The “gig economy”, the phrase used to describe the rapid growth of self-employment and micro-businesses, has been by far the fastest-growing sector of the economy in the past five years, and a huge new source of growth.
By last year, self-employment in the UK had hit an all-time high, with 4.6 million people working for themselves, according to the Office for National Statistics. They now account for 15% of the labour force, compared to 13% before the crash of 2008. If you add in micro-businesses – that is, companies that employ fewer than nine people, and which often amount to a few freelancers banding together – the totals would be even higher.
There are some signs that the trend is levelling off, as big companies start hiring more people as the economy recovers. But countering that is the rapid rise of the new breed of sharing apps, of which cab-hailing firm Uber and room-sharing service Airbnb are the most visible. Airbnb is now running what it is now in some ways the biggest hotel chain in the world, with fewer than 2,000 employees – the likes of Holiday Inn might employ that number at just three or four sites.
The rise of the “precariat”
Now the left has picked up on that army of workers as potential voters. The Labour leader, Jeremy Corbyn, and his shadow chancellor, John McDonnell, are arguing that parental leave, paid holidays and a host of other rights should be extended to the self-employed.
The rising “precariat” – those making a living from doing short-term “gigs” on precarious contracts rather than from secure jobs – have none of the protections that traditional employers offer, and that unions and the Labour Party have fought for. They don’t get parental leave, or sick pay, or paid holidays, and they can’t take themselves to an employment tribunal if their workflow suddenly dries up or they haven’t got enough cash to pay themselves at the end of the month.
Many others, and not least some big companies, hoping to strangle competition with red tape, are arguing that Uber and Airbnb should be made to treat their drivers and home-owners as staff, with all the costs and employment rights that entails. In the US, there are court cases underway trying to re-define sharers as staff. Across the developed world, there are efforts to make the self-employed much more like traditional workers. In fairness, there is something to be said for this.
If self-employment offered the same kind of benefits as a staff job, then more people might make the transition. It can be a demanding lifestyle, without much in the way of perks. If people working for themselves got maternity leave, for example, more women might try it. The trouble is, in many more cases, people in the gig economy have actually fled the dead hand of excessive regulation.
Busting the self-employed myths
For starters, it is a myth that the precariat are poorly paid, or living a hand-to-mouth existence. In fact, all the evidence suggests the self-employed are doing much better than the average worker. A recent survey by Boox showed the average salary was more than £50,000 in the UK, compared with £26,000 for employed people.
True, there are plenty of low-paid self-employed people cleaning houses or delivering parcels – but there are also lots of well-paid professionals. The gig economy hasn’t made them worse off. A report on Uber drivers shows they were making a lot more than old-style cab drivers. In New York, for example, they were making $30 an hour, compared to $15 for taxi drivers.
The “social protection” some of the left want to offer them will have to be paid for somehow. If they were to be offered holiday pay and parental leave, for example, then presumably they would have to face higher taxes and national insurance charges. But they may not want that. Some might want three or four months off a year, and others may work 24-7 for 12 months of the year – but that is their choice. In fact, self-employment is rising because it generally offers higher pay and better conditions than traditional employment, and more flexibility as well.
Funnily enough France – probably the most over-protected labour market in the world – also has the fastest-rising number of micro-businesses according to Eurostat statistics. It is the one way of escaping deadening state regulation – only freelancers in France have any sort of control over their working lives. The last thing the gig economy needs is a raft of intrusive and cumbersome employment regulations. In reality, the best thing we could do is deregulate it even further.
We could raise VAT thresholds so the self-employed could push their sales up without the bother of having to register. Or we could allow them to take on one member of staff, without having to pay tax and national insurance for them, or be burdened down by employment law – that would create a huge number of jobs as well as making their life easier. After all, if the self-employed earn much more than the average salary, then that can only be because their productivity is higher. If we had even more of them then the whole country would be a lot richer – and far richer than if they were all taking time off on paid leave.