The gig economy has ridden roughshod over vulnerable workers in recent years—but a recent review into employment practices could lay the basis for a radical reorganisationby Frank Field, Andrew Forsey / July 20, 2017 / Leave a comment
The vulnerable human underbelly of Britain’s labour market has, thankfully, taken centre stage in the national political debate. The prime minister deserves credit for helping to propel it there.
Last September when we submitted a report to her on bogus self-employment—as well as the poverty pay, chronic insecurity, and shoddy treatment that came with it—at Hermes couriers*, the PM responded almost immediately with two moves.
First, the PM referred Hermes to HMRC for an official investigation. Her second move was very much in keeping with her ability to set up and then see through major inquiries to get to the bottom of particularly sensitive (and hugely important) matters that have been kicked by some of her predecessors into the long political grass. In this instance, she commissioned an “Independent Review of Employment Practices in the Modern Economy” under the chairmanship of Matthew Taylor, Chief Executive of the Royal Society for the encouragement of Arts (RSA). So far, so good.
But the major test of the PM’s resolve on this particular matter comes in whether or not her government will now enact the necessary legislative measures to protect those vulnerable workers over whom the gig economy has ridden roughshod in recent years. The proposals outlined in the Taylor Review, which landed on her desk last week, could lay the basis for this much needed radical reorganisation of the labour market.
As we documented both in that study on Hermes’ working practices, as well as subsequent ones on Uber, DPD, and Parcelforce, companies operating within the gig economy have sought to compete with one another by keeping their labour costs artificially low.
The Taylor Review begins to plot a route away from this business model, by extending worker protections to a broader class of “dependent contractors,” i.e. those who are wrongly classed as self-employed by companies under the current system.
This would represent a hugely welcome move towards enacting the proposal we submitted to the Review, for a national minimum standard of fair work in the gig economy. The idea is to insert a floor so that no company can operate below a certain threshold of hourly earnings, job security, and even basic humanity.
There is one area in which we have urged the government to be bolder than the Taylor Review, and that is in the trade-off between flexibility and the national minimum wage.
The Review posits that people in the gig economy who choose to work at off-peak times should not necessarily be entitled to the minimum wage. But when one of us raised this in the House of Commons, the Minister for Small Business, Consumers and Corporate Responsibility, Margot James, could not have been clearer in her assurance: “Minimum wages rates are sacrosanct. There will be no trade-off when it comes to ensuring that everybody is paid at least the minimum wage.”
“There is one area in which we have urged the government to be bolder than the Taylor Review”
This is a clear undertaking from the government and it needs to be honoured in any subsequent legislation. If gig companies are required by law always to abide by the minimum wage, even if that means a loss in flexibility, they will need to regulate the supply of labour or pay from their profits the minimum wage when there is not the level of demand to pay all workers at that rate.
The answer to this conundrum could lie in another of the Review’s more radical proposals: a series of sector-based strategies is mooted to help turbo-charge productivity and earnings.
One helpful prototype here could be the working party being set up at our request by the Department for Transport, specifically to address the issues we raised in our report on working conditions in the private hire industry. As things stand, private hire operators’ right to “flood the market” with an unlimited number of drivers in the absence of a wage floor means it is almost inevitable that a certain proportion of drivers will take home poverty wages.
A sector-based strategy here to improve companies’ management of their labour would help deliver the gains in productivity that are a prerequisite for higher earnings, particularly for those workers who comprise the vulnerable section of the labour market.
Take Hermes as another example. A sector-based strategy would necessarily need to look at how delivery rounds and working hours can be restructured so as to guarantee that no driver takes home less than the minimum wage.
A series of strategies along these lines would not only instil a greater sense of fairness within the gig economy. They would also help the PM begin to crack the central economic challenge facing her government, of how to improve productivity and earnings within Britain’s flexible labour market.
None of this will be possible, of course, without swift legislative reform to put key parts of the Taylor Review into action. If the PM does not act swiftly on this front, it will be the House of Commons’ job to do so. Watch this space.
*In a response last year to the report, Hermes said that it “does not reflect” the way it operates