700,000 gig economy workers are paid less than the legal minimum

Last year, Matthew Taylor published his review of modern working practices. This review was established by the prime minister following the report my colleague Andrew Forsey and I submitted to her, titled “Wild West Workplace: self-employment and the gig economy.”

This week the government finally responded. Its new commitments will deliver real gains for a large number of casual workers when it comes to holiday and sick pay rights.

Regrettably it still leaves unanswered a series of crunch questions around the living standards of workers in the gig economy. But two documents—one published alongside the government’s response, another buried deep within it—are of huge significance. These papers hold the key to the future of the labour market and protecting its weak underbelly.

The first is an official survey of the earnings and characteristics of the 2.8m people who have worked in the gig economy over the past year. This is the first of its kind and shines the brightest light yet on this large and growing section of the workforce.

Its findings should send shockwaves through the government. For we now know that the gig economy is the single largest force undermining the cornerstone of the government’s labour market policy, the National Living Wage. 700,000 people working in the gig economy over the past year were paid less than the legal minimum because they are labelled “self-employed” by the companies for whom they work. By labelling their workforce in this way, companies are free to offload to individual workers all of the risks and responsibilities usually taken on by employers.

The survey shows that for certain groups of workers the gig economy does also offer the flexibility and freedom that is associated with genuine forms of self-employment. It is those groups who are most likely to be using the gig economy as a means of supplementing other sources of income.

However, the survey shows also that several hundred thousand workers rely on the gig economy for work on a daily basis, as the main source of their income.

They are the ones, based on the hundreds of submissions Andrew and I have received from drivers and couriers over the past 18 months, who are most likely to be trapped in a form of self-employment that is barely recognisable to most people; having much of their working life controlled by the companies for whom they work, with little flexibility or freedom, while still shouldering the risks and responsibilities.

Given that almost half of those earning money in the gig economy deem it to be important for maintaining their current standard of living, it is doubly disturbing to note from the survey that 448,000 gig workers earn only a little more than the legal minimum. Also concerning is that exactly half of all gig workers expect their income either to stagnate or deteriorate in the year ahead.

Herein lies the importance of a second document published by the government, buried deep within its response to the Taylor Review.

It is this second consultation document on how to best define employment status and enforce the accompanying rights, which holds the promise of extending basic protections to every individual who works in the gig economy.

At present, such protections can only be gained if workers have the resources, time, and sheer guts to mount a successful legal battle through the courts.

A small but noble band have done so, most notably in the case of Uber. But a key recommendation that Rachel Reeves and I submitted to the government, at the conclusion of our Select Committees’ joint inquiry on the gig economy, was that the law itself should be reformed so as to remove this burden from individual workers and instead require the companies who benefit from their labour to prove their workforce is genuinely self-employed.

Ideally, given the country is demanding action to protect vulnerable gig workers, the government would have supported the bill that Rachel and I drafted for them, which would have reversed this “burden of proof” and revamped the definitions of employment status so as to reflect better the reality of the modern labour market.

But it has chosen instead to consult. Our job, therefore, is to ensure that the outcome of that consultation is a shoring up of the integrity of the National Living Wage, by extending this layer of protection to the 40 per cent of gig workers earning either below, or just above this minimum rate.

The government has delivered assurances to me, twice, on the floor of the House of Commons that the National Living Wage will remain as a cornerstone in its implementation of the Taylor Review. A failure to act quickly on our draft bill will have the opposite effect; further impoverishing vulnerable members of the work force.