Commenting on the publication of Matthew Taylor’s Review into employment practices in the modern economy, Mark Littlewood, Director General at the Institute of Economic Affairs, said:

“Taylor’s recommendations are likely to achieve little to reduce in-work poverty while increasing costs, which will be passed on to consumers in higher prices for taxi rides and home deliveries, and to workers in terms of reduced net pay and fewer, and less varied, employment opportunities. The gig economy empowers consumers over businesses, and these new recommendations could overturn this balance.

“The new gig economy has blurred the old regulatory distinction between employment and self-employment. Politicians and their paid advisers have naturally concluded that we therefore need yet more regulation. Sooner or later another innovation will come along to allow the sellers and buyers of labour to escape these new regulations. And then yet more regulation will be called for. Rather than playing this economically costly and ultimately futile game of cat and mouse, politicians should use the emerging gig economy as an opportunity to liberalise labour law.

“It’s also important to note that there are relatively few full-time workers with families to support who are making a precarious living on either zero-hours contracts or as self-employed contractors for Uber, Deliveroo and other platforms. Those that are would be best assisted by in-work benefits rather than through altering employment contracts across the board.”

IEA Analysis:

 

• Policy-makers attempting to give new employment rights to ‘insecure’ workers should recognise that the costs do not fall on the ultimate employer, but are passed on to the consumer in higher prices or are borne by the employee in lower pay increases, or other adverse changes in working conditions.


• The data does not show huge numbers in what is normally characterised as gig work, with the rise in self-employment being largely in more traditional fields such as hairdressing and conventional freelance jobs.


• Attempts to define ‘dependent’ employment linked to particular app platforms flounder when we attempt to draw lines between these and other forms of self-employment which are increasingly dependent on website and mobile phone communications, or operate through agencies.


• Devising a new status intermediate between employee/worker and self-employed will add to the already considerable complications of defining work status and rights, particularly if a new National Insurance rate is added which differs from the existing self-employment rate to reflect new benefits available to gig workers.


• A long-overdue merger of income tax with National Insurance might avoid some of these complications and reduce the incentive for employers to contract out work.


• Zero-hours contracts (ZHC) are demonised as exploitative by trade unions and other interested parties, but the evidence suggests a more nuanced picture; though hotel and restaurant work often pays badly, substantial numbers of ZHC workers work in public sector jobs in education, health and social work, earning well above the national living wage.


• Zero-hours workers are not typical of the workforce as a whole, with two-thirds being part-time, a third under 25, and about a quarter being full-time students: 6% are over state pension age.


• There are relatively few full-time workers with families to support who are making a precarious living on either zero-hours contracts or as self-employed contractors for Uber, Deliveroo and other platforms: they are best assisted by in-work benefits rather than through altering employment contracts across the board.


• Pressure to consolidate ZHC arrangements into fixed hours contracts will (by raising costs) reduce the total hours of work made available and close off opportunities for groups of workers (students, those with caring responsibilities and the semi-retired) who cannot, or do not wish to, commit to fixed weekly schedules.

Notes to editors:
For media enquiries please contact Stephanie Lis, Director of Communications: slis@iea.org.uk or 07766 221 268

To read the IEA’s submission to the Taylor Review, click here.

Further IEA Reading: Working to Rule-The Damaging Economics of UK Employment Regulation

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.

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