Cancelling the Gig

One thing we're unlikely to ever know is whether Theresa May intended the Taylor Review to provide "cross-party" support for a series of technocratic changes to employment practice or whether it was always going to be merely a propaganda stunt intended to help recast the Conservatives as the "workers' party". The unforeseen general election result has put the kibosh on both possibilities. She won't risk her parliamentary majority over legislation - however modest in its impacts and Blairite in its inspiration - that might prompt a backbench rebellion by the free-market right of her own party, while the claim that the Tories are best placed to advance the interests of the economically insecure looks ridiculous in the face of a resurgent Labour Party committed to abolishing zero-hour contracts. May's vacuous appearance at the launch of the final report, Good Work: The Taylor Review of Modern Working Practices, looked like nothing more than a weary obligation and perhaps compensation for Matthew Taylor having wasted a year of his life (I wonder if the title was a wistful recognition of this).

One of the more bizarre claims in the report, which may well have been inserted specifically to garner a gold star from the Prime Minister, was the existence of a uniquely British way of working: "We advocate change but in doing so we seek to build on the distinctive strengths of our existing labour market and framework of regulation; the British way ... The UK is good at encouraging economic activity and creating jobs. ‘The British way’ works and we don’t need to overhaul the system. But persistent issues with wage growth and productivity provide sufficient rationale for us to look at how the labour market framework could be improved". The implication is that what we might term "a red, white and blue way of working" is a relatively recent development, stemming from the deregulation of the Thatcher years and the "flexibility" celebrated under Blair, but these developments were not confined to the UK: consider the union-busting of Reagan's America and the Hartz programme of Schröder's Germany. If there is anything particularly British it is the increased visibility in recent decades of the grey economy, where people survive on a combination of episodic work and benefits. In the past, that work would have been largely hidden and cash in hand. The aggressive pushing down of unemployment and disability claimant numbers, along with the growth of in-work benefits, has brought it into view.

The report is superficial but can't help hinting at deeper issues. For example, "The same basic principles should apply to all forms of employment in the British economy ... we need to make the taxation of labour more consistent across employment forms while at the same time improving the rights and entitlements of self-employed people". In other words, employment is currently disfigured for many by a de facto class system that leads not only to unequal rights but to inconsistent tax revenues. Though the public focus is on the most vulnerable workers, it is clear that the government is also concerned with well-paid contractors, hence the aborted attempt to increase National Insurance contributions (NICs) for the self-employed earlier this year. Many independent contractors (particularly those operating through personal service companies) have superior benefits to employees in the practical sense that foregone rights, such as employer pension contributions, are more than made up for via higher incomes. Those higher incomes are the result of tax avoidance (that is, avoiding income tax and NICs by paying lower-rate dividend and corporation tax), which means the cash-equivalent of those supposedly foregone rights is indirectly subsidised by employees. It's also worth noting that employers can also avoid tax, over and above employer NICs, through the capitalisation of contractor costs.

Taylor adopts a deterministic (and neoliberal) stance in seeing technology as both the powerful enabler of the gig economy and an area of risk that requires government regulation. This qualifies the claim of companies like Uber that the "platform" is a purely neutral space between employer and contractor, but it does so by implying that government is outside and must intervene for the public good, judiciously balancing the interests of providers and consumers as well as workers. This ignores the extent to which such platforms arise within the spaces created by existing regulation. The result is that Taylor casts government as another potential beneficiary of the technology rather than one of its architects: "technology can also offer new opportunities for smarter regulation, more flexible entitlements and new ways for people to organise". The problems of the gig economy are not the result of technology, any more than the problems of dock workers a hundred year ago were the result of hiring booths. The technology responds to the legal environment. For example, consider this statement: "Platform based working offers welcome opportunities for genuine two way flexibility and can provide opportunities for those who may not be able to work in more conventional ways". Now replace the first three words with "Prostitution".

In essence, the report is a pious call for a better behaved capitalism: "The best way to achieve better work is not national regulation but responsible corporate governance, good management and strong employment relations within the organisation, which is why it is important that companies are seen to take good work seriously and are open about their practices and that all workers are able to be engaged and heard". The all-too-evident failure of this approach since the 90s does not appear to have given Taylor pause for thought. If anything, he remains wedded to the New Labour idea that government's role is to even-handedly support both employers and employees as if the challenge were one of different endowments and needs rather than a power imbalance between the two: "The law and the way it is promulgated and enforced should help firms make the right choices and individuals to know and exercise their rights". Employers have clear choices while employees have theoretical rights. There is little recognition in any of this that employee rights were largely secured through independent labour organisation leading to workplace and parliamentary pressure (i.e. forcing choices on others), not through the "wokeness" of benign employers.

The pro-employer bias of the report is most obvious when it comes to the issue of overhead costs, though Taylor at least shows delicacy in avoiding the traditional term - "employee burden" - in favour of a more neutral alternative: "the ‘employment wedge’ (the additional, largely nonwage, costs associated with taking someone on as an employee) is already high and we should avoid increasing it further". The report explicitly refers to the current apprenticeship levy as an element of this wedge, and you can infer that it also includes employer NICs, maternity leave and holiday pay. No evidence is provided to show that this is "high", either in absolute or relative terms, or that it is problematic beyond reducing corporate profit. It is simply taken as read that business overheads should be reduced. The Taylor Review might appear to be more employee-friendly than the bonkers Employment Law Review produced by Adrian Beecroft in 2012, which in attempting to make a bonfire of red tape managed to self-immolate, but it springs from a similar worldview: entrepreneurs, not workers, are the true wealth-creators.

Despite his comments about consistency, Taylor mostly proposes little more than cosmetic change: "Worker (or ‘Dependent Contractor’ as we suggest renaming it) status should be maintained but we should be clearer about how to distinguish workers from those who are legitimately self-employed". What he doesn't do is question the basis for the difference in employment status. The traditional argument is that the self-employed are exceptional, reflecting episodic work demands or variable terms, but it is the corporate employee, with fixed terms and PAYE, that is actually the exception historically. Recognising this, some libertarians call for all workers to be self-employed and for wages and terms to be set individually. The capitalist argument against this is essentially Ronald Coase's The Nature of the Firm, namely that the boundary of employment is determined by transactions costs (i.e. overheads), so it is optimal for some labour to be held permanently inhouse and some to be bought in contingently. In other words, the categorical difference in status is for the convenience of the firm not the employee.

This truth is obscured by a tendency to appropriate incidental aspects of an employee's circumstances as a trade-off for reduced employment benefits, as if the firm were doing the worker a favour. For example, you might put up with a poorly-paid job because it is 10 minutes walk from your home, as you thereby save on time and travel costs, but that convenience is a feature of your circumstances, it isn't intrinsic to the job. Similarly, a zero-hours contract may well suit some workers who have other demands on their time (e.g. care obligations), but that shouldn't be taken as a quid pro quo that justifies lower wages. Such "flexibility" is usually a unilateral imposition by the employer, not a negotiated compromise. This tendency to confuse the interest of employer and employee is evident in the report's approach to piece-rates, where it proposes a margin of error to ensure average hourly rates don't drop below the national minimum wage (NMW). This misses the point that the issue with piece-rates is their inappropriate application to jobs over which the worker has limited control. For example, piece-rates for Uber trips are problematic because they leave drivers vulnerable to external factors such as traffic or time-wasting riders (traditional taxi fares, which combine time and mileage, mitigate this). Where workers have control they are able to calculate and thereby guarantee their hourly rate of pay. If you fall below the NMW, that's evidence the job shouldn't be paid on a piece-rate.

Viewed in Coasian terms, the attractiveness of self-employment to contemporary businesses is due to reduced transaction costs, so we should expect the level of self-employment to grow as those costs are reduced by technology or deregulation (i.e. removing statutory overheads). The popular view is that technology is a major factor in driving this precise change, but this fails to explain why over the last twenty years self-employment as a percentage of the workforce has trended down in the US while trending up in the UK, despite the former being the originator of much of the technology and no more regulated than the latter. One obvious explanation for the difference is healthcare: US workers are incentivised to find permanent jobs with coverage while UK workers aren't. Deregulation also appears to play a smaller role than anti-red-tape champions claim, with variations across European countries clearly owing more to longstanding structural features of the economy (e.g. self-employment has been consistently high in Greece and Italy) or compositional changes over time (e.g. it has trended down in Poland since EU accession, probably because international firms moved in and domestic firms expanded).

The one proposal in the report that has the potential for a significant impact is for non-guaranteed hours to be paid at a higher minimum rate. As Torsten Bell notes, this is better thought of as a minimum overtime multiplier. While most statutory overtime rights internationally (e.g. in the US and France) focus on a minimum multiplier for hours over a standard working week, there is no reason why the higher rate can't be applied to every unguaranteed hour. This would mean that all hours for a zero-hours contract would have to be paid at the higher rate, which would discourage the use of such contracts for low-paid jobs. That this proposal has only a slim chance of being enacted is indicative of the degree to which the UK labour market is already highly deregulated, not to mention vulnerable to employment regulation abuse (for example, the infamous "Swedish derogation" has been twisted in the UK to legitimise paying agency workers lower wages than permanent employees doing the same job).

Despite claims that we'll all be working in the gig economy of the future, it is clear that the new flexibility applies predominantly in specific sectors that have long been based on more arms-length or casual working arrangements, such as delivery driving or bar work at the lower end of the pay scale and professional and corporate services at the top end. These jobs are often centuries-old, as is the agitation for better worker rights and regulation of the trade. Much of the new economy is simply the old reconfigured. For example, the workers in Amazon's distribution centres are the descendants of casualised dock workers. Cranes, larger cargo ships and containerisation have simply moved the labour demand downstream, taking the precarious employment conditions along with it. While part of the UK growth in self-employment is due to the surfacing of the grey economy, and some may also be attributed to outsourcing and "Coasian optimisation", there remains the possibility that growth over the last decade reflects an ongoing sub-division of these traditional sectors - i.e. more labour is competing for the same hours of work (think of Uber drivers competing with licensed taxi drivers) - rather than either a growth in those industries as a percentage of the economy or the extension of self-employment to other sectors. In other words, the hidden story behind the "British way" may be the old tale of under-investment, poor productivity and short-termism.