Self-employed workers are arguably the hardest working folks out there. The UK House of Commons Select Committee Report on self-employment and the gig economy, published in April 2017 and chaired by Frank Field MP, begins by observing that ‘the self-employed are a large and growing part of the UK labour force’ constituting some 5 million workers amounting to 15% of the total labour force.
The report observes that ‘self-employment can be a positive choice’ and supports measures that would make things easier for those who want to start their own businesses. The report acknowledges that self-employment ‘can represent entrepreneurial zeal and a highly desirable culture of self-reliance.’ The virtue of self-reliance indeed appears elsewhere in Field's other writings on welfare so we're looking here at a concept of welfare that involves more than a simple invitation to relax and let The Government look after you. This is good. Many welfarists could do with a reminder that the government is not their parent, and more importantly they are not children who need to be protected from the harsh realities of life.
The report does well to highlight the role played by technology in the gig economy, and to acknowledge the ‘large number of positive developments and opportunities.’ The gig economy is broadly defined in the report:
These digital platforms disrupt the previous model of work by vastly expanding the traditional capacity of self-employed workers to reach customers.
The main concern underlying the report is not exclusively with the potential for exploitation of workers (i.e. the morality of Uber making money off the backs of innocent drivers) but also with the potential for employers to avoid their financial obligations to contribute towards the welfare state, and to give their so-called self-employed workers increasing scope to avoid income tax and other social security obligations.
The report therefore offers proposals to ‘protect both those workers and the public purse’. The public purse in this context basically means taxpayers financing the welfare state. It is a huge problem if more and more people want to be supported by the free money available from the welfare state, and fewer people want to pay money in.
The report outlines the essential structure of the ‘social contract’ underlying the welfare state, beginning from its roots in the Beveridge Report of 1942. The report observes that ‘public support for welfare spending has been in long-term decline’ and attributes this to ‘wider public perceptions of the importance of contribution and the social contract’ which is a polite and rather fancy way of saying that people don’t want to pay for immigrants who pitched up two hours ago and paid nothing in to the system and also, let’s face it, people definitely don’t want to pay for strangers of a different race, nationality, language and culture regardless of how long ago they pitched up on these shores. Human beings are funny that way. Quite self-regarding and less worried than they should perhaps be about the welfare of Other People who are Not Like Them. They didn't have to grapple with mass immigration in 1942, did they, so of course everyone was behind Beveridge and his social contract vision. This is precisely why intelligent people argue that immigration and welfare should be delinked:
That argument applies equally well to all rich countries, not just the US. If there is lots of free money to be dished out in a rich country then it's only natural for people to feel emotionally overwhelmed by the fear of being overrun by orcs. Orcs are scary creatures that creep out from the deep and dark places in the bowels of the earth, and migrate in a heaving mass to rich countries to try and get their greedy little hands into every pot of free money they can find. Back in the real world, Griswold points out that most immigrants are exactly like normal people: they just want to work, and earn money, and support themselves. But no amount of pointing to the obvious facts will ever subdue the primal fears of rich country citizens about what looks to them like an orc invasion. So the best solution is to delink welfare from immigration. If citizens are not worried that they'll be forced to foot the bill, and forced to share their free schools and free hospitals, they'll be less worried about who's coming to live in the same country as them. Just make immigrants pay to support themselves. Ban them from using free schools and free hospitals. They can home-school their children and if they get sick they can self-medicate with herbs or something. It's not difficult. Where there's a will there's a way, and immigrants are remarkably resilient, hardy and self-driven: they had to be, to cross the desert for forty days with no water and then get into a leaky boat made out of tin foil to venture across the ocean. Let them get on with it, with no public funds. Then there'll be less squabbling over the spoils of welfare, and less fear and resentment in the world.
The Field report notes that the only remaining welfare recipients for whom people still have respect and support are the pensioners. Well, of course. The pensioners tend not to be immigrants. They tend to have put in their time, 'paid into the system' as it is euphemistically put, and do not tend to have recently washed up in a leaky boat from a poor country far away. They have worked hard all their lives and it seems right that they should be able to retire on social security support. None of this is very surprising. As the report itself says:
That will be a concern for the Select Committee, because of the fear that gig economy workers will avoid paying in to the welfare system but still require to be supported by the public purse when their business runs aground. Moreover there seems to be a perception that the self-employed benefit disproportionately from the welfare system despite having paid little in.
The aim of Employment law is to regulate the voluntary exchange made between employer and employee. Voluntary? Why should a voluntary exchange require any form of regulation? There are two main reasons.
The modern market economy depends upon voluntary exchange between people selling what they have to offer and buying what they need. Workers sell their problem-solving skills and ability to get things done, and employers pay them a wage in return. That’s the beauty of the market. Alas, markets are not very effective in ensuring that everybody ends up with the same amount of stuff.
Income inequality is widely considered to be one of the most pressing social problems of our time. There is an intuitive sense that the economic pie ought to be carved up in a fairer way, coupled with the assumption that less for some will result in more for others. This post introduces my conference paper on the tension between such distributive concerns on the one hand, and the productivity goals of corporate law on the other.
I wrote yesterday about the Toronto conference paper. The aim of that paper (as currently conceived) is to situate concerns about executive pay within the broader debate about redistribution of corporate profit between capital and labour. The law currently gives shareholders a key role in monitoring executive pay; the paper therefore takes the philosophical ideas underpinning ‘shareholder ownership’ as a useful starting point in explaining the link between productivity, profitability and pay in regulating corporate enterprise. The central concern is with the tension between pay and profit, where pay covers the proportion of corporate income allocated to rank and file workers while profit encompasses the residual income after pay and all other liabilities have been satisfied. With the current setup of executive pay, managerial workers are often entitled to a share of the ‘pay’ plus a share of the ‘profit’.
To whom, workers or managers, is corporate productivity largely attributed? How does this translate to a claim to a share of the profit? Do all workers ‘deserve’ to share too in the profit? How do we evaluate their respective claims? What is to be said about workers who are in lucrative positions owing largely to luck or chance, or those in low-waged jobs owing largely to their underprivileged backgrounds? Does the manager produce work of greater value than the labourer, or did he just get ‘lucky’ to be selected for the managerial role? The paper links these questions to the productivity side of the equation, in order to take account of the labour product that the employer is paying for and how that affects the value of that product as reflected in wages and wage distribution.
Hard at work preparing a paper for the Labour Law Research Network conference to be held at the University of Toronto in June. The paper is provisionally titled 'Production, Pay and Profit'. It's all about why some people are paid 'too much' and whether that is 'fair', whatever that means.
June update: here's how that turned out, under the title 'Large firms, wages and productivity'.