Mr. Moar Tax - Used under Creative Commons License

That John McDonnell doesn’t understand economics is obvious enough, the man’s a hardline Marxist and socialist. Who has even said that the Senior Lecturer knows his onions on tax. However, his latest little sally is a remarkable misunderstanding all the same. He’s insisting that gig economy workers – contractors to you and me – will be given full employment rights. Something that will either reduce wages to such gig economy workers, mean some number of them don’t have jobs at all or some – and most likely outcome – combination of the two.

What he’s missing is that such employment rights are a cost of employing someone. So, if we raise that cost of employment we’re going to have one of two results. Either fewer people employed or a scrimping on some other part of the employment bill – wages will fall. This should be obvious enough, obviously enough. Why are people employed in this manner in the first place? Because it’s cheaper to do so.

A Labour government would give temporary workers and those on zero-hours contracts the same rights as full employees, John McDonnell has said.

The shadow chancellor told the TUC Congress he wanted to give workers in the “gig economy” basic rights such as sick pay and parental leave as part of a plan to deliver “the biggest extension of individual and collective rights our country has ever seen”.

Sick pay’s not all that much of an issue to be honest. Employers don’t pay it, it’s a reduction in the balance of the national insurance payment they make to HMRC. They’ve taken the NI off the wages, then they deduct things like maternity pay (well, 90% of it) and SSP, then send the balance on. What will be interesting here is whether McDonnell starts to insist that such workers start paying full NI as a result of gaining such rights.

On the first day of a Labour government those in the “gig economy” such as Uber drivers would have the same rights as other workers. “Just because you don’t work regular hours doesn’t mean you can afford not to work when you are sick,” Mr McDonnell said. “Just because you work several jobs doesn’t mean you can afford to lose one of them without warning. Just because you value the freedom of independence or the convenience of flexibility doesn’t mean you have to forgo basic rights.”

That seems to imply that it will be difficult to fire such gig workers. Which is going to reduce the number hired in the first place, isn’t it?

After a long, hot summer of screaming angrily into its own navel, the Labour party is finally talking to the outside world again. Or at any rate that’s one way to look at John McDonnell’s plan to curb the gig economy, unveiled at the TUC conference.

Well, yes, curbing that part of the economy is going to lead to fewer jobs in it, isn’t it?

The basic thing is obvious enough though. We can raise the non-wage part of employment compensation, sure we can. And as we do we’re going to create a pressue to reduce the wages part of it. If employers cannot do that then they’ll lower their employment costs just by employing fewer people. Adding employment rights is thus exactly like insisting upon a minimum wage. Same effects, same direction, it’s only how much this happens which is at issue, not whether.

So, John McDonnell has just announced that fewer people will be employed at lower wages. As government policy. Aren’t we all so lucky?

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Rhoda Klapp
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Rhoda Klapp

Here’s a modest proposal: Give all employees the option of receiving their remuneration with all the benefits, or trade them all or in part for more money. And of course the option of working as a personal service company under whatever contract freely made with the non-employer. Freedom. Why not try it after everything else didn’t work?

Quentin Vole
Member
Quentin Vole

I’ve seen this in US businesses, where each employee can use a page on the company intranet to trade off benefits – pension, health insurance, holiday entitlement, even part-time working – against salary. There may be UK businesses operating in the same way for all I know.

Spike
Member

I’ve read about businesses where you can pick from a smorgasbord of benefits, but not where you could renounce perks entirely and take the equivalent in cash (though you pay tax on the latter). Now what we need is an employee option where I can renounce the right to file a state unemployment claim (with its presumption that any separation is the employer’s “fault”) and draw benefits that increase the employer’s payments into the fund (taxes). Let me agree to be an employee-at-will in exchange for higher pay, as consultants essentially do. No; politicians don’t want what’s best for people;… Read more »

TD
Member
TD

I was a partner in an engineering firm for years. It was not that unusual for a person to tell me that they had their insurance through their spouse so could they have a raise instead. It actually seemed a fair request was generally granted.

mole125
Member
mole125

I’ve been in a number of businesses where some of that has been possible. Its more been positioned the other way round, employees can opt into sacrificing some of their salary for additional benefits (family health insurance etc), but also the ability to ‘sell’ some (5) days off, to trade down on some standard benefits etc.

mole125
Member
mole125

The thing that gets me about all of this is that people are talking as if the ‘gig economy’ is something new and modern. If anything it is the historical norm throughout much of the world for many labourer/low skilled jobs. Workers would gather each morning at the market/factory gates/docks/farm gate to find out if there were any work for them. Some would be known by the employers/foremen and get more consistent work (effectively a zero hour contract), others would be adhoc as available. It is so normal there is even a bible parable based on the fact that the… Read more »

Southerner
Member

But where’s the line between the self-employed gig worker and the self-employed, say, baker?

Rhoda Klapp
Member
Rhoda Klapp

Like the Mexicans (and other hispanics) who hang around the old Shell station on route 5? And in some equivalent place all over the US?

Southerner
Member

For it is written that the Magical Money Tree shall bear infinite fruit, yea even unto these the least bound by contract of my brethren. Which solves the problem of who is going to pay for it.

jgh
Member
jgh

I have a leak in my roof. So, I have to incorporate and employ a builder to get it fixed, instead of just paying one? Madness!

Rhoda Klapp
Member
Rhoda Klapp

Another modest proposal. You should be able to incorporate your household. Claim all the costs against tax, hire out the workers to employers and handle their tax or pool the income and share it in whatever way is most advantageous.

Quentin Vole
Member
Quentin Vole

Some people seem to do that already. My wife does ‘house detective’ work for ‘big houses’ and her latest work was paid for by the owners’ business, not them personally. They may be on the fiddle, or maybe their home is ‘owned’ by the business.

Spike
Member

The employment arrangement (contract or no), along with the health insurance contract, is the last frontier by which politicians can distribute Free Stuff and not have to raise taxes, because someone else pays for it. I was a self-employed contractor for Microsoft around the time that another one successfully sued for government unemployment compensation despite the terms of his contract. The entire industry moved to staffing temporary projects through job shops rather than individuals. The agency pays any benefits mandated by government, and incidentally, lobbies for law changes to put independents out of business, such as the absurd IRS rule… Read more »

BniC
Member
BniC

I believe the term ‘tramp’ comes from the late 1800’s depression when workers would walk from factory to factory looking for work each day