A Tough Gig? Why Britain Needs a New Social Bargain

The ‘gig’ economy can provoke divisive debates. The recent rise of platforms like Deliveroo and TaskRabbit are exciting and concerning commentators in equal measure. It’s simplified into: either you’re for innovation, freedom a­nd flexibility, or you’re for workers’ rights, taming the tech giants and reducing inequality. This clash, however, is a distraction from holding the government to account for dealing with wider challenges of changing work practices and work-based poverty.

“Traditionally if you were a consultant, freelancer or self-employed, you had a skillset or a trade, be it a journalist, a plumber or an IT consultant – a skill that you could take to market,” explains Susannah Kintish, Partner at Mishcon de Reya. “That is not necessarily the case when you’re talking about a rider for Deliveroo. Then you start to get into the emotion of inequality and whether corporates are taking advantage.”

However, as Kintish points out, you’ve only got to listen to radio phone-ins following a major ruling to know that many gig economy workers are happy with their job and employment status. In a recent survey of Deliveroo riders, 85 per cent of UK riders said that flexibility is what they value most. A majority of their riders work for fewer than 15 hours a week, and just 1 in 10 say it is their main source of income.

The current legislation is not fit for purpose. Employment definitions largely derive from 1996 – eBay wasn’t even around then, let alone the tech platforms that drive the gig economy. The legislation of that time couldn’t foresee the world of work as we know it today. The government knows this and initiated the Taylor Review to try clear up some of the problems – with Brexit, it is unclear when (and if) its findings and the results of the consultations will ever see the light of day – but its remit wasn’t wide enough. As Kintish suggests: “we need a whole reassessment of the social bargain between those paying and those receiving wages.”

Currently, the self-employed can’t bring discrimination cases to court – Kintish and others think the government should equalise discrimination laws. And no matter the worker status, everyone should be earning the minimum wage. But a one-size-fits-all approach doesn’t lend itself so easily to something like holiday pay, as it will load costly regulations upon a majority of companies and people who are already happy with the flexibility of their work.

There are tax advantages to being self-employed that need consideration. The Institute for Fiscal Studies (IFS) in its influential GreenBudget last year, worked out that the tax advantages currently amount to an average of £1,240 per year. Of course, lower access to social security benefits may justify paying some lower taxes, but the IFS doesn’t think the differences in benefit entitlements are equivalent to £1,240 per year. The IFS concludes that income should then be taxed at the same overall rates for employees, the self-employed and company owner-managers.

Deliveroo riders have access to free accident insurance, but platforms are openly apprehensive about offering too many private benefits for risk of being labelled employers. Will Shu, Founder of Deliveroo, has called upon the Government to introduce a Charter to allow platforms like his to provide certain benefits like insurance and payments to cover sickness or holidays, as well as training.

Something has got to give. Charlie Mullins, Chief Executive of Pimlico Plumbers, who recently lost an appeal in the Supreme Court in which a plumber classed as self-employed was ruled to be a worker, is adamant: “Instead of attacking the gig economy for falling foul of 19th and 20th century industrial law, which isn’t fit for purpose, the government should look at what has developed from a far more impartial standpoint, and draft new laws, based on original principals of protecting workers from exploitation.”

The Taylor Review was focused on and called Good Work. It’s an important and noble concept, but one that is inherently ambiguous. As such, it might be beyond the scope of government to set out meaningful criteria of good work that everyone can agree with, and, even if that were possible, it’s almost certainly beyond its scope to ensure everyone has it. What is in the government’s power is overcoming the existence of in-work poverty. As a nation, we rightly dislike the idea of people working flat out and still falling below the poverty line. A minority working in the gig economy are caught in this position, but so are some employees, which is why the government provides tax credits.

Rather than focusing on what companies must do, the government should try looking through the other end of the telescope. As argued by the IFS and others, at the wrong level, minimum wages cause unemployment, but the government has other weapons in its arsenal. Tax credits are part of the solution, but something more radical like a universal basic income may be on the cards. It’s been tested in Denmark, Finland, Canada, the US, Spain, Kenya and even Scotland, and though it may sound utopian, it has roots in the thoughts of Milton Friedman – Margaret Thatcher’s favourite economist – in his proposal for a negative income tax.

If, as some fear, we are heading towards more inequality, reforms – whether piecemeal like tax credits, or wholesale like a basic income – may be preferable to living in an unequal society or suffering the disemployment effects of overregulating innovations like gig economy platforms.

This article first appeared on FT.com.