Economic Theory

The new Taylorism misunderstands the changing nature of work

A little over 100 years ago, the American engineer Frederick Winslow Taylor outlined in his book Principles of Scientific Management the methods that a factory manager should use to maximise workforce efficiency on the production chain. Taylorism — the division of labour into ever more specialised tasks and the attempt at precise measurement of productivity — swiftly became synonymous with the output expansion, but also the alienation, of the industrial age.

Now we in the UK are slated to experience a different kind of Taylorism. Like the old variety, it is founded on the notion that general principles can be applied to a wide range of productive tasks. But the new Taylorism seeks to adapt public policy to the changing landscape of work, where self-employment constitutes a growing share of all employment, and where platform businesses — many of them part of the so-called ‘gig’ economy — are bringing together millions of people each day as buyers, sellers and sharers.

It is difficult to disagree with Matthew Taylor and fellow participants in the “Review of Modern Working Practices” that labour market regulation must change to allow individuals, households and firms to reap the rewards of innovation. But the proposals of the Taylor Review fundamentally misjudge the benefits and costs of technological and operational change to workers, businesses and families. In so doing, they offer an inadequate basis on which to begin labour market reform.

A chief struggle of virtually every recent attempt at analysing changing workplace conditions from a public policy viewpoint is the definition of ‘worker’. A lot hinges on the choice of definition, because worker status in most developed countries entitles the employee to a set of benefits, most of which are obligations on the employer of one form or another. It is no wonder, then, that a key battlefield of 21st century employment involves attempts by individuals to show that they do qualify as workers, whilst the firms that they do business with are at pains to demonstrate that they are merely contractors.

These disquisitions may make for interesting political debate and lucrative business for lawyers, but from an economic perspective they are a waste of time and energy. The economist is interested in the relations of individuals as suppliers and acquirers of goods and services. The wish to engage in productive and mutually beneficial exchange, and to lower the transaction costs of such exchange, explains fundamental features of modern life such as the widespread use of contracts, the specialisation of the workforce, and the coming together of people with diverse backgrounds and interests to form business firms.

But we should not mistake these temporary and evolving arrangements — established out of expediency, in line with the technology and needs of each era — with permanent features of a modern economy and the ‘good life,’ which we might wish to preserve for their own sake.

This is where the Taylor Review puts the cart before the horse. The modern welfare state was established in the middle of the 20th century, which means that most of its central elements were built into the economic structure that prevailed at the time, namely the full-time employment by large-scale concerns of mostly male workers for most of their working lives. But this does not mean that, in order to ensure we continue to meet the goals of the welfare state — adequate living, working and consumption standards for all — the same policies must be retained. Because technology, productive capacity and the composition of the workforce have all changed quite dramatically since the time of Aneurin Bevan, sticking to the old ways of doing things is neither necessary nor sufficient to secure continued improvements in well-being.

People value the flexibility and variety offered by the use of platforms. They like to be able to change careers in the course of their working lives, and they anticipate working longer than their parents — because they will live longer and because work helps to keep one healthy in old age. The right way to tackle the public policy implications of this change is to ask: given that these shifts are occurring, and given that they are good — because goods and services are becoming cheaper, more people can access the workforce, and there is greater choice for all participants — how must policy change so that its goals are still met?

Framing the problem in this way suggests a very different approach. It means eliminating National Insurance and financing benefits from income taxation levied directly from individuals. Note that this change would be neutral for the net income of workers, because employers already pass on their share of NI to employees. It also means making savings and insurance — including for old age pensions, temporary bouts of unemployment and voluntary career breaks — more easily portable across jobs and life stages. It means reconsidering whether a statutory retirement age is desirable.

When Taylorism was coined in 1911, both proponents and detractors overestimated its long-term consequences. The former saw a future of boundless efficiency improvements from ever larger manufactures, ever more accurate measurement and ever more minutely divided work. The latter worried about the industrial age’s potential to turn independent and curious brains into mindless automatons.

Neither prediction came true, and the consequences of Taylorism were comparably mundane. Yet, just like its century-old predecessor, the new Taylorism as outlined in the latest Government review underestimates the desire and capacity of people and institutions to change with changing circumstances. But change they do, even against the stubborn impulses of legislators.


Policy Analyst at the Cato Institute's Center for Monetary and Financial Alternatives

Diego was educated at McGill University and Keble College, Oxford, from which he holds degrees in economics and finance. His policy interests are mainly in consumer finance and banking, capital markets regulation, and multi-sided markets. However, he has written on a range of economic issues including the taxation of capital income, the regulation of online platforms and the reform of electricity markets after Brexit. Diego’s articles have featured in UK and foreign outlets such as Newsweek, City AM, CapX and L’Opinion. He is also a frequent speaker on broadcast media and at public events, as well as a lecturer at the University of Buckingham.

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