A profound change is taking place in the UK economy – and it’s not a good one for workers.
After the industrial revolution in the 18th century, paid work became typified as employment for large businesses, often in factories – and it has remained so ever since. Prior to that, productive workers typically worked for themselves as outworkers, paid per item produced.
What we are now seeing is a return to that structure of paid work.
This may sound stark, but the figures support the argument. In August, the Office for National Statistics published data to illustrate the changing nature of paid work. Most jobs created under the current government have been in self-employment – which is higher today than at any point in the past 40 years. Of 1.1 million new jobs created since 2008, 732,000 were self-employed.
And the typical self-employed worker is not a well-paid consultant – it is a building worker, taxi driver, cleaner or care worker: often low paid, with little pension provision. They have to work later in life to survive financially, so we are seeing many fewer self-employed people going into retirement. At the same time, more retired people are taking up self-employment to supplement an inadequate pension.
“The number of over 65s who are self-employed has more than doubled in the past five years to reach nearly half a million,” says the ONS. “Self-employed workers tend to be older than employees and are more likely to work higher (over 45) or lower (8 or less) hours … Average income from self-employment [has] fallen by 22% since 2008/09.”
Another factor is that many people who are employed in work – perhaps on zero hours contracts at the minimum wage – are undertaking a second job as a self-employed person. And many people who are called ‘self employed’ are no such thing by any normal definition. This was revealed with the closure of the City Link parcel delivery company. It emerged that many of those losing their jobs were classified as self-employed – despite working in City Link overalls and driving City Link liveried vans, that were provided by the workers at their own cost.
It is unlikely these trends will reverse. The UK has the most flexible labour market in the EU, thanks to conscious policy decisions by both Labour and coalition governments. Self-employment is the most clear-cut example of that flexibility, along with zero hours contracts.
Meanwhile, globalised competition is reducing real pay levels. One appalling example of this is the Amazon Mechanical Turk. Amazon acts as a broker for employers to tender for work that can be conducted online, with bidders seeking work by tendering at low cost. Much of this work is carried out in India – at rates few European workers could survive on.
A recent report by accountancy firm PwC predicts that, by 2020, most workers in the UK could be operating outside what we see as the standard forms of employment. This does not only mean through self-employment, but also via portfolio work – where one person may have more than one employer.
A survey just published by accountancy firm KPMG found that more than 70% of human resources managers would like to increase their flexibility in how they assign workers to specific projects. KPMG believes this will lead to a big increase in portfolio workers, who might work part time for as many as five employers – working a few hours a month for each.
Another major change is the development of the ‘shared economy’. This is a fast-evolving and even faster-expanding sector. An example is AirBNB. Individual owners of properties can let out homes during holidays, or rent out spare rooms, negotiating via the AirBNB website with potential tenants. This saves holidaymakers a substantial amount of money, though units of accommodation are not always of good quality, or even in compliance with basic health and safety standards.
AirBNB has faced legal action from government authorities concerned that planning obligations have been breached and relevant taxes not collected. In Germany, the Netherlands and several US states, arrangements have been entered into for AirBNB to collect hotel taxes and forward them to tax authorities.
Uber is another example of the sharing economy, enabling car owners to become taxi drivers. But the drivers are unregulated, fares are rock bottom – many taxi drivers already barely earn a living – and one Delhi woman has alleged she was raped by an Uber driver. Uber has been banned in Frankfurt because it is in effect operating as an unregulated hire car service. In London, however, Uber drivers are subject to regulation and required to purchase appropriate insurance.
But, whatever we think of the sharing economy, it is unlikely to be a short-term phenomenon. It is one example of how we are adapting to falls in real incomes for most of the population – and also of how the internet can be used to develop new and alternative economic relationships. Those are probably more likely to favour employers than individual workers and can become more exploitative than usual employment contracts.
For one thing, companies are enabled to hire and fire at will. Another attraction for companies is that, if workers are classified as self-employed, the company can avoid paying national insurance contributions. They also do not have to cover holiday wages, sick pay or, if workers are based at home, office overheads. In broad terms, this new (or perhaps, more accurately, old) economy is likely to significantly reduce net pay.
In this context it is difficult to talk of positive spin-offs, although for some people (including myself) the freelance life is enjoyable and financially rewarding. For most, it is no such thing – and is the result of market forces, not free choice.
It is sensible to consider how workers can respond. It might seem odd for the self-employed to join a trade union, but it can be very helpful. My trade union – the National Union of Journalists – provides practical support for members. We have access to legal services, advice on bargaining and information on rates paid to other members by various employers.
Support services can also be provided by co-operatives. One of the problems faced by the self-employed is balancing our workloads. In some weeks the self-employed may be flooded with work; other weeks the flow might dry up. Forming themselves into co-ops can enable freelancers to pass on work to trusted colleagues. These co-ops can also market themselves collectively and engage support workers – such as book-keepers – between them.
It is possible, then, that the surge in self-employment could lead to a rise in this type of co-operative. There are already many examples of this type of arrangement, for example in the taxi, business consultancy and design sectors. But I wonder how widespread this response will be unless there is a campaign of awareness of the benefits of working collectively. Perhaps the time for that has come.