Labour Market

Matthew Taylor’s Seven Pillars of Employment Wisdom

The Taylor Review – introduced in the first chapter by ‘Matthew’, as our demotic times seem to require – is an interesting piece of work.

He sets out ‘seven steps towards fair and decent work with realistic scope for development and fulfilment’. First, that the same basic principles should apply to all forms of employment: there should be a fairer balance of taxation, rights and responsibilities across the labour market. Second, there should be broad equivalence for work on platform-based apps and work elsewhere. Third, the law on self-employment should be clarified with a new status of ‘dependent contractor’ superseding the existing ‘worker’ status. Fourth, we should encourage good management and ‘strong employment relations’ within organisations. Fifth, workers should have attainable ways to boost future employment prospects. Sixth, there should be more emphasis on workplace health. Finally, there should be ‘sectoral strategies’ to boost wages in low-paid sectors.

Put like this, it sounds like a thousand and one wafflefests of the sort that Taylor’s Royal Society of Arts has pushed for as long as I can remember. But there’s more to it than that.

In some ways the review is surprisingly sensible. Taylor debunks much of the mythology around current labour market trends, pointing out that gig work and zero-hours contracts (ZHC) have many plus points and shouldn’t be banned – something that has predictably infuriated the unions and Labour’s spokeswoman Rebecca Long-Bailey. He doesn’t think that occupational changes associated with an alleged ‘hollowing-out’ of middle-income jobs are creating greater inequality. He points out that concerns about job insecurity are exaggerated: ZHC employment is not expanding as rapidly as many claim, and gig work is often a top-up rather than the main source of people’s income. Both forms of work are valued by most participants: ‘we have come to understand that flexibility does work for many people… an agile labour market is good for protecting employment’. Hallelujah!

However, although the report recognises the dangers of further regulation, and Taylor is wary of the ever-growing size of the ‘wedge’ which tax and employment mandates place between employer costs and employee net pay, there are many recommendations which would exacerbate these problems.

Taylor wants higher taxes on the self-employed. He wants greater employment rights for his newly-defined category of ‘dependent contractor’. He wants the Low Pay Commission to set yet another pay rate – a higher rate for ‘extra’ hours which minimum-hours contract employees are asked to work. He wants employment tribunal fees to be reduced and fines on guilty employers increased. He wants the minimum wage piece-rate system to be applied to app-based gig work (a far more difficult task than he imagines). He wants unpaid internships to be made illegal… and so on.

There is little understanding here that these interventions will have knock-on consequences. As I repeatedly emphasise in my recent IEA book, Working to Rule, employment mandates are not ultimately paid by employers but are passed on. If passed on to consumers, they reduce demand and ultimately employment. If passed on to employees, they mean lower pay growth or in some cases less favourable working conditions.

Revealingly Taylor, as might be expected from a quondam sociologist, reifies labour markets. While going on about the importance of ‘good work’ and ‘high quality’ employment – of which he thinks the government should publish indicators on a regular basis, incidentally – Taylor speaks of ‘a challenge for the labour market in terms of creating suitable jobs’. What does this mean? A market cannot be challenged. A labour market is a means by which huge numbers of employers and workers interact to create usually beneficial outcomes.

Further meddling in the labour market, whether by Mrs May implementing some or all of Taylor’s recommendations, or by Corbynites barging through the door which Taylor has opened, may make such beneficial outcomes far less easy to achieve.

Editorial and Research Fellow

Len Shackleton is an Editorial and Research Fellow at the IEA and Professor of Economics at the University of Buckingham. He was previously Dean of the Royal Docks Business School at the University of East London and prior to that was Dean of the Westminster Business School. He has also taught at Queen Mary, University of London and worked as an economist in the Civil Service. His research interests are primarily in the economics of labour markets. He has worked with many think tanks, most closely with the Institute of Economic Affairs, where he is an Economics Fellow. He edits the journal Economic Affairs, which is co-published by the IEA and the University of Buckingham.

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