Stop forcing benefits down my throat and give me hard cash, dammit This rise of the gig economy might mean that we should redefine the whole concept of being an employee, as compared with being a contractor. There is a political argument going on around this very subject already. There's plenty of people in the US arguing that Uber's drivers – and all those other people at TaskRabbit, Lyft …
it seems to me that many people would prefer to have some mandated stability in their employment. This is probably dependent on a person's risk aversity, of course - but what seems to be happening in the contract market is that companies are increasingly employing contractors at rates not significantly different from employee rates, while giving them none of the employee benefits. It's wonderful for the employer, but I would argue that for many employees it's not the way they would choose to work.
I know this is probably heresy for Tim, but a point which could be made that a company has responsibilities to the society in which it operates, rather than just to its shareholders... I suspect the breaking point occurred when 'personnel' departments - which at least maintained the illusion of some sort of interest in the employees - mutated into 'human resources': the nightmare where the employees are just plug-in replaceable parts.
Basically, the idea of the "sharing" economy is to break up unified hives of workers into an atomised powerless mass, where single worker bees will forever out-compete each other, driving prices down, while the company reduces costs and responsibilities to a minimum for the benefit of VCs, mezzanine financiers, lawyers, lobbyists and later shareholders.
Greetings from The Iron Heel.
It's fun to see The Iron Heel mentioned here, as I listened to it last week while finishing up some DIY. Great fun as an adventure novel, and well worth a listen even if your political tastes differ.
I stole the title of this comment from http://www.theguardian.com/books/booksblog/2007/dec/07/howdidjacklondonssocialist
The book can be had for free at http://www.gutenberg.org/files/1164/1164-h/1164-h.htm as it is outside copyright.
https://en.wikipedia.org/wiki/The_Iron_Heel
Absolutely agree. I read this
Or I could be suggesting that everyone should get to enjoy that higher value from that same cost to the employer of being able to decide exactly how to allocate that total income.
and the first thing I thought is that there's fuck all chance of any employee enjoying the higher value. The employer will simply reap the benefits of any mandated provision's removal. The balance of power does not lay with the employee which is why unions exist and why we have mandated entitlements - because the market simply cannot be trusted to provide them. It seems Tim is living in some sort of utopia whereby employees with rights reduced to that of someone in a Dickensian workhouse would be paid far more to compensate. Utter bollocks.
Now, there is certainly an argument to be made that Governments can often overstep the mark with the levels of entitlement mandated in crass vote-buying exercises whereby they lose sight of the aim of the mandate and the cost to society and the employers as a whole. That I will wholeheartedly agree with. There is always a sweet spot between legally mandated entitlements and the level of subsequent employment. It is much like minimum wage which I abhor simply because it doesn't create much benefit when the subsequent job losses are taken into account - it simply gets set too high. I believe the money would be better spent on free health and education so that people have little excuse for not bettering themselves. You should get higher pay for being of more use (in theory) not because someone said you must.
"The employer will simply reap the benefits of any mandated provision's removal."
How?
Currently, to employ someone, the employer adds up all he costs of the pay, the benefits, the taxes that must be paid etc. And then decides whether to hire more or less people. The decision being whether that total package is more or less than the benefits and output of the extra people.
How the package is sliced and diced doesn't (absent tax rules) make any difference to the employer. If you cut the cost of the benefits then the employer is still willing to pay the total sum. And competition would quickly mean that they were again if the benefits were cut.
" many people would prefer to have some mandated stability in their employment."
That stability is a false sense of security.
I have been a contractor for the last 8 or so years full time and previous 20 or so years part time).
A week ago one of the companies I did work for rolled over and went belly up with little notice. Everyone out on their ear with a couple of weeks wages - looking for a new job.
I have multiple clients running simultaneously. I am used to the feeling of going out to engage customers. I can work more hours when there is more work and less when there's less work.
There are a few companies around who don't want to sign up new employees, but are willing to engage people short term to achieve specific goals. They won't hire the person looking for a job, but they'll hire the contractor.
Who is really in the more stable and secure position? The employee or the contractor?
"I have multiple clients running simultaneously. I am used to the feeling of going out to engage customers. I can work more hours when there is more work and less when there's less work."
That still places you in a minority. I'd be prepared to bet that the vast majority of people on minimum wage or thereabouts would have great difficulty in deciding on putting money aside for the tax man or medical bills or just for a "rainy day" rather than essentials they need now. I'd also be prepared to bet that those same people WILL NOT get all of the extra cash equivalent to the lost "benefits".
Something like Tim suggests might work at the "professional" or "career" level where people are sometime in a position to negotiate their contracts,but the vast majority are simply not in jobs like that. They'd end up waiting on street corners for the employers "enforcers" to come around offering a days work for a some shitty fixed price, take it or leave it and most would be desperate enough to take it.
" I'd be prepared to bet that the vast majority of people on minimum wage..."
... would be better dumping their dead-end job and thinking a bit more like an entrepreneur.
Get a rake and a leaf blower and go gardening. You'll make far more money than minimum wage as well as having more than one customer. One customer leaving is not a threat to your income.
what seems to be happening in the contract market is that companies are increasingly employing contractors at rates not significantly different from employee rates
I have seen no evidence of this. Contract rates are, of course, more volatile than permanent salaries, and there are always a few comedians hoping to hire a senior contractor with a comprehensive portfolio of skills for school-leaver rates. But in 30 years of contracting I've hardly ever seen a permanent job that pays what a comparable contract job does.
Perhaps if you've got nice employers who treat employees/contractors well the system you describe would have merits worth discussing. In a world were even successful companies off shore jobs to temporarily push up share prices, were there are attacks on the ability of those who wish to negotiate collectively by private business and by the government (who is suppose to be looking after their interests, ha), were companies who structure themselves to pay virtually no tax in a territory where they operate payroll taxes are one of the things it is hardest to dodge, were insecurity could prevent reporting of harassment etc etc. In utopia maybe, but this is not a utopia.
Of course in a free market if you feel you are being treated badly as an employee or contractor you can look elsewhere for work and find somewhere better, or start a better company yourself. As a contractor this is nice and easy as you simply don't renew the contract which is much less hassle than resigning.
I've never heard of a company off-shoring to temporarily push up share prices, they do it to reduce costs and have a more flexible workforce without so many govt regulations weighing them down. Now if everyone was a contractor it's a million times easier to reduce the workforce by, again, simply not renewing contracts. That may sound bad to you that companies can just let people go without issue, but it also means companies are less reticent to hire contractors when they know there's no chance of a tribunal if they forget to cross their t's on the redundancy notice.
Unions have a bit of a history of their "collective negotiations" being little more than blackmail with things like the closed shop and the coal miners bringing down Ted Heath. Thatcher was right to stamp it out. Unions helping their members is no bad thing, but some use their members for their own political aims.
Companies restructuring themselves to pay less tax? Well so do I, and so probably do you (got an ISA?).
I'd love to see a more flexible workforce like Tim suggests, even though in my personal case I'd probably be worse off (currently on a pretty high wage for what I do which they don't have much choice about thanks to some TUPE arrangements a couple of years ago). Companies would be so much more inclined to hire people for work without all the bullcr*p that comes with employees, and wage renegotiations will be much easier for contractors; done a good job and they are asking you to renew? Ask for 20% more!
"Unions have a bit of a history of their "collective negotiations" being little more than blackmail with things like the closed shop and the coal miners bringing down Ted Heath. "
Whereas when employers ganged together to fix working rates that was OK? Adam Smith has something to say about that, by the way.
Closed shops, oddly, suited many employers. They meant, for instance, that competition was very hard to start up. In the days of the print unions it was very, very hard to start a new newspaper because if you didn't employ union workers you would be picketed, and all the closed shop workers were currently employed elsewhere. Why do you think they persisted so long? Eddie Shah was allowed to be the fall guy to try to bust the print unions, he lost out, Murdoch benefited because Shah had debugged using modern presses which were cheaper to run than the labour-intensive machinery of the other papers.
Of course, employers would never, ever, break any laws. Such as collecting and disseminating information (mostly inaccurate ) about their employees/ex-employees, and then using it to prevent them obtaining employment.
Nah...never 'appen mate.
Oh wait....
And the unions are doing an excellent job protecting their members....by legal action against those companies, mostly ones big enough to have known better.
HMRC current means of defining self employment would seem to mean that genuine taxi drivers are, while many private hire drivers are not.
Pf course, with no paye the gov would be squillions down in income....but we're going down that route anyway, since many employers regard part timers as disposable...
@Dave Quoi?
@TheTick I've worked in companies were this has happened. As for your point about ISAs, no I don't but I do have a pension. The difference is that I'm not employing a small army of accountants and laywers to snake through loopholes so that I am suddenly being paid in a tax haven instead of the country where I work.
Is that you pay legitimate expenses out of gross income (or count them as tax deductions, whichever way you prefer to think about it). This ought to include that £4,000+ season ticket for a 'seat' (good luck with that!) on the misery line. (Of course, if you're a real contractor working for several different outfits, a season ticket probably isn't appropriate in any case).
Many continental countries allow this to be done by employees anyway. So those French colleagues are not only paying about one third of your travel costs, they can charge it against tax, too.
A lot of that is because a generation ago the only contractors were lawyers/accountants/etc and they got to make the rules. When every receptionist or sandwich shop worker is an indpendant contractor expect the tax loopholes to get tightened as quickly as they were when every programmer decided that they were now contractors paying themselves dividends.
That might be true for those taxed as self-employed ('Schedule D'), but if you've formed a limited company, it's hard to see how legitimate expenses could be denied. No doubt there could be even more stringent tests (like IR35) to identify those who are really employees and simply trading as contractors for the (largely perceived) tax advantages.
"Many continental countries allow this to be done by employees anyway. So those French colleagues are not only paying about one third of your travel costs, they can charge it against tax, too."
Dutch colleagues get 100% of their travel costs (public transport) paid for(*). The alternative is Amsterdam and Rotterdam turning into something worse than London in terms of both population density and congestion. This way people are spread along the Randstad and it's generally a pleasant country to live in.
I used to commute from Rotterdam to Amsterdam every morning on well-run trains. The UK equivalent would be a catchment area from Hastings/Brighton/Portsmouth to Nottingham/Birmingham/Kings Lynn/Bristol, but for everyone working in London, not just the upper middle classes.
The side effect of this policy is that businesses have stopped heavily clustering around the major cities and are also spread up and down the Randstad
The UK's transport and taxation system is bass-ackwards in a huge number of ways and working tax credits are one of the more stupid examples - it's far more efficient to let people keep more of the money they earn than to make them pay tax, handle it internally and then pay it back out again.
(*) There are allowances for company cars but these are taxed heavily and road taxes are a killer too. A public transport season pass allows unlimited travel outside of working hours and gets covered by the company, whereas every non-work km in a car is taxable as a perk.
As far as Tim's proposal goes: As others have pointed out, it would be a return to policies of the 18th, 19th and early 20th centuries. One of the defining characteristics of the middle 20th centuries (up to ~30 years ago) was a decline in inequity.
Since Reganomics and Thatcherism became the governing policies, the gap between rich and poor has been widening ever more quickly. Such gaps tend to lead to popular uprisings, which means they're not sustainable long-term - and unlike even 20 years ago it's almost impossible to cover up and intimidate groups into silence, no matter how much people like Murdoch might think they control the flow of information.
The UK's transport and taxation system is bass-ackwards in a huge number of ways and working tax credits are one of the more stupid examples - it's far more efficient to let people keep more of the money they earn than to make them pay tax, handle it internally and then pay it back out again.
The purpose of that particular system is to facilitate the "ticket clip". In order to perform it the money must flow through the system "creating employment" and feeding Government suppliers.
Your entire thesis seems to be that because flexibility in non-cash-worker-rewards vs extra cash is beneficial to you, that we should all have this extra "flexibility" imposed on us.
Which is fine for those who truly do have the freedom to pick and choose ("career women", you write, and "those not on minimum wage"). But for those who don't, you're effectively giving their employers the freedom to "allow" their employees the chance to work themselves into an early grave.
And I'm sure that would never be abused.
Oh, hang on, we already have zero-hours contracts. And they've turned out to be an untrammelled force for good, haven't they?
They are removed here - there is a special exemption for high tech companies (those where 50% of employees use a computer). No statutory holidays, no bank holidays, no overtime, no limit on working hours. The result is that salaries are half as much as in that bastion of pinko commie liberalism the USA.
There are also a rapidly reducing number of jobs since all the good people are in Silicon Valley and the companies are moving there to find the people.
The point of all the employee benefits is that for many jobs, they are so low-paid that it doesn't make economic sense to have to employ accountants for each person. Far better and cheaper just to have standard rules. Accountants only make sense for the well-off.
Another point is the possibility that given the option of cash over holiday, the employee opts for cash. The employer then notices that his employees are spending the extra cash on nights-out on the town and other frivolities which aren't strictly required for life and decides to cut wages. The enforced holidays are there to protect the workers from such practises. Remember Catbert's "timebank"? Now someone is seriously suggesting it?
About 50% of the work that Ronald Coase did for his Nobel was on exactly this issue ("Theory of the Firm"). When is the firm the correct structure, when the network of contractors?
Ans: when one is more efficient than the other for the task at hand given the current level of technology.
"When is the firm the correct structure, when the network of contractors?"
Why consider these as alternatives?
Ideally a firm would like a predictable workload growing at a manageable rate. To deal with that it would ideally like a predictable workforce.
In practice it gets neither. Workload varies as orders or contracts come along or end. The workforce varies as people quit and have to be replaced, take annual or parental leave or fall ill. The fit of available employees to work is statistically noisy.
A sensible way of dealing with that would be to set target employee levels to deal with average workloads and availability or maybe a bit lower and fill the gaps with some form of contract staff. In some cases these may be employees of an agency in others freelancers. In effect this is fitting larger amounts of work than a single firm could provide with a larger workforce than a single firm could employ; as the numbers get bigger the noise become less in proportion. The individual firms have the benefit of a core workforce used to working together and used to the firm's way of working and for the workers there's a choice of employee benefits or flexibility depending on what they value.
(Yes, I know this doesn't take into account economic fluctuations which affect lots of firms at the same time but that's going to be a problem for any system.)
Historically what we've had is a tax system designed and administered by permanent employees who simply don't get the notion that there are alternatives. (Actually some of them do get it but they then leave to become self-employed tax advisors so the system remains run by permies.) The result is that they came up with IR35 to pretend that only employees exist. This blurring of the distinction resulted in the notion that there could be a class of people who could be treated as employees when it suited the engager but denied any employment rights and hence we get zero hour [employment] contracts. And it's abuses such as this latter situation that the then IR's then political mouthpieces said that IR35 was meant to prevent.
What we need to realise is that the permanent employee, the agency employee and the freelance contractor operating as a bona fide business all have valuable roles to fill.
"we" may not be able to dismantle corporations but we can choose to organise ourselves in ways that do not follow big business patterns.
Says me, who works in a "company of part-timers".
On a different note, what would be nice in terms of statutory rights is the right to take up to a certain amount of leave (even if unpaid). People should be able to take a break if they want to.
It is a brilliant idea, it is in fact the same model with which lawyer and accountant offices work, and was also used after the 1917 revolution in Russia. There it did not work because of the huge disconnect between central planning, resource allocation, market demand and the realities of life. It did not fail because people were lazy or unwilling.
The volkswagen model shows it is a successful model, Volkswagen was in the 1930's by law owned by the Unions. This Union ownership was transferred to the state of Saxony, which still holds a majority of voting rights. This model will never become reality, the 1% holding the 80% of the worlds assets would lose here, they own enormous propaganda machines, elect our politicians and control if we get jobs. And they do it so well that even people with low wages, paying a higher percentage of taxes then a billionaire, thinks this is great.
" the 1% holding the 80% of the worlds assets would lose here, they own enormous propaganda machines, elect our politicians and control if we get jobs. And they do it so well that even people with low wages, paying a higher percentage of taxes then a billionaire, thinks this is great."
More antisemitic conspiracy rubbish.
If statutory holiday was reduced then the people at the bottom of the pile would be exploited - since there are some overheads to having more employees doing doing the same number of total hours, it's cheaper to have fewer people doing longer hours, so companies will push for it. Those who are skilled (like most Register readers) have flexibility here so can insist on better terms, but the people at the bottom of the pile will get exploited, and that's not a society I want to live in.
There are possibly also other benefits that are harder to measure - ensuring people have some time off will benefit their health and so reduce the drain on the nhs/incapacity benefit in the future.
That said more flexibility is useful. My current company ignores bank holidays- you get an equivalent amount of annual leave, you can take it on the bank holidays or at another time, great for taking time off when it's cheaper to go on holiday. My previous one let you buy or sell up to to a week of leave (although when when I went to buy some they looked at me surprised as they were so used to people being overworked and selling some of their leave)
I disagree with the article, but it's good to be challenged as to why I do, more of this sort of thing.
There's the standard libertarian fallacy here - that people are nice, charitable, etc.
Paid holiday won't be replaced by negotiation, because the individuals will have no bargaining power. We live in the era of zero hour contracts - people will be given the choice of working every hour the employer wants, or being replaced by another unit of interchangeable exploitable schmuck. Only those with unique, irreplaceable talents will have any flexibility in the resultant system.
It's the same problem with removing welfare: the reality is that it won't be replaced by charity, because the vast majority of people are selfish jerks. They'd much rather watch someone die in a gutter than give up a few precious pennies. It's not like this is hypothetical - welfare was born out of such an arrangement, as a solution to the problem.
People in the UK give over £10 billion a year to charity, despite also being taxed. Lots of people are nice and charitable. I've lived and worked with all sorts of people in my life (except the significantly rich) and I've found most people will give someone a hand when they are in need. It's just p*ss-takers they have a problem with. The vast majority of people are NOT selfish jerks.
Welfare was initially a few shillings for people over 70 (something like the equivalent of over 100 in life expectancy now), who would complain about that eh? But it quickly expanded as soon as politicians realised they could buy votes with it. Now we have a permanent benefits culture trapping millions in poverty with marginal tax rates higher than the top tax band (haven't kept up with this though, perhaps the Tories have sorted it?) and all these people will vote for the parties that keep them down on benefits street rather than give them a hand up to main street. State welfare has nothing to do with people's welfare.
Zero hour contracts are desired by quite a few people. Why would you take that flexibility away from them just because you don't like the thought of it?
"People in the UK give over £10 billion a year to charity"
The problem is the UK's welfare spending is an order of magnitude bigger than that, and there is no way that those of a chartable disposition are in a position to donate 10x more for reasons that are not personal factor to them (e.g. protecting animals, children, etc)
Maybe gov spending is not very efficient, but are any of the other options actually better? A lot of charities are way less efficient at delivering aid to the intended.
Here is a good infographic on what the UK spends money on, though I have not verified it is correct:
http://headlinesuperheroes.co.uk/stuff/cashogram/cashogram-1.0.1.png
Back to the Heath Government...
But how do you fund NIT? One way is to tax corporations who pay less than the living wage a little more than enough to make up the shortfall. It would be a "social cost of your business" tax.
The real "moochers" in the Randian sense are the corporations who pay so poorly that many of their workers are on benefits, which means we are funding them. A corporation should bear the social costs of its activities - and if it doesn't, it should make way for a more efficient corporation that can.
In the same way, housing benefit should not be used to fund private landlords. If they can't run their business without the State giving them money, the model is broken and should be replaced.
"The real "moochers" in the Randian sense are the corporations who pay so poorly that many of their workers are on benefits, which means we are funding them."
This isn't wholly and exactly true I'm afraid.
Benefits that are paid only because you have a job could (please note, could) be subsidies to employers. So, working tax credits, the EITC in the US, could be. The general empirical finding is that they're not very much in the UK and about 25% of the EITC is in he US.
But benefits that are paid whether you work or not are not subsidies to the employer. Quite the contrary, they raise the reservation wage and thus act as anti-subsidies.
So, for example, one of the reasons you go to work is to make money to pay for health care. If you're poor, in or out of work, in he US you get Medicaid. Is this a subsidy to employers? No, because you get it whether you're working or not, it's about poverty, not work status/. And he NHS most certainly isn't a subsidy to employers: no one at all complains that they're being subsidised because they don't pay us enough to afford Bupa.
But if one of the things we work for is to afford health care then having free health care, whether we work or not, reduces the need for us to work. And thus raises the wages that must be paid to tempt us into work. That's raising the reservation wage.
Given that the majority of the welfare state does not depend upon working status then there's more of the anti-subsidy than there is of the subsidy to employers.
Poor riposte Tim, I assumed from the OP that he was referring solely to 'in-work' benefits so banging on about the dole and the NHS is a bit of a straw man.
If people in work need benefits to allow them to do a job then the employer is getting a subsidy (however small you claim it to be)
I don't disagree that the current system is wasteful and have seen the soul-destroying nature of benefits dependency first hand. I'd probably favour some form of basic payment to all irrespective of their working status.
Now if the government were to return this £100+ billion a year to us who gave it to them, we might be in a position to be more charitable to the less well off. However, similar to the employers described in many of these comments, the government is uniikely to do the charitable thing: any surplus from dismaantling the welfare state will likely be funneled to vested interests. To use a Registrism, it will all be spaffed on Capita.
Others have pointed out that's not enough money to replace welfare. Much of that money is spent on rubbish like donkey sanctuaries and other similarly thinly veiled cons, so it's not even equivalent. To add insult to injury, charities are exceptionally inefficient, so the overall cost to society for the same quality of life will be even greater.
Never mind the fact that without safety nets, people will have to weave their own. With employment rights thrown out the window, they'll by necessity have to be even stronger and more comprehensive. Instead of giving money to charity, they'll start stockpiling it against the bad times.
People never think it through - as well as fluffy happy commie reasons for benefits, there are plenty of good *right wing* reasons to maintain the benefits system. Would you want to work with benefit scroungers? Do you want them stealing your TV? Do you want to pay even more to put them in prison? Do you want them dying in the street from diseases they can't afford to treat, causing a massive public health hazard? Benefits are a really cheap way of keeping them in their place.
Even if we come down to libertarianism, the argument's flawed. How can there be the honest promotion charity really be born out of a doctrine that can be summed up as "Wahwahwah! I'm a selfish bugger and don't want to pay my taxes!"?
> But it quickly expanded as soon as politicians realised they could buy votes with it
Too true.
When Oystercard was first introduced in London, it had a simple fare structure. But since it is ultimately run by politicians, over time it has become horrendously complicated: there are discounts for the disabled, the unemployed, students, apprentices, war veterans... all to earn the votes of those people.
It angers me: not only how expensive this must be to administer, but the injustice of it. If you want these groups of people to be better off then simply GIVE THEM MORE MONEY, not discounts. Otherwise you are effectively giving money to people who use the tube, but discriminating against those who choose to cycle or walk.
Not only that, but you are increasing dependency: "get a job and not only do you lose your benefits, but you also lose your cheap cinema tickets, cheap tube travel, free prescriptions etc"
End this double-dipping. Make it illegal to offer different prices based on someone's employment status, education status or disability status. Cinemas could no longer offer cheap showings for the unemployed or students, but they could still offer cheap showings before 5pm (which anyone else who is around during the day could benefit from)
Makes the disabled worse off? Then give them some extra money to compensate, which they can spend on whatever they want.
For prescription charges: 5 out of 6 prescriptions are exempt anyway. So in this case, just make them free for everyone, and save the administrative overhead of handling all the exceptions.
That would be the state pension. Two shillings a week for the over-75s'
It was never meant for the low paid, only the middle classes.
The average life expectancy [of the labourer] in the early 20th century was 46 years.
What we need now is a return to those days, when England had an empire. The navy was manned by forced conscription, there was no health care for the poor and jobs were allocated on basis of a penny a day and free tea, if you bent over and thought of England.
Oh wait....that is what Timmy is in favour of.......now, if employers were decent, moral people who lived by the law of the land voluntarily...
But we all know they are a load of scrimping, whining, tax-evading immoral bags of solid excrement..
"People in the UK give over £10 billion a year to charity, despite also being taxed. "
Well gosh. That would pay the nation's pensions for 3 days (And yes, govt pensions are welfare)
If you wiped out welfare overnight and made payments rely on charities, you _might_ get £30billion per year. Where you'd get the other £270 billion from is why there's a tax-based welfare system in the first place.
Amongst other things, such a system ensures that London doesn't have 30-50 murders _per_day_ like it used to in the "good old days", along with a life expectancy (excluding infant mortality) for most of the population of around 45-50 (which is what it would return to if the health system wasn't tax-funded as most people wouldn't be able to afford treatment - and that's another £200 billion you'd need to fund via charities).
Some people might yearn for a return to such things but I certainly don't. It's easy enough to live in a "libertarian" society if you want to, several such places still exist in the world and they're generally regarded as hell-holes.
And there lies the wub.
The law is to protect the bottom.
According to economic theory, all jobs are valued by the employer at "the least we can get away with paying".
There have always been more people of working age/capacity in the region than there are jobs to be done - and modern transport means that the region in question is even larger than in history.
All low-skill jobs can be done by anybody.
Thus, in the absence of external force (law), low-skill jobs will be paid the absolute minimum, with the least benefits, shortest holiday etc.
On top of that, if your pay is low, unpaid holiday is infinite cost as you can't make rent/eat etc.
I already see this in the UK's care industry. Many care workers have multiple jobs, doing shifts at B during their time off from A.
"According to economic theory, all jobs are valued by the employer at "the least we can get away with paying"."
Balderdash. A job is valued at what it's worth. Just about the single most common mistake businesses make is thinking that underpaying people is better than overpaying them. In fact, it's very important to try and pay your employees the right amount.
Tautologies tell us nothing. Why is a given job worth more than another?
You are buying a specific product.
Do you buy the product from Supplier A who charges £10, or Supplier B who charges £5?
If you said A, you're either a liar or an idiot and there's no point in continuing the discussion.
- Though if you said "It depends why A costs more", then that is a very good question.
According to economic theory, jobs are the same. When hiring somebody to do a thing, you want to spend the least overall.
That might mean hiring one person instead of two, paying the more skilled person more than you would have laid either of the less skilled ones - because a 1.5 multiplier is smaller than 2.
You might pay a very skilled person a lot because the cost (in time and money) of replacing them is very high.
The goal remains as spending the least.
However, none of the actors have perfect knowledge and they all have biases (inertia, not wanting to do certain things, wanting to live in particular places). In general, this tends to lead to employers offering more, and potential employees and contractors asking for less.
The answer, as all good economists know is "it depends"
In certain of my business dealings (shiny metals) if I buy something from supplier A at half the fair market rate, say 45% of spot, I will expect to get in trouble with the law. Someone offering goods at a rate indicating that they probably paid either nothing or fences rates (20%) for them means they are almost certainly not the legal property of the seller. So "I buy from B, because they might not be a tea leaf" is an acceptable answer. Or at least in my recent experience, A was an undercover cop seeing who would take "stolen" bullion.
I can think of several other scenarios where I pay more for a supply because of the "free" service that comes with it. Sometimes this is simple convenience, corner shop prices higher than supermarkets sort of deal. Other times it's like my local bike shop where I get advice I can't get from the internet, and I buy my parts there even if they are 30%+ more than online. Plus they fit them for "free", which involves labour and capital (workshop) that has to be paid for somehow.
"The answer, as all good economists know is "it depends""
Entirely so.
"In certain of my business dealings (shiny metals) if I buy something from supplier A at half the fair market rate, say 45% of spot, I will expect to get in trouble with the law."
Oooooh, yes, exactly so.
"In certain of my business dealings (shiny metals) if I buy something from supplier A at half the fair market rate, say 45% of spot, I will expect to get in trouble with the law."
Plenty of businesses (large ones) will quite happily do that and then come to an arrangement with the law. When you have enough money and power, it can be quite profitable to deal in stolen property and even do so with state blessing.
For all the carrying on about benefits dependency: The current structure is setup to encourage it. If minimum wage was set at a proper level then those who work wouldn't be dependent on state handouts and those who didn't would have a good incentive to seek out work.
The current arrangement suits employers far more than it suits beneficiaries because it means that workers need to push for substantial pay rises in order to escape the loss in marginal taxation caused by welfare clawbacks if they go for less - and the problem is that for the most part there's always someone willing to work for minimum wage.
If minimum wage was set at a proper level then those who work wouldn't be dependent on state handouts and those who didn't would have a good incentive to seek out work.
If you are, as I suspect, implying that the minimum wage should be higher then I thoroughly disagree. Higher minimum wage levels are a massive discouragement to employment and financial activity. Take the example of Australia as a case in point. The minimum wage is currently a minimum of (I think) $17.50 per hour. A teenager waiting tables on a Sunday can quite easily earn the same hourly rate as a qualified tradesman when penalty rates are taken into account. How do you think that works out for the industry as a whole? Higher prices are required in general to cover these higher wages. These higher prices then discourage more casual dining out activity. In so many places these days you see entire levels of staffing by effectively children. I've seen places where everyone from the table staff to the chef were minimum wagers because the cost of those wages is so high. This just results in poor outcomes for both employees (older more experienced staff are not employed) and customers (quality is absent). Before you state the obvious "you have a choice, go elsewhere" I am telling you this is absolutely endemic in the industry. Retailers and hospitality are both staffed by kids. The minimum wage is not helping people at the bottom as it is displacing the older workers and increasing it is just inflating the cost of all basic goods and services. It is a cancer in its current form and level.
NB The younger you are the lower the minimum is, hence the issues.
The percentage of people on or effectively on minimum wage appears to be increasing rapidly.
if robots take most of the jobs, there will be so many people competing for the remaining (highly skilled) jobs, that it may get close to 100%. As minimum wage approaches zero, we will, presumably, have a re-run of the French revolution.
Here in the UK, contractors/self employed are effectively treated as being companies with one member of staff - and, as many have observed, "it take three people to do the paperwork for a one man company" Unless you are up-market, you probably can't afford to do the paperwork right, and this can be used against you at any time.
For years I worked as a highly paid contractor to a large multinational. I/they had the choice of being contract or permanent. We both agreed that it made very little difference who paid the sick pay/holiday pay/expenses. (I stayed contract because I occasionally worked for their competitors). My contract ended a few months before they went bust - because of short-termist accounting - their products were still selling well.
"Instead, we should abolish all those statutory provisions and simply allow people to negotiate whatever deal they like."
Q1: How does collective bargaining fit into this picture? Wouldn't it almost by necessity end up with getting the same deal for everyone who is doing the same work? Or does Tim consider this an anachronism too?
Q2: In practice, some degree of job security is necessary to obtain a mortgage or enter into a rental agreement, let alone being able to sleep at night knowing you'll have some chance of feeding the kids next week.
However even if employers are prepared to negotiate individually on rates or holiday, I very much doubt they will negotiate on employment security. It will be more a case of "this is our standard contract, take it or leave it". Is that how it should be?
Q3. The cost of having somewhere to live would be very low, if it weren't for the artificial constraints on the use of land for housing. Don't those need to be removed as well? Or would a drop in housing prices result in a similar drop in wages, meaning that whatever happens, the poor are condemned to be poor forever?
Q4. How do in-work and out-of-work benefits affect this picture? If these are market-distorting forces, does that mean they should be scrapped as well? Including the NHS?
Q5. The argument seems to be "any market-distorting forces reduce economic activity and therefore make us poorer". But that is talking about the aggregate. It's clearly possible for us to be "richer" overall, looking at the average, while some people are desperately poor. Is this an acceptable outcome?
"And thus was the Empire forged. Many men, of course, became extremely rich. But this was perfectly natural and nothing to be ashamed of, because no one was really poor - at least no one worth speaking of."
"There's the standard libertarian fallacy here - that people are nice, charitable, etc."
People generally are, but often not the sort of people who climb the greasy pole of corporate hierarchy.
The problem with all this libertarian claptrap is that it ignores the fact that many employers will screw their workforce into the ground in the pursuit of profit. One of the key rolls of any government IMO is to protect the workers from the employers, or at least create a framework where one cannot screw the other. Generally speaking, historically, it's the workers who get screwed.
"fact that many employers will screw their workforce into the ground in the pursuit of profit"
There's also the type of employer who isn't (in all honesty) that competent at running a business. Oh, well enough to keep it going but are corporately-speaking a policy short of a company handbook. Rules on employment conditions stop them cocking up other peoples lives.
"The problem with all this libertarian claptrap is that it ignores the fact that many employers will screw their workforce into the ground in the pursuit of profit. "
The law dictates that in the absence of directions to the contrary (from the shareholders), a company must maximise value to the shareholders.
This results in companies being more-or-less legally required to be pathologically sociopathic - in such an environment, sociopaths do well and climb the tree quickly - up to the point that they fly the company into the ground by diverting funds into their own pockets (bonuses) and "screw the shareholders". (Eg: Enron, MCI, etc etc)
As per my response to Mark #255 above - it's not a liberty for you to have an employment contract, it's an imposition forced on businesses by the government.
I don't think Tim is suggesting that you be unable to voluntarily write a contract with an employer that matches the current state of affairs, so long as both sides agree.
That'll work. The employer offers a bowl of rice as salary and there'll be someone somewhere desperate enough to agree. And if there isn't then just wait a bit more.
This is why we have these socialist structures imposed on us in the first place. Or maybe they were workers' rights hard-won over centuries, because being paid a pittence and ending up in poor houses wasn't very nice.
Never mind, Call me Dave is busy winding the UK back to Downton Abbey and everyone will be happy. Well, everyone who matters anyway.
A skilled contractor can of course negotiate terms with the employer (or client rather). Looking at it from the perspective of a contractor myself, I completely agree with you, Tim.
However, if you look at the wider picture, and especially jobs which pay very little as it is, jobs where little skill is required, you absolutely do need some protection for employees. They are in no position to negotiate anything. They will be ruthlessly exploited in the quest to make bigger profits, if the laws and regulations allow it, because employees at that level can often be replaced on the same day, if they don't fully agree to the employer's terms.
Full employment is impossible in a free market.
It can only be done by making the Government the only employer.
- Not the employee of last resort, as that's the same as having out-of-work benefits.
A thought experiment:
Everybody is employed.
Somebody invents a machine that does the work of 10 people.
9 people are now unemployed.
1000 other business units have the same need, and purchase the machine.
9090 people are now unemployed.
"A thought experiment:
Everybody is employed.
Somebody invents a machine that does the work of 10 people.
9 people are now unemployed.
1000 other business units have the same need, and purchase the machine.
9090 people are now unemployed."
OK, we've done that actual experiment. Someone invented the tractor and suddenly we didn't need 40% (circa 1880 or so in UK) working on the land but only 2%.
I'm pretty sure the unemployment rate isn't 38%.
I'm pretty sure the unemployment rate isn't 38%.
In the short-term it was.
Over the longer term, new technology often creates jobs in new sectors that replace many of those that were lost due to it, but there's no reason why it would be the same number and this takes a long time.
- In the UK, what actually happened was lots of people emigrated, and even larger numbers got killed in various wars. That said, it seems unlikely that current UK unemployment rates would be much different if that hadn't happened, as we did import huge numbers of people later on.
Full employment is a very unstable position. You can only balance on that needle in a Star Trek post-scarcity economy or if the Government decrees that everybody is employed.
" They will be ruthlessly exploited in the quest to make bigger profits, if the laws and regulations allow it"
Except all the evidence is that they're not actually as stupid as you seem to think, and that this isn't the case at all. So your 'I know better than those stupid povs how they should spend their money' doesn't really work.
The povs are loving their zero hours contracts, aren't they? Who are we to say they aren't? They love them, they're snapping them up, they can't get enough. They're choosing zero hours contracts over other kinds of contracts, the povs are, because they love them so much.
Sports Direct didn't know what to do, they wanted to offer traditional contracts but the povs wanted to work precariously and not know how many hours they were going to work until the day before and not know how much money they were going to make that week. They wanted to work precariously and raise a family with zero hours contracts or save for a house with a partner with zero hours contracts, to have that extra flexibility and bargaining power. So Sports Direct had to offer the povs zero hour contracts, because the povs were crying out for them.
And who are we to say otherwise or know better or criticise, the povs had the upper hand in this employment relationship and they were begging for zero hours contracts.
The crap one has to read...
"And who are we to say otherwise or know better or criticise"
So you're agreeing with my point, then. You do think you know better than other people how they should be allowed to spend their money. Because you think they're thicko povs.
I don't know if you've read the entire thread or not (it seems like you haven't), but it talks about people's employment conditions, not about people spending their wages once they've earned them.
And we look at the evidence, draw a conclusion based on the evidence, and conclusion we find that we wouldn't like to be in their shoes. You say, "Who are we to judge how they spend their money", which, if you pardon my French, has fuck all to do with the subject we're talking about.
"Except all the evidence is that they're not actually as stupid as you seem to think,"
No idea why you interpreted my post the way you did. We don't need evidence to prove that they are not stupid, because I certainly did not say they were. Less specialised roles don't mean they are stupid people. They just have less to bargain with because there are more employees to choose from.
Let's look at my own wife for a minute, who I certainly wouldn't call stupid at all. She used to work in a big hotel chain in London at the front desk. (Receptionist in other words.) The wage was meagre even after she had been working there for years and was made supervisor. The shifts, sometimes back-to-back double shifts, were long and often unpredictable. She's kind of a tough cookie and put up with it, but she has outlived a lot of others during her time, who didn't. If people quit, it took less than a week to have somebody new on the rota -- on minimum wage. If people moaned too much, they were shown the door and replaced just as fast.
She got by with her salary, but she couldn't make any savings, and therefore she couldn't risk losing the job and possibly spending a few weeks without any income. It's not a situation you want to be in. And while hotel/gastronomy is a tough area to work in, it's a piece of cake in comparison to other jobs, where people could be replaced even quicker.
Now take away sick pay, any holiday and pay, maternity leave and pay, minimum wage, and turn this into contract-based work... and sure enough that hotel will find plenty people willing to work longer for less. Extend that to other areas, and it's soon (even) more lucrative to claim benefits than to work your arse off. (And the employers will still find people willing to work for even less, because -believe it or not- some are not entitled to claim benefits and have no other choice. Those people, strangely enough, are also those seen to come here and "steal" jobs from Brits... but I digress)
Anyhow, my wife only managed to get out of there, because I encouraged her (and would have been able to support her, if she hadn't managed to better her situation). That's what *she* said, not what *I* think. No, she isn't stupid. (She had a bachelor degree to begin with, which turned out useless; and she has now managed to become an accountant doing weekend classes for several years. A "luxury" that she wouldn't have been able to achieve while working in that hotel -- not least because she'd have to work on weekends)
I wouldn't dare call people in low-skilled or low-income jobs stupid. The situation that they are in is often much harder and more complicated than we -privileged- contractors can imagine. Talk of politicians losing touch with reality...
If my original post came across like I'd consider myself somewhat better than others, I do apologise. I don't. I have worked my arse off to get where I am now, and that hasn't been an easy feat. But I have also had a fair bit of luck along the way, which not everybody is fortunate enough to have.
@Tim: If you want to call me a Marxist, fair enough. I think there's a lot of grey between black and white, but you're known to write in a provocative fashion, which we all appreciate and like.
"exploited in the quest to make bigger profits, if the laws and regulations allow it, because employees at that level can often be replaced on the same day, if they don't fully agree to the employer's terms."
Have an upvote. That used to be called the bull system on the docks.
The current situation of benefits over cash payments has been negotiated over time by the contractors, the contractees and other interested parties.
This has become the 'Regulated Environment'.
The 'Regulated Environment' is constantly in the process of renegotiation.
Employers chose to set up business in regulated environments because it is beneficial to them to do so, likewise the employees chose to work for those companies that offer them the benefits they require.
If either party decides that they don't want to remain in the 'Regulated Environment' they are free to move to a 'Non-Regulated Environment'.
We have become richer collectively because of the 'Regulated Environment' not despite it.
occur
especially at the bottom of the heap.
Your fantasy would result in workers forgoing vacations, weekends and other down time in order to make some money.
For example, what about truck drivers, shall we have them under the same conditions as your self employed IT contractors who work 12 hr days 6&1/2 days a week.
Do you really fancy driving to your job knowing the truck driver behind you, through having a big family and a bigger morgage, has worked 100 hrs in the past 6 days and is flying on caffine pills and sugar drinks?
The working hours rules and the various benefits put in place were'nt some great evil socialist plan to destroy capitalism, they were designed to make capitalism better for the workers so they'd be less likely to stage a revolution and kill all the ruling class.
"Do you really fancy driving to your job knowing the truck driver behind you ... has worked 100 hrs in the past 6 days "
Nowadays truck drivers are only allowed to do a certain amount of hours at a stretch, must take breaks etc. and there's a maximum on the number of hours of driving they can do per week.
That's why trucks have tachometers, and the police do check these.
I think a tachometer tells you what your engine revs are at a point in time. I think a tachograph records how long your engine has been running and what revs it was doing at every point over a period of time.
But Tim's point, i think, was that if a truckie wants to work extra hours then s/he should be allowed to. Like doing a 168 hr week then having a 7 day break. Run from Melbourne to Darwin and back, no need to waste .money on motels. Negotiate a decent rate for getting the load there quickly.
Shirley you aren.t suggesting that the police should be enforcing annual leave or public holidays. That sounds like socialism to me.
And then after Mr truckie is allowed to do a 168 hr week, Mr airplane pilot wants to do the same and dives his aircraft into the ground because he forgot to lower the flaps as he slowed to land.
The rules regarding working hours are not there to prevent people from earning lots and lots of money, they are there to protect the rest of us from a sleep deprived truckie/pilot/train driver desperate to pay for his week's vacation....
oops was that a red stop signal?
"Nowadays truck drivers are only allowed to do a certain amount of hours at a stretch, must take breaks etc. and there's a maximum on the number of hours of driving they can do per week."
Which has had the unintended consequence of drivers taking more risks, chancing red lights and taking shortcuts down roads not built for trucks in an attempt to complete their run before a mandatory rest stop forces them to sleep in the cab ten miles from their house.
Yes, if a transport manager is trying to get a driver to do more than is realistic in the time available. Such a situation being most likely to occur in cases where profit is prioritised over people.
The law is there for a good reason: I've heard older truck drivers refer to amphetamines as 'truck drivers'. Driver fatigue is a thing and if you are free to chase the overtime in an unregulated environment why not do 80 hours a week with some chemical assistance to help you stay the distance?
I never said I was in favour of an unregulated environment, I said it has unintended consequences. For the record I do think regulation of the drivers is a good thing, but there should be some leeway other than "done X miles = stop now" as that will always lead to drivers feeling under the gun and pushing it.
"The working hours rules and the various benefits put in place were'nt some great evil socialist plan to destroy capitalism, they were designed to make capitalism better for the workers so they'd be less likely to stage a revolution and kill all the ruling class."
Exactly.
I am constantly amazed at how those of the upper 20% often forget who Marie Antoinette was. You would think they could afford a better education.
"I get all of the cash that any employer is willing to offer me as that cash."
If an employer is paying you you're an employee. If you're not an employee the person paying you can't be an employer. "Engager" is a sufficiently neutral term. It might seem to be overly technical or a matter of semantics but it's such loose use of language that enables HMRC and the like to sell the lack of distinction to whichever politician is working for them this year.
It's bad enough that many commentards don't get the distinction. It's even worse that a good number of contractors don't. But Tim really should know better.
I am feeling very mixed about this article and much of the ensuing commentard input.
On the one hand, the libertarian in me agrees that more labor flexibility for both employers and employees will be a good thing, if it raises economic output and improves more people's standard of living.
On the other hand, the social democrat in me worries that people who have become highly dependent on benefits: the poor, the unemployed, the unskilled, bureaucrats, politicians, highly regulated subsidized industries such as banking, health and insurance will be in for a very rude awakening as the gravy train stops or slows down.
In a truly utilitarian system, we would want the greatest good for the greatest number. Tim's idea (along with many others I can think of) might be a (very) tentative step in the right direction.
One of the "big issues" around work is that the future-present promises some "great" jobs (figuring out ways to deploy tech in new, exciting and highly profitable ways, for example) and lots of "crap" or non-jobs for those who cannot do "great" jobs or have had their roles replaced by "great" technology.
To me, this is the real question: how will we manage these ineluctable changes in an increasingly shorter time span? Give everyone an Ipad and a guaranteed minimum income? Soylent Green? No options should or will be off the table.
I am not convinced more legislation will be the answer. During the Industrial revolution, many decades passed as agricultural societies changed into industrial ones. There was still time to manage the immense economic and societal dislocations this evolution caused, by constructing social welfare systems, fighting wars, quelling civil unrest, uprisings and so on (not necessarily in that order).
The problem with this latest Industrial revolution is the restricted time window. In 10 to 15 years (or less) we will move from Uber-like options (which create some more semi-skilled employment while breaking current business models) towards self driving cars that will quickly put these same people out of work. Smarter cities will progressively remove the need for street-sweepers, tube employees, bus drivers,ticket salesmen and traffic wardens, to name just a few, And there are many,many more examples of these trends occurring everywhere, every day.
How to manage it all? That is the real question. When some experts predict 47 % of jobs will disappear within the next 15 years, it would be wise to start thinking about it very soon, and not at the pace of election cycles, as is normally the case. My brother's solution was to become a certified plumber, and he currently earns more than I do.
There was still time to manage the immense economic and societal dislocations this evolution caused...
And I'm sure the millions being ruthlessly exploited by the satanic mill owners (read that how you will) living in squalor, regularly thinned by cholera and typhoid had an abundance of patience while waiting for the regulatory system required when 1 man has 10,000 places to fill and 11,000 individuals need to stay alive was slowly brought into being.
I mean those who survived did.
"When we evaluate the US welfare system, which gives people food stamps, rent vouchers and so on instead of just straight cash, even the Census (the people who measure poverty) agrees that the value gained by those who receive them is less than the cost of providing them, simply because preferences do vary."
I suppose people whose preferences are to buy drugs and steal food might value cash more highly than food stamps. That doesn't mean that the best outcome for their families, the food retailers or even themselves is to give them cash.
For this to work correctly I think we need to use some of the extra value generated to pay a cash benefit to all citizens, THis would form the minimum citizen allowance that is enough to live on, not comfortably but at least survive.
Everyone then is free to supplement the minimum with as much luxury as they are willing to work for and we can gain all the efficiency of the zero regulation system while feeling happy that we are not doing it by starving the poor.
I like the siren call of the intellectual purity of the model expressed in the article. The model predicts that when there is a shortage of people with a certain skill set, then rates will rise, and whether it's a job or consultant will be relatively unimportant.
If, however, people outnumber the need for a given task, then a race to the bottom in the employers favour will ensue. History is littered with cases where this imbalance existed for one reason or another.
So this is the baseline of historic capitalism, red in tooth and claw, without any market distortions such as unions, minimum wage, barriers to entry (qualifications, regulations etc), competition rules - capital and skills in demand do well and the rest not nearly so well.
Accepting that any changes to the base model likely have a cost, what seems to be missing is a debate on how to determine those distortions and costs that give the most bang for the buck, and efficiently lead to an acceptable society. Given that I'd rather not rely on the fickle whim and potential unpleasantness of people (me included) to underpin things, that, with some reluctance, leads to the government getting the gig, on the probably unproven assumption that it evens things out a bit.
Sadly this is it. Much as I enjoy Tim's articles and have learned much and changed my mind over a few things as a consequence of reading them, the sad inescapable truth is that for the last 30-40 years there has been a persistent, deliberate move to enrich the few at the expense of the many.
Actually, it's probably more accurate to say that the 30 years post WWII represented a partial and temporary respite from the untrammelled greed of a minority of our species.
It's far, far too early for a pint but it does drive you to drink.
... because the bastards fiddling the banking system fucked up the real economy.
Most people want a regular income via a standard pay cheque. A known quantity deal where regular hours at a known income level and tax paid is the norm.
People are back to having to work in this shitty 'you work for me, but I'm not your employer roles' not because they want to be contractors, but because these roles are are the few available to put food on the table. This desperation is then expoited by the billion dollar company (uber) who take no responsibilty but trouser all the real profit.
People will not put up with this shit forever.
Quite simply, they allowed people to voluntarily take up to a month's additional leave; the cost to be deducted from volunteers' wages over the following three months. We were a decently paid bunch, so the scheme was wildly successful, and credited with saving some twenty jobs.
The experiment was never repeated... Corporate takeover, different attitudes of new owners and so on.
From experience with that example, I think there certainly is a place for an element of choosing your own package, but I'm a tad concerned such a move, nationally, would be used as a way to bring down existing contractor rates. That said, there's a lot to be said for a life of gigs, rather than stagnating in one secure job.
"That said, there's a lot to be said for a life of gigs, rather than stagnating in one secure job"
If, that is, like me and perhaps you, you had an expensive education including a Russell Group university, a professional qualification and the ability to be a self starter. How many of us have the necessary background, skills and experience?
Also there are these pesky things called children. When mine were at the expensive stage I worked in two longer term jobs because, even without a mortgage, I didn't want too much economic uncertainty. The moment the last one left university, it was back to a life of relative insecurity where I didn't have to say "yes sir no sir" to people with delusions of competence.
We shouldn't generalise from our own experience to that of everybody. It's what politicians do and it's what Mr. Worsthall has done here, I think. Apart from anything else, I would like the rubbish to get collected and the hospital to continue to function rather than find that nobody has bothered to turn up this week, or that the consultant has buggered off to a new "gig" and they can't find a new one.
NSW Dept of Ed does this - except you prepay your leave. The scheme works by reducing your wage to 80% over years and you get the 5th year on 80% pay as leave, in which you can do anything you like except work as casual in a government school (you can work for another state's system, or the private/catholic system, or even in an overseas school).
Unsurprisingly this is popular with many of the older staff who have nearly paid of mortgages, have no dependent children underfoot, who look at it as a trial run at retirement. Even more unsurprisingly it is not popular amongst new teachers who are looking to earn every dollar you can. I will be applying for this when I hot the top of the pay scale as it will have the added effect of keeping me below several nasty thresholds.
So you are lending the government money at 0% in the hope that they don't cancel the scheme before your turn?
Why not live on 80% of salary, save 20%, invest it at an average 8% return and take a year off on the more than 100% you then have?
Unless I've missed something there's a very big flaw in this idea and it seems that it comes from not thinking outside of the contractor box. For the purposes of planning and workforce management there are advantages to knowing how much leave your staff will be taking in a given year and the ability to dictate at least to some extent when they can take it.
Imagine you run a call centre and you can in theory at least forecast the number of calls you expect to take and by some mathematical jiggery pokery determine the number of bums on seats you need to answer an arbitrary percentage of those calls. If you know the figures you know how many staff you need to employ and if you know how much leave they're entitled to you can work that into your equations.
Since you're paying for the leave you can set limits on the number of people that take leave at any one time so that you can still meet your target for the percentage of calls you want to answer by ensuring that you will always have enough people to take those calls.
In Worstall's-World everyone's a self-employed contractor and so can chose when they want to work as long as they accept that they're not going to get paid for it. When the school summer holidays arrive as they do every year your contact centre is going to be empty because 90% of the women that work there (which is usually well over 50% of the workforce) take the six weeks off to look after their children or their grandchildren. For the parents especially, not being paid isn't a massive problem because the cost of childcare is on a par with what they earn every day. Most people will decide that the small effective decrease in available income is worth taking given that you get six weeks off work. Work seven hours a day for an extra £20 a day, £8+ of which is spent on travel or parking or whatever or have those seven hours plus travel time to yourself? For most people in a household with another income it's an easy enough choice to make.
So if we want to run our contact centre efficiently we're going to have stipulate the days we want our contractors to work when we agree the contracts and given that we'll be using the same criteria for deciding that we'd be using if we were allowing paid annual leave, the employee is in pretty much the same situation as they were before but they now have to set aside the money they need to take holiday out of their normal income. That's easier said than done when you're on a contact centre wage. Not a problem when you earn two or three times as much as a contact centre worker but not easy when that extra 10% you'll be getting paid isn't that much. Add to that, that the contractor will have plan their leave in advance when the contracts are agreed and the so called freedom of the contractor is gone. The employee loses flexibility and so does the employer; if the forecasts were wrong and it's actually quieter you can relax the leave limits and people will take the leave reducing the chance you'll be paying them for being at home when you needed them at work.
The other option is that contractors come to work when they feel like it which is no good for a business that needs to plan its staffing levels. If as a business you pay people for leave then you're generally buying yourself some workforce stability; most people take some leave before they've accrued it and so if they leave employment they have to pay it back. If Joe Bloggs owes two weeks' leave then Joe Bloggs is less likely to leave on a whim because Joe Bloggs will only get half a month of wages when he does.
If we also consider the school summer holidays again (and the easter holidays and all the others) then what about teachers? They don't have a choice about when they take their holiday so how does being a contractor benefit them in that respect?
Being a contractor is great if you get paid a contractor's wage but for the average person on an average wage it's not as great as a contractor thinks it is. For most people it would mean either less freedom and flexibility or intolerable uncertainty.
And you've made the mistake of thinking only inside the employee works for a single company box. In reality there will be requirements from both sides. The employee wants certain things. The employer wants certain things. In the case of the employee they can take the job with restrictions on holiday or they can get a different job with the requirements they want. The call centre employer will get all the employees he wants who are willing to forgo flexibility on holiday. Other employers who don't have such restrictions will get the employee who wants flexibility with their holiday.
Who says the contract has to give the contractor complete freedom to decide when to show up for work? The contract may require certain conditions, like working a set schedule unless you have previously notified the company you want that day off. If everyone is a contractor, the contracts don't have to be written in a way that "avoids making them look like an employee". In fact, some contracts would probably look very much like what they had as an employee - no reason the contract couldn't provide set hours, set holidays, the same number of paid days off, etc. If enough employees wanted that, the company would probably offer it as one option from a menu that ranged from that, to more flexible contracting arrangements.
If too many people want the same day off so there aren't enough people to fill the need, the contract could say days off are first come first served, so you don't get it off if too many others have asked for it. Or it could increase the pay for those days until enough people decide they don't need that day off after all.
In fact, the contract could be written with variable pay, so everyone bids on the times they want to work (maybe they bid for September in mid-August) by specifying which days they'll work and the minimum pay they'll accept. On days when everyone is willing to work, pay is lower. On days when everyone wants to take the day off, pay is higher and those willing to work are compensated for that. You already see this to some extent with shift pay, holiday pay, etc. but this makes that more flexible. Maybe you need to only pay employees 20% more to work on a weekend during the winter, because they weren't going to be doing anything anyway, but they want 80% more in the summer? That's better than setting an arbitrary amount like 40% that applies year round.
It's easier to administer, it defangs the morality police, and it gives more agency to those who receive it. And if we extend it to be a universal minimum income, it does allow employees and employers greater latitude in how they structure an employment agreement, including pay and the ability to trade some non-cash benefits for a lower paycheck.
However, this is still making a rather generous assumption that humans are somewhat decent at return maximizing and do have the ability to choose from a large menu of options and pick out even moderately optimized solution. The reality borne out in studies is that humans are poor at the former and are paralyzed by the latter. Is that education or a wiring fault? The body of evidence points to the latter, as interventions don't seem to make too much difference, outside of reducing choice.
And there is one other slight issue: culture. I don't mean a national culture or regional culture, I don't mean the ethnicity that one was raised in, or anything like that. I mean the culture of the workplace. Over here in the states, there are a few employers who have gone as far as abolishing the concept of a time off bank or leave and instead instituted a "take what you want" policy. I'm sure the early adopters didn't intend to see this outcome, but what happened is that the amount of time taken was less than when people had a fixed amount of leave. There is speculation as to why this is (including selection bias), but anecdotal evidence suggested that even with the approval and endorsement of the C-suite, there was a fear of job loss, demotion, or other repercussions for being absent or taking more than a colleague. And I'm sure we've all had a boss or two who was such a vindictive bastard that we assumed they would dock our pay for wasting a staple or paperclip.
Since then, I've read other reports that some companies have seen this and want to institute it to reduce the amount of time people are on leave and to do away with the liability of paying out accrued vacation benefits when someone leaves the company (varies by state, but some, including California, consider vacation time a cash-equivalent benefit that must be refunded to the employee if they leave on their own or are dismissed without cause). Of course, the employee would be free to leave, but this is only really a choice in a low or moderate unemployment economy. As cash is in fact the lifeblood of our existence, most people will tough it out in an unfavorable situation just so they can continue to feed themselves, not sleep in the rain, etc.
A free market with perfect competition would mean none could earn more tha enough to eat.
The market will regulate itself, that is true, but we won't like the result.
I would probably get the long straw, as I am an engineer with plenty of certifications and experience both in software and hardware, and in management and sales. That is the reason I am going to become a contractor in a few months (we are finishing a project).
This system would benefit me, but would be terrible for society. It would mean if you are less skilled, you get to either die of hunger or society has to give subsidies to the rich (ASDA, etc).
It is wrong, extremely wrong.
"A free market with perfect competition would mean none could earn more tha enough to eat."
Nonsense.
You're getting confused there between a free market and a malthusian economy.
The average income in an economy will be defined by the average productivity in it. The higher productivity the higher the incomes.
And more so in a free market. Because that's one in which employers have to compete with each other for the labour they desire.
Gig economy is all about hyperbole. It is literally the soup du jour. It only exists at all because real jobs are hard to come by and companies are playing fast and lose with the definition of employee. something the US labor department fixed this month.
I've been working short term contract jobs for years now and people still ask me why I don't have a permanent long term job. It's like they don't get out or read the news. Temp jobs have been a good portion of the US economy for over 2 decades. This scam of being an indie contractor is just the logical extension.
As for benefits, there has been a concerted and coordinated destruction of benefits ongoing since the 1980s. If you have benefits and have been able to hang on to them, let along actually, you know, benefit from them, you are one very, very lucky person in this modern age.
"For example, almost all workers are legally entitled to 5.6 weeks’ paid holiday per year (known as statutory leave entitlement or annual leave). An employer can include bank holidays as part of statutory annual leave. Self-employed workers aren’t entitled to annual leave.
Who out there actually would, if given an entirely free choice of cash or holiday, choose to have exactly 5.6 weeks of it each year? Everyone who would not choose exactly that amount, rather than the cash an employer would be willing to pay (or withhold, for those who want more leave) instead, is losing out by having that amount imposed upon them."
I'm still trying figure out how being paid for time off is an "imposition." Doubleplus good, eh?
Uber drivers don't "need" to be employees of Uber, in exactly the same way that any other taxi driver doesn't need to be an employee of their taxi dispatcher. In the real world outside the navels of the Uber-gazers, taxi dispatchers are often the "employees" of the taxi drivers, in a similar way that the people listed in the Yellow Pages aren't the employees of the Yellow Pages.
There are many models of taxi dispatcher. You can own a fleet of vehicle and employ drivers to driver your vehicles. You can employ drivers to drive their own vehicles. You can own a fleet and drivers can hire your vehicles. You can even be a pure dispatch service and have nothing more than a couple of telephones, a radio set, and a list of drivers who've hired your dispatch service. Uber is the dispatch-only model. What is sometimes called the "radio hire" model - the driver "hires a radio" which is their contact to the dispatch service.
Uber's only problem is they charge their drivers three arms and a leg to be on their lists, and their drivers don't bother to comply with the law requiring them and their vehicle to be licensed. There's a gap in the market their for a dispatcher to charge a sensible dispatch fee.
I agree 100%. The last place I worked (just quit there recently), actually provided about 8 days -- 1.5 business weeks or so -- a year PTO (paid time off). But, that was it -- if you got sick it used PTO; I'm not a sickly person, but this still meant after 8 months I had just 3.5 days of vacation built up.) Honestly, although PTO is nice for keeping your paychecks predictable (important if your budget is tight!) I would have preferred simply being paid when I'm there, and not being paid when I'm not there, but having a little more flexibility in taking time off, and hopefully slightly higher pay. (Disclaimer, this place was awesome otherwise, dot-com-style break room air hockey table, massage chair, and all... free freezer with ice cream sandwhiches and such, free coffee, a weight lifting room, and so on, nice work environment, and plenty of camraderie with nice co-workers and supervisors, and "highers up" who clearly did care about the employees. But we're talking benefits versus straight cash here.)
The problem I'm seeing is, at least here in the US... for a company with PTO like above, they could cut PTO, raise hourly pay by about 25 cents and hour, and still pocket a few cents an hour in savings. But, standard "US corporate culture" would suggest many companies would just (given a chance) cut PTO, and raise pay by 0. The economy here is still in poor shape (despite what the talking heads say), with many low-paying jobs (in real terms, and even lower when inflation-adjusted) replacing the higher paying jobs lost the last 5-10 years.
"I'm still trying figure out how being paid for time off is an "imposition." Doubleplus good, eh?"
His point was, unless you took off *exactly* 5.6 weeks vacation, you have potential time when you could have been vacationing (or sitting around at home) while being paid, and instead you were at work actually working for the pay, leaving potential benefits on he table and losing them. He contends (more or less) that 5.6/52 is 10.7%, so wouldn't people prefer a 10.7% raise? I would (but as I say above, I expect many companies given the chance would cut the vacation but not give even 5% raise let alone 10%.)
Where I work we are told that the company cannot provide plans more than two weeks in advance due to order fluctuations etc. I don't personally believe it but that's the rule. With summer holiday of three weeks, one for winter, and one some other time (usually our discretion), I know that there will be some consistent times off (right now!).
Without this, I reckon we'd work every day that isn't a public holiday, we'd burn out before our cash pile amounted to anything and no doubt some change in government policy would rule that the extra pay for holiday can be counted as a part of our wages, not in addition, hence we lose. Again.
Cynical?
It's hard not to be when the employer's union is practically writing the legislation these days...
"There's going to be some economic activity that will not take place as a result of the imposition"
This is an argument I have heard used against all sorts of social and environmental legislation.
I would like to know more about; Why this would be the case? How it has been proven? and if it is the case, if it is a fair return on investment?
Please excuse the poor grammar I am ignorant.
Thanks
So, a potential employer has a job of work to do that it's worth him paying £100 to have done. It's not worth £120 to have done.
There's someone looking to do a bit of work and they'd do that job for £100 but not for £80.
(We can extend this model to anything we like. Someone's willing to grow and sell a pear for £1 but not for 80p, and someone is willing to buy and eat a pear for £1 but not for £1.20. All economics happens at the margin, so don't worry that this price differences wouldn't affect *your* decision. They will, at that margin, affects someones').
Great, so the two meet, agree, the job gets done and everyone's happy.
Now introduce a "wedge". That's actually the technical term for it. Say we add a 20% tax to those wages that must be paid. The employer will still only pay £100, the labourer will only get £80 and so the job won't get done. The pear won't get grown or eaten. and this is true of us pushing up the wages through insisting upon holiday pay and sick pay etc. Or of VAT, or national insurance, or income tax and so on.
Anything that introduces that wedge between the initial market clearing prices means that some economic activity won't happen.
Now, obviously, we do need to have government of some, however small, size and thus we've got to have taxes. And certainly at low levels what we get in government (a criminal justice system say) is very definitely worth more than the economic activity we lose by paying for it. But that's not true of all sizes of government, of all taxes.
The question is, well, when?
Using the US stupid holiday system to support any change to other countries' employment practices shows an overwhelming lack of understanding of the irrationalityof management in US companies. There are bucketloads of well-designed studies which show that over time, almost all people become less productive when they don't take holidays and when they work more than somewhere around 45 hours per week on an ongoing basis (*). There are exceptions to this and those few exceptions are often the ones making decisions because they can outcompete everyone else so get promoted. BUT, they are a minority and slave-driving everyone else reduces their efficiency not increases it. But no one in management anywhere is really willing to say the emperor has no clothes and manage their company effectively. It makes us all richer and better off in so many other ways, when we mandate things like the European Working Time Directive, which doesn't allow people to work themselves into the ground and prevents over-competition screwing everyone. There is a clear market failure here that needs regulating in the interests of both society and the economy.
(*) short term versus long term is radically different here. Most people can work long hours for a week, or two or three. The longer they work more hours the less productive they become, making mistakes (which they or other people have to correct), simply working more slowly etc. Similarly, most people can work for a year or two only taking minimal holidays but again their performance degrades over time. THis can be difficult to judge because their expertise may be going up at the same time so they seem more productive than two years ago, but this is "what is seen and what is not seen" (Bastiat) and the loss in productivity of an experienced worker working sensible hours per week and sensible weeks per year is hard to see individually, but well-supported by the evidence.
Is assumed about the American worker in this article. There's the myth and then there's the reality. Working in The US, for a very long time, I can only say, reality doesn't look anything like the myth; nor does the welfare system look anything like the perpetrated myths of the right wing.
It feels to me that you're writing this from a privileged position that most people do not share. While you may be able to negotiate a contract you're happy with, most of us are at the mercy of the employer who wants to squeeze every last cent out of us.
In Australia, we get exactly 4 weeks of paid annual leave (not including a smattering of public holidays). If that were not standard, employers would be handing new employees contracts with just one week of leave over Christmas, and expecting it to be rubber-stamped because "we use the same contract for everyone." In fact, this already happens when smaller companies force employees to take half their annual leave over Christmas.
Those Americans you mention as having less leave than Europeans because of lower tax rates? That's baloney. No one gets the option for more leave until they get seniority.
In short, minimum, broad-based, statutory employment conditions are a way of guaranteeing a modicum of sanity that employers would, as a group, love to see whittled away. Just ask Murdoch.
I agree with all the previous commenters who say Tim's proposals are out of touch with real life for poor people.
But one sector that does need the cash is student grants. If the government is serious about getting people from families with no money into university - and I do have serious doubts here - the only way to do it is cash up front. Nothing less than that will do.
Someone whose parents sent him to Eton may not worry about a debt of £30,000 or more. But if your family has no money that is just not on.
I see this in a number of jobs in the UK, jobs are temporary but the err... employers pay the same rate as permanent staff.
That or fixed term contracts then people have to reapply for their own job with the chance the someone less experienced who is cheaper to employ will come along.
The dairy industry in the UK is a nasty example of unequal bargaining. The dairy can give 24 hours notice of cancellation but the farmer must give 12 months. The dairy can say "We are going to pay this price or cancel" so how come this continues?
Worstall must be in the right club not to have a problem with this.
We have an economic system that assumes that everyone is motivated by greed, which is not true for everyone, and the most lucrative jobs tend to attract the most greedy and sociopathic/psychopthic individuals (indeed, ISTR that at least one bank admitted to deliberately trying to recruit ethically-challenged individuals, in the aftermath of one of the banking scandals of recent years). And a lot of 'economic activity' is people trading shares on teh Stock Exchange - to a large extent either betting on each others emotions, or trying to find new ways to con each other.
Given a system that, in the main, rewards best such unpleasant behaviour, is it any wonder that we're beset with problems in trying to reach a fair level of reward for all employees and a reasonable safetynet for the unlucky?
Clearly with increasing mechanisation and computerisation we can doand produce more and more with fewer and fewer people. What then for tradtional economic theory? That is, IMO, just as much a pipe-dream, a libertarian free-market utopia as is that of a perfect socialist utopia.
I just wish that as much effort as is currently expended on tiddling with the current system were put into trying to come up with a better system from the ground up. In particular, I'd like to see a system where it is clearly the case that companies exist for the benefit of humans, not the other way around (as is the case now), and if something that rewarded social behaviour above socipopathic could be come up with, that'd be great! I quite liked some of the ideas that Kim Stanley Robinson 'disussed' in his Mars trilogy, but not being particularly 'into' economics, that's about the only text that's gone into possible alternatives in any detail at all that I've read.
Trouble is though, that even if someone comes up with a wonderful 'new economic system', the changing from what we'e got now to the new system could be difficult in the extreme. I'm realist enough to see that it's unlikely to happen anytime soon, almost certainly not in my lifetime, now, but I do hope that eventually we'll get to a system that allows folk to live and to do what they're good at, instead of forcing so many to do the job they can get irrespective of whether they might be best doing something else entirely.
Anyway, thanks again to those above that have enlightened me a smidge in what,to me, are some of the weird and arcane workings of our current system.
As a general rule, in America, unless you are a very skilled/senior-level guy you do not get to choose how much vacation you have. All this 'some people prefer to get paid less and have more days off' rather flies in the face of the fact that, for most people, you get your 18 days combined sick/vacation pay as mandated by the company and that's your lot. So much for individual choice.
taxes upon income are lower over there, as Ed Prescott pointed out, so it makes sense to work more hours
I'll believe this when there is a study comparing US States and finding any kind of correlation between local income tax rates and number of holidays taken.
It is entirely silly to claim the income tax rate is the determinant factor for the different length of holidays between the US and Europe.
And no sales tax, I might add. The makeup can differ considerably from place to place, usually as a result of the dominating industries there.
Florida, Nevada, and Texas, for example, have no income taxes, among others. Then again, many of these states have lots of visitors (the former two are tourism-heavy), so they use sales taxes to capture the non-resident business.
Then you have states like Delaware, Montana, and New Hampshire, which go the other way and have no sales taxes. Most of these have little outside traffic so focus on their in-state industries (Delaware likes to attract businesses to their state, the rest are very rural). People tend to come to these states to settle down, so it's easier to do income taxes.
Alaska is a real unique case. It has NEITHER sales NOR income tax. Then again, it's also the poster child for a rural state. Sizable chunks of its population live out in the middle of nowhere, beyond any practical means of enforcing those taxes. Commerce is atypical, and many acquire their own sustenance by hunting or fishing. If you're wondering how Alaska pays its way, it's via PROPERTY taxes. I suspect the main targets here are the oil companies.
I've worked both sides of the fence, and straddled the fence as I am now (both a "contractor" to the people I actually work for, and an "employee" to the staffing agency that pays me and supplies "benefits").
The main problem as I see it is the difference in pay and benefits. If you are "self-employed" then in the USA you have to pay rougly double the SSI tax ("self-employed tax"), you have to buy your own health insurance, pay your own unemployment insurance (if you opt to, and if you do the rates will probably be significantly higher for you) and you will have a higher risk of unemployment. Not to mention the stress and the additional work taking care of all of that. Generally you want to get paid more for all of that risk, extra work, expense and stress.
But the "client" generally doesn't want to pay that extra amount, even though it will probably actually cost them less than if they did it themselves.
For me, my preference really comes down to who I am going to be working for/with and what I will be working on, and how much autonomy they will give me (whether they treat me like a code monkey or a developer makes a big difference to me) and where I will work (mostly at home or in an office).
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