Within the framework of private law, where individuals are largely self-governing subject to the basic principles of the law of obligations (contract, property, and tort) the law has nothing to say about whether everyone should have the same amount of stuff or even the same amount of social standing or economic power.
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 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. Thus we see a tension between distributive concerns and the productivity goals of corporate law.
When evaluating capitalism people often point to the excesses of Victorian England, the dark satanic mills, and all the children who were maimed or killed in factories or stuck up the chimneys of rich people's houses. Grim. Nobody wants to go there. Today, we read about how CEOs portray the unacceptable face of capitalism with their inflated salaries and their rewards for 'failure' meaning that if there's a market downturn they get a 'golden handshake' and move on to their next lucrative disaster. These kinds of stories would not commend capitalism to anyone as a way to model an economy.
But capitalism is not perfect: it is merely the least bad economic system that mankind has discovered so far. The place to look if you want to see what happens without capitalism is Africa. It's not all that pretty, is it. Suddenly Victorian England starts looking very hopeful as an alternative way to organize society. The causes of economic failure are many and complex, and it is difficult to single out a single factor as being the worst problem causing negative growth rates in some African countries. But one thing we know for sure is that capital markets tend to create better conditions over time. So law has a role to play in supporting and facilitating capitalist markets and underpinning the integrity and sustainability of the economic model. In sum: figure out laws that help facilitate open markets, and back capitalist initiatives as much as possible: enforce contracts and property rights and forget the rest of the nonsense people worry about these days such as who was unfair to whom in the nineteenth century. Time to move on, folks, put all your historical grievances to rest, pass a law stating that everyone hereby apologies to everyone else, if that helps you feel better, and pull yourselves up by your own bootstraps.
The blog begins with a paper prepared for the Labour Law Research Network conference to be held at the University of Toronto in June, 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.