The gig economy has transformed the way we work in Britain, says Andrew Grice. Some five million people – one in seven of the workforce – are now classified as self-employed: an incredible rise of 45% since 2000. Indeed, when Tory ministers boast of creating 2.7 million jobs since 2010, what they don’t say is that a third are probably self-employed jobs. That means a vast number of workers now lack such basic rights as parental leave and sick pay. It also means a headache for the Treasury. Employers have, until now, been one of the most efficient “tax collectors for the state”: they deduct the requisite income and national insurance tax from an employee’s wages, add their own National Insurance contributions of 13.8%, and send it off to the Exchequer. But as firms increase their use of agency staff, and as more people become self-employed, that income stream to the Treasury starts to dry up. So MPs have a “difficult balance” to strike – ensuring people can still work flexibly; minimising the tax advantages that induce companies to shed their obligations to the workforce by employing the self-employed; and minimising the damage to the public finances. (Andrew Grice, The Independent, quoted in The Week,10 December 2016)
The government has stood aside and let this train wreck happen. Some people are imaginative, self-motivated and have good skills. They would thrive anywhere. But the majority are “self-employed” from necessity. It is no way to live. It is stressful, not knowing whether you will be able to feed your family, whether you will get sick and whether you will have any pension when you reach retirement age. The only people who benefit are the CEOs and Board members, raking in the profits and, in so many cases , investing little or nothing.
Epicurus, were he alive today, would recall that previous generations enjoyed reasonable job security for most of their working lives. Writing as one who benefited from the old system I think it is appalling the way people are being treated now us (more principled?) people are out of the way. Voted for Brexit? Were I suffering in the gig economy I would have voted that way too. Epicurus, would, I am sure, agree. Life is short, too short to be exploited and bullied. Please let us just stop it!
The last bit first, I don’t think economic insecurity alone can explain the Brexit alone. Apart from Gibraltar, the most pro Remain local authority was Lambeth, a working class part of London with a large black population. They suffer from the gig economy more than most, yet that didn’t affect the way they voted the way conventional wisdom would lead you to expect. The EU actually provides workers with all sorts of rights the government would be free to ditch if we went for a so called ‘Hard Brexit.’
If I were the government, I would scrap the National Insurance system altogether, and replace it with higher income taxes. National Insurance was a good idea when the welfare state was in its inception, but we have a much more comprehensive system now. There’s no need to keep a system that penalises the self employed. It may also be necessary to strengthen the trade unions, unpopular as that may seem. In the past, the trade unions could operate ‘closed shop’ agreements with employers, whereby employers agreed only to employ union members in exchange for the union’s co-operation. Nowadays, such agreements are rare: companies like the option of being able to hire non-union members, such as the self-employed and agency workers. But they had the benefit of preventing union members from being undercut by competition, leading to higher wages overall. We still see this in the Nordic countries, where unions are so strong, even social democrats see no need for a national minimum wage.
But apart from unions, I’m not sure if there is a solution to the increasing number of self-employed. Ultimately its important for people to have the freedom to choose how they work, and if they are choosing to be self employed, we have to respect that. The UK’s low unemployment rate shows that there are jobs available, and earnings are increasing at a respectable rate. (http://www.telegraph.co.uk/business/2017/01/02/wage-growth-set-return-2017/) A higher minimum wage will reduce the incentive for employers to hire agency staff. So Brexit notwithstanding, its not all doom and gloom, but there is still a lot of work to be done.