Labour Market

Taylor review fails to factor in costs to employees of proposed interventions


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IEA response to the Taylor Review

The Taylor Review calls for increased regulation of flexible work. But it ignores the costs these interventions will cause by way of reduced employment. It cannot, therefore, show that the benefits it claims would follow from its proposed regulations exceed the costs. This is a fundamental methodological flaw that renders the Taylor Review’s recommendations almost worthless.

In a response to the Taylor Review, IEA authors Len Shackleton and Jamie Whyte argue that, while Taylor praises the current flexibility of the UK labour market, his recommendations will constrain workers’ choices, reduce employment flexibility, reduce employment levels and, consequently, slow economic growth.

Forcing businesses to treat self-employed people as “dependent contractors” will generate extra costs for business because they will have to provide additional benefits. These costs will inevitably be passed on to consumers through higher prices, and to workers through reduced net wages and employment. The same will happen if Taylor’s recommended mandatory entitlements for agency workers are introduced, thus harming the very people these measures are supposed to help.

“Dependent contractor” status

Taylor’s recommendation:

  • Change the legal status of app-based workers to “dependent contractor” to give workers more employment rights.


Problems:

  • Will create extra costs and reduce profits, forcing the platform suppliers to pass on these costs, either to consumers (who would react by buying less and thus reducing employment) or directly to the workers, by increasing the payment for using the platform.

  • May make gig economy business models unsustainable.


Agency work

Taylor’s recommendation:

  • Abolish the Swedish derogation exemption of the EU’s Agency Workers Directive which currently protects agencies from having to provide the same pay and benefits condition after twelve weeks of work in a role.


Problems:

  • Abolishing the Swedish derogation exemption would reduce options for both employers and workers and may increase job insecurity for some agency workers.

  • Agencies have an important role in areas of the UK labour market, such as hotels and catering, nursing, acting, secretarial work and security services. The proposed restrictions would add to costs and reduce the number of workers agencies can employ.


Commenting on the Institute of Economic Affairs’ response, author Len Shackleton, Editorial Research Fellow at the IEA, said: 

“The Taylor review advocates further regulation of the UK labour market because, while its authors are content with the quantity of work in Britain, they are unhappy about its quality. The problem with this approach is that giving gig workers and other self-employed people access to similar benefits as standard employees will incur extra costs, which will be passed on to consumers and workers themselves rather than ultimately borne by large businesses. So by trying to improve quality of work these proposed interventions will eventually impact quantity.”

Notes to editors: 

For media enquiries please contact Nerissa Chesterfield, Communications Officer: [email protected] or 020 7799 8920 or 07791 390268

To download a copy of the IEA’s response to the Taylor Review please click here.

In June 2017 the IEA released a report called ‘Working to Rule: The Damaging Economics of UK Employment Regulation’. To download a copy please click here.

The mission of the Institute of Economic Affairs is to improve understanding of the fundamental institutions of a free society by analysing and expounding the role of markets in solving economic and social problems and seeks to provide analysis in order to improve the public understanding of economics.

The IEA is a registered educational charity and independent of all political parties.



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