Regulatory pressure on Uber is mounting, and it’s not a good thing.
Last week minicab operators joined black cab drivers in demanding that Transport for London imposes stringent new conditions in return for renewing Uber’s licence to operate in the capital. This is classic incumbent behaviour in the face of newcomers with a superior product – cheaper, more convenient and offering more assured quality through rating and easy reimbursement mechanisms.
The problem is that predictable anti-competitive whingeing is difficult to disentangle from the increasingly prominent claim that Uber drivers, like others in the gig economy, are being exploited because their self-employed status means that pay is unpredictable and they don’t get benefits such as sick pay and paid holidays. We have already seen tribunal and court judgments which seem to support these concerns, prompting wider questions about what self-employment should mean in the twenty-first century.
Self-employment jobs have grown faster than employee jobs since the recession. This has led to the belief that the apparent post-2010 jobs “miracle” is phoney. Businesses cynically outsource work which should be done by those in regular employment, the argument goes. They get it done cheaply by avoiding many of the costs of employing people directly, ranging from office space to pension auto-enrolment. Meanwhile, these self-employed workers suffer.
This is difficult to substantiate, however. According to the ONS, much of the increase in numbers seems to have been the result of a sharp fall in those leaving self-employment rather than an increase in those entering it. Moreover there is little correlation at the sectoral level between employee jobs lost and increasing numbers of self-employed.
On average, the self-employed, including Uber drivers and Deliveroo workers, report themselves as happier than the employed. The majority are not seeking employee jobs, and those who work part-time are less likely to want extra hours than part-timers with employee status.
But there has always been concern that self-employed people may dodge tax by misleading HMRC about their independent status. It is unsurprising, given financial stringency, that in the recent Budget the chancellor attempted to raise the national insurance contribution (NIC) rate paid by the self-employed.
The proposal was withdrawn, of course. However there may be a drive to revive the plan after the election, while offsetting it by giving self-employed people access to some of the benefits enjoyed in standard employment. This is what Matthew Taylor, currently leading a review of modern employment practices for the government, will push for when he emerges from purdah.
It may sound a reasonable quid pro quo, but it would be difficult to implement. In the case of Uber and similar app-based outfits, it would effectively destroy the business model and the opportunities it offers for casual employment, forcing gig workers into standard contractual employment and pushing up prices to consumers.
If extended to all self-employed people, the benefits could not be paid for by employers except in limited circumstances where the worker has only one major client. Even here it would be difficult to implement. As for self-employed shopkeepers, or proofreaders and cleaners with many clients or customers, benefits could not be paid for in the same way. The government would have to fork out, rather negating the point of raising NICs. Nor could such workers easily be forced to take holidays or maternity leave in the same way as an employed person.
Uber has the right idea in offering its drivers access on a voluntary basis to subsidised insurance against sickness. We should not be forcing workers into a standard contractual framework that reduces employment choices, stifles innovation and raises prices to consumers.