more than a rearguard

action in the face of growing

economic pressures, many of which

are of Beijing’s own making.

China’s zero-Covid policy may

have suppressed the pandemic more

successfully than elsewhere, but the

minor outbreaks behind the

continuing lockdown in Xi’an, a city

of 13 million people, and the latest

local lockdowns and mass testing of

14 million in Tianjin, about 100 miles

from Beijing, offer a reminder that

China will remain closed for the

foreseeable future, with adverse

effects for travel and transportation,

hospitality and leisure, consumption

and the conduct of international

business. The Omicron variant could

mean, under strict pursuit of zero

Covid, a huge negative shock for the

economy. Or it could torpedo zero

Covid altogether, bringing new

political and economic problems.

Covid aside, China has its work cut

out. The impact on the economy of

excessive levels of indebtedness, the

effects of rapid population ageing

without adequate coping

mechanisms and the stall in

productivity growth are familiar and

increasingly significant problems.

Moreover, the consequences of the

bubble bursting in China’s $55 trillion

real estate sector, equivalent to four

times the value of GDP, will be hard

to manage. Property sales, starts and

prices are now uniquely falling

together as stressed developers are

forced to dispose of assets and

restructure. The wider negative

consequences for land sales and

auctions, the heavily indebted local

government sector and banks and

real estate loan collateral will be a

running sore for years.

The Common Prosperity

campaign, embraced by President Xi

as a fundamental requirement of

socialism, heralds ostensibly an

assault on inequality, excessive risk-

taking and imbalances so as to

eliminate social instability risks. Yet

it ignores badly needed but awkward

political and institutional reforms,

with its main features comprising

even greater state and party control,

the primacy of state firms and a

blizzard of regulation to bring the

private sector to political heel and

guard against “disorderly expansion

of capital”. In pursuing these

objectives, China risks undermining

the productivity growth and

innovation it craves and lapsing into

the feared middle-income trap.

Economic concerns will be

downplayed this year. The Year of

the Tiger celebrations and the

Winter Olympic Games are less than

a month away, China’s annual

National People’s Congress is due

the following month and the

important 20th Party Congress,

designed to cement Xi’s core leader

status, will take place at the end of

the year. In 2022 the government

will try to keep the economic ship

steady, but no amount of economic

fine-tuning can detract from the

difficult decade ahead.

David Wighton

George Magnus

What happened to

those early hopes

that a permanent

shift to more

working from home

would deliver a big increase in

productivity? There is no shortage of

theories, ranging from widespread

staff burnout to a proliferation of

pointless virtual meetings, but some

bosses reckon there is another factor.

They suspect that when based at

home staff put less effort into working

for their employers and more into

working for themselves.

Since the first lockdowns, there has

been an explosion in the number of

people making money from online

“side hustles” alongside their day jobs,

be it selling second-hand clothes on

the internet, creating YouTube videos

or playing the financial markets.

According to a survey by Morgan

Stanley, more than one in three

Europeans now earn extra money

from content creation, ecommerce or

trading. For the under-25s it is even

higher, with polls of Generation Z

employees finding that more than

70 per cent have a second job of some

sort and almost a third of them spend

15 to 20 hours a week doing it.

Whether or not this has affected

productivity, Morgan Stanley analysts

reckon there is a bigger threat — that

many of these employees will quit

their regular jobs entirely to pursue

their side hustles.

Faced with this risk, you might

imagine that employers would be

seeking to crack down on such

moonlighting. After all, many

companies have rules against staff

having jobs on the side. Yet

rather than get tough, some

employers are doing the

reverse.

Given the popularity of

side hustles and the

increasing challenge of

hiring staff, some bosses are

reluctantly offering

employees more

flexibility to pursue

their own projects.

Others are looking

at it more

positively. William

Carson, a director

of Ascensos, a

outsourced

customer service firm, says that

companies should view it as an

opportunity to build stronger

relationships with employees. “What

we see this meaning for our industry

is that second jobs must be embraced

and celebrated, even encouraged to

help long-term engagement.”

The interest in online side jobs is a

particular issue for a business such as

Ascensos, which works for ecommerce

brands and has a lot of young staff.

But Carson reckons it will spread

across all types of employment.

“Every organisation will have to take

it on in some form.” While Ascensos

has reported an increasing number of

requests for shorter hours to allow

staff more time to spend on their

other ventures, Carson says that

allowing outside interests need not

harm the productivity of their

employers.

It is ironic that more firms are

allowing employees to have outside

interests just as the rules for MPs

doing side jobs are set to be tightened.

But there is nothing unusual about

companies letting some staff take on

other roles. After all, many public

companies’ chief executives also sit as

independent directors on other

companies’ boards. This supposedly

provides chief executives with

valuable experience that will improve

their performance in their main job.

Sceptics suspect it is more about

improving their prospects of getting a

bigger job next time round.

For years, some large companies

have allowed staff, particularly in

areas such as IT, to work on their own

projects, partly in the hope that some

might turn out to be valuable for the

business. Even before the pandemic,

some firms actively encouraged

their staff to have a side hustle, as

long as it didn’t compete with the

employer’s business. Simon Paine,

co-founder and chief executive of

Rebel Business School, believes

there is a business

benefit.

The firm

runs

courses in

entrepreneurship,

so it makes sense

for employees to

have personal

experience of it, he told

CNBC.

The pressure on companies

to allow employees more

flexibility to pursue their

sidelines is part of a broader challenge

posed by the Great Resignation. Since

the first pandemic lockdowns,

companies are finding it much more

difficult to hire and retain staff across

a very broad range of jobs.

In some cases this has resulted from

a reduction in supply (such as people

permanently leaving the hospitality

industry) or an increase in demand

(all the junior lawyers needed to deal

with a huge increase in workload from

the boom in corporate deals). Yet

there also seems to be a general

willingness among employees to take

a risk and try something new, either

leaving to set up their own ventures or

quitting to join another company.

Companies are being forced to pay

up to retain or attract good people,

which is why some bosses are

gloomier about inflation than many

mainstream economists, or they are

offering more flexible working

conditions, including the freedom to

have side hustles.

Yet this surely runs the risk of

actually encouraging staff to leave. It

allows employees to develop a new

sideline, while enjoying the security of

a steady job, that they could then

decide to pursue full-time.

Morgan Stanley’s survey found that

41 per cent of those employees doing

something on the side planned to

leave their jobs within two years. Even

if only a small proportion actually do

quit, that would be a very big deal for

their employers and for the broader

economy.

“Even if one in ten sees these

ambitions through, wage inflation

looks set to persist,” Morgan Stanley

says. For companies, this makes it a

tricky balancing act. Too little

flexibility and you may struggle to

hire the staff; too much and you might

struggle to keep them.

Some enthusiasts say the risk that

employees will be encouraged to leave

can be overstated. Most second jobs

bring in pretty small sums and are

unlikely to be viable standalone. For

many staff, it is just a bit of fun. This

suggests there might be something

else that companies

could try to keep

employees happy.

Make their day jobs

more interesting.

‘‘

’’

David Wighton, a former business

editor of The Times, is a columnist

for Financial News

6 Simon Nixon is away

George Magnus is a research associate

at Oxford University’s China Centre

and at SOAS and author of Red Flags:

why Xi’s China is in Jeopardy

Problems are piling up

for China’s economy,

and not just from Covid

Workers have been

abandoning the

hospitality sector

‘In pursuing ideological

objectives, China risks

undermining the

productivity growth and

innovation it craves’