The impossible economy we’re living in ought to be a matter of intense public debate; but, for reasons I explore here, our attention is focused elsewhere. Fortunately, not everyone’s forgotten the economy: a thought-provoking new report from the Resolution Foundation aims to explain the jobs ‘miracle’.

Further reading

How the world forgot the financial crash

By Peter Franklin

Let’s start with the facts. Employment levels didn’t just recover after the deepest recession in living memory: they’ve gone on to exceed the high point before the crash when we were supposedly at full employment. As the report sets out, there are three million more people in work now than in 2008 and the employment rate is three percentage points higher.

The authors (Torsten Bell and Laura Gardiner) point out that this has happened in the face of some pretty strong “headwinds” — not only slow growth, but also the demographic greying of the population. Then there was the impact of austerity, in which public sector employment fell (the jobs miracle is thus a private sector jobs miracle).

One might also add the growing ease with which employers can offshore production, not to mention the onward march of automation. Indeed, this is an era in which pundits breathlessly predict wholesale replacement of the human workforce with robots. They may be proved right — eventually; but thank goodness for authors like Bell and Gardiner, who attend to things that are happening on a relevant timescale.

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How, then, do they explain the great surge in (human) employment? Their argument can be summed up in two words — income shock:

“…real working-age incomes are today only 4 per cent above their pre-crisis levels, rather than the 28 per cent growth we might reasonably have expected.”

It is said this has been the worst decade for wage growth in over 200 years. That’s debatable, but undoubtedly it’s right up there with the 1910s and 1940s, when there were world wars on.

As the authors put it, “we’re a lot poorer than we expected to be” and to compensate for this, they argue, households are working more. If that’s the case, then we’d expect the employment surge to be especially strong in households that (a) have non-employed adults free to enter paid work and (b) a limited capacity to cut their spending. The report shows that this is exactly what’s happened in respect to single parents and “coupled women with children”.

Further reading

The exploited underclass is revolting

By James Bloodworth

Rival explanations are not such a good fit with the data. In particular, the UK labour market, while pretty flexible compared to a lot of other countries, did not become significantly more flexible over the course of this decade. In the early days of the Cameron premiership there was a move to weaken workers’ rights — but, thankfully, it was defeated. Indeed subsequent reforms have placed employers under heavier obligations — especially the National Living Wage and the Apprenticeship Levy.

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But what about welfare reform? Might that be a better explanation for the rise in employment than wage stagnation? The report shows that the phasing-in of Universal Credit comes too late in the decade to explain the bulk of the jobs boom. However, the authors do concede that other welfare changes — like the squeeze on benefits and the increasing use of sanctions — have done a lot to push people into work.

Meanwhile, increases in the minimum wage and National Living Wage have acted as a pull factor. The same could be said for the raising of the income tax personal allowance, which was £6,475 in 2009/10 and £12,500 in 2019/20 does provide reassurance that work pays and people won’t be penalised for coming off welfare.

Political rhetoric matters too. Both before and after the recession, governments have pushed pro-work, anti-welfare messages (not least because they’re consistently popular with the public). Tony Blair appealed to “hard working families”, Gordon Brown promised “British jobs for British workers” and the Coalition Government championed the cause of “alarm clock Britain” (i.e. that part of the population that gets up early in the morning to go to work, while their non-working neighbours are still in bed).

As the report itself makes clear, the employment surge is concentrated among lower income groups, who also saw stronger earnings growth than the rest of the population. So while the authors make a strong case for the income shock hypothesis, they under-emphasise the role of welfare-to-work policies.

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There’s something else that the report could have said more about — which is where all those extra jobs came from. Wage stagnation and welfare cuts may have created additional demand for work, but that doesn’t guarantee that employers will supply it.

Over this decade, we’ve seen some severe income shocks in other parts of Europe — but no jobs miracles. It’s not that the Greeks, for instance, lack the British desire to work. Indeed, the country has suffered a devastating drain of youth and talent, with almost half a million Greeks leaving the country in search of employment abroad.

Further reading

The permanent punishment of the Greek people

By Peter Franklin

If the mere demand for work created jobs we wouldn’t have had three million unemployed in this county during the 1980s, let alone the devastating joblessness of the Great Depression. An especially interesting feature of the jobs boom in this decade is just how widespread it is. It isn’t just limited to London and the South East — in fact, as Bell and Gardiner point out, the “least jobs rich subregions of the country (Merseyside, the West Midlands metro area and South Yorkshire) have all experienced growth during 2008-18 around twice as fast as the average.” Evidently, the “Northern Powerhouse” and “Midlands Engine” are more than just words.

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One thing is for sure, the British economy is capable of creating and filling jobs to an extent not previously thought possible. Which brings us to the report’s key recommendation, which is that our leaders need to wake up to the new economic realities.

Full employment — i.e. the point at which demand for labour starts outstripping supply — is structurally much higher than it used to be. The risk of the economy overheating through runaway wage inflation is correspondingly lower. Indeed, the greater risk is of the economy falling short of the point at which the labour market is just tight enough to encourage healthy wage growth — plus the investment in productivity that is the ultimate guarantee of our future prosperity.

Further reading

Are we really reaching full employment?

By Peter Franklin

If we’d woken up to the new realities earlier, then, as Bell and Gardiner say, this would have “supported running a looser macroeconomic policy in years gone by.” Macroeconomic policy has monetary and fiscal components, which if loosened would mean lower interest rates and more government borrowing (to fund spending and/or tax cuts). In theory, this would have stimulated the demand that could have meant more growth and higher wages over the last ten years.

In practice, though, it’s hard to imagine how monetary policy could have been any looser since the crash. Interest rates have stayed on the floor, banks have been bailed out and we’ve had repeated doses of quantitative easing. As for government spending, there’s an argument to be made that the restoration of fiscal discipline helped give businesses the confidence to start hiring again. On the other hand, cutting capital spending on infrastructure and other investments in productivity was an obvious own goal.

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Ultimately, the most important debate isn’t over how best to set the macroeconomic ‘temperature controls’ of the nation, but about what sort of an economy we want. Obviously, we want enough jobs for everybody who needs one. But quality matters as well as quantity. A good job offers more than subsistence. It must also hold out the prospect of a brighter future, as well as providing dignity and fulfilment in the present.

Further reading

Why we can't ignore the working-class identity crisis

By James Bloodworth

Instead of organising UK economic policy around access to a limitless supply of cheap labour, the priorities need to be reordered around investment in people and the communities they live in. Therefore we should be open to global talent, but not use immigration as a tool for suppressing wages; rather than weakening workers’ rights, we should strengthen their preparation for the world of work; and instead of funding transport links that facilitate outsourcing, we should concentrate on local infrastructure that boosts the competitiveness of domestic supply chains and thus the market power of British workers.

As we draw to the close of an extraordinary decade, it’s time to choose a better future. A bargain basement Britain of low wages, low skills and poor prospects is not a good enough – no matter how hard we work.

Shockley was as close to a rock star as it got in the science world. Having won the Nobel Prize for co-inventing the transistor, many people thought he had gone mad when he moved to Palo Alto to found the Shockley Semi-Conductor Laboratory. But he had his reasons. He had grown up in the area, and he wanted to return home to help his ailing mother.

Shockley hired an all-star cast to join him – experts in physics, metallurgy and mathematics, they abandoned the East Coast to work on the commercialisation of the transistor. Robert Noyce, one of the hires, said getting the call from Shockley was like picking up the phone and talking to God.

Read the series

When competition ends in conspiracy

By Jonathan Tepper

Shortly after arriving, however, they discovered he was an erratic and difficult boss. He was a genius, but a jerk, and not just your ordinary, run-of-the-mill jerk. He was an epic egomaniac – and had tried to claim sole credit for the invention of the transistor. Later in life, he spent his time espousing a racist eugenics agenda, promoting a high-IQ sperm bank, and losing all contact with his children. He was, by most accounts, a horrible boss.

Within a year of joining Shockley, the new hires decided to leave and found a new company – Fairchild Semiconductor. Later dubbed the ‘Traitorous Eight’, they signed one-dollar bills in place of formal contracts – a symbol of nonconformity.

Many consider this act of employee treachery as the definitive moment of Silicon Valley’s creation. It set a precedent of ‘can-do’ entrepreneurialism and loyalty to lofty ideas, rather than individual firms and egos.

Noyce, only 29 at the time, was the ringleader and the group’s transistors expert. Eventually, Noyce and his colleague Gordon E. Moore outgrew Fairchild, and again poached employees to start Intel. In 1971, only three years after founding Intel, Noyce made history yet again with the invention of the Intel 4004, the world’s first microprocessor. He had invented the beating heart of the modern computer.

Suggested reading

Time to topple the technopoly

By Charlotte Pickles

Silicon Valley owes its success to many things – access to capital, proximity to Stanford (one of the best universities in the world), and access to a vibrant Pacific hub in San Francisco. But what helped make it the innovation capital of the world is rarely discussed: California is one of the few states where non-compete clauses in work contracts are completely non-enforceable. In other words, employees have full rights to leave and work for a competitor.

In many other states, employees may be asked to sign a non-compete agreement as a condition of their employment. The terms vary considerably, but the basic idea is that if you are fired or quit your job, you cannot work for a competitor within the same industry for a certain period of time. These clauses make it difficult for workers to leave jobs and bargain for higher wages elsewhere.

Back in 1872, California made it illegal for employees to be bound to a specific employer. This state law is still in effect nearly 150 years later, and the lack of non-competes has proven a powerful factor in the Valley’s success. To this day, Boston lags Silicon Valley in the commercialisation of new technologies.

Imagine where the Valley would be today if Noyce had been prevented from defecting? What if Wozniak had never left Hewlett Packard to join Steve Jobs? Where we would be if Nikola Tesla were prevented from leaving Thomas Edison?

Suggested reading

Google, Amazon, Facebook: It's time to smash Silicon Valley monopolies

By Nigel Cameron

Silicon Valley’s history demonstrates that respect for worker talent was prized above strict company loyalty. This led to a malleable ecosystem, where good ideas spread quickly from company to company and innovators were free to choose their own fates. Professor AnnaLee Saxenian, author of many books on the tech industry, points out that, “In the early days engineers would say, ‘I work for Silicon Valley.’ And the idea was that they were advancing technology for a region, not any single company’s technology.”

If Noyce thought Shockley was God in the early 1950s, Steve Jobs idolised Noyce in the 1970s. When Apple was starting, Noyce was already a legend with Intel. “Bob Noyce took me under his wing,” Jobs said. “He tried to give me the lay of the land, give me a perspective that I could only partially understand.” Jobs continued, “You can’t really understand what is going on now unless you understand what came before.”

Although Jobs worshipped Noyce, he failed to give his own Apple employees the same freedoms that allowed Noyce’s best innovations to flourish. In 2014, it came to light that Jobs had been preventing employees from moving to other companies. Silicon Valley was founded on freedom of mobility for workers, but the tech giants – Apple, Facebook, Google, Adobe and many others – were caught in “gentlemen’s agreements” to not poach each other’s employees. Staff brought the case forward claiming that these pacts made it difficult to market their skills and that they also suppressed their salaries.

Suggested reading

What government can do about the winner-takes-all economy

By Peter Franklin

As part of the lawsuit, emails came out in court between Steve Jobs and Eric Schmidt, the CEO of Google, “I am told that Google’s new cell phone software group is relentlessly recruiting in our iPod group. If this is indeed true, can you put a stop to it? Thanks, Steve.” In another email, Larry Page from Google sent a distressed message saying Steve Jobs had threatened war if a single one of his staff were hired.

In the end, the agreement not to poach went out across Silicon Valley. Google, Adobe and others developed Do Not Hire lists. This was clear collusion, and the tech firms were forced to pay a $324.5 million fine for their illegal non- compete pact.

Further Reading

Marxist McDonnell has a plan to save capitalism

By Daniel Haynes

The non-compete problem did not end there. These contractual arrangements are now spreading like an epidemic across the entire economy and hurting the poorest the most. Today non-competes cover almost 18% of the entire American workforce and nearly 40% have signed one in previous jobs. Only California and three other states (Montana, North Dakota and Oklahoma) ban non-compete agreements in the US.

Lawyers sometimes argue that these clauses help protect trade secrets, but is there any good reason to ask camp counselors, janitors, and personal care workers to sign them? There are already federal laws dedicated to protecting Intellectual Property and today even those who clearly do not possess trade secrets are made to sign them, including 15% of workers without a four-year college degree and 14% of people earning less than $40,000.

These employment clauses are found in a staggering percentage of America’s largest fast-food chains with minimum wage employees. Chains like Burger King, Carl’s Jr., Pizza Hut and, until recently pressured in 2017 to drop them – McDonald’s. These no-hire rules affect more than 70,000 restaurants – more than a quarter of the fast-food outlets in the US – according to Alan B. Krueger, who is an economist at Princeton University.

Suggested reading

The collapse of unions is corrupting capitalism

By Denise Hearn

If you’re wondering what Pizza Hut has to lose if one of their store workers decides to work for another Pizza Hut across town, the answer is simple: the fewer options workers have, the less freedom they have to find a company that might pay a higher wage. The only function of these rules is to limit worker mobility and diminish their ability to bargain for wage increases. This is modern day feudalism, and workers have become vassals to corporate lords.

The truth is that non-competes only help firms that want tight control over employees. They do little for a given industry at large or for the economy. They harm workers and are disastrous for workers’ wages.

Often employees do not realise they are signing away their right to work somewhere else, as firms are not legally obligated to disclose non-compete clauses in almost all states. According to a study by economists Matt Marx at MIT and Lee Fleming at Harvard University, barely 3 in 10 workers were told about them in their job offer, and in 70% of cases, they were asked to sign them after they had already accepted the offer and turned down any alternatives. Half of the time, non-compete agreements were presented to employees on or after their first day of work.

Further Reading

Could Mill's model mend capitalism?

By Victoria Bateman

Barring workers from moving in search of better opportunities only works in an environment where firms have all the power. Because of industrial concentration, a number of firms now have monopsony power – that is, they are the only buyers of labour. A monopoly means there is one seller, and a monopsony means there is only one buyer.

In a monopsony, workers have little choice in where they work and have little negotiating power for wages with employers. In a healthy economy, many firms would be competing equally for workers and would be incentivized to entice new hires with higher wages, better benefit packages, and few restrictions on their next career moves. But monopsonies make it easier for firms to depress worker wages. The classic example of this is a coal-mining town, where the coal plant is the only employer and only purchaser of labour. Today, in many smaller towns, Walmart is the new coal plant – and is the only retail company hiring.

With burdensome occupational licensing, forced arbitration, and increased industrial concentration thrown into the mix, American workers are now faced with pressure on all sides. Without a strong union movement to provide a countervailing power, American workers are left to fight alone.

This is a toxic cocktail. The hangover from increased corporate power is real, with many struggling to meet basic needs. This is not the free capitalism we need or the hope that drove the ‘traitorous eight’ in Silicon Valley decades ago. Workers deserve better.

This is the second of three extracts from “The Myth of Capitalism: Monopolies and the Death of Competition” a new book co-authored by Jonathan Tepper and Denise Hearn.

With this sweeping reform, Labour hopes to rebalance the rewards of capitalism towards workers. Who can blame them? Between 2007 and 2015, the UK was the only advanced country in which wages contracted while the economy expanded. The theory is that giving workers a seat at the decision-making table (also known as co-determination) will ensure their interests are championed, and giving them a stake in the companies they work for will increase their productivity.

Unsurprisingly, business leaders responded with hostility. Yet the plan is not hugely radical – in fact this model is the norm in one form or another across much of Europe. Predictably the conversation quickly turned to Germany and its famed industrial model.

Further reading

Could Mill's model mend capitalism?

By Victoria Bateman

Defenders of the policy, perhaps trying to quiet thoughts of Venezuela, pointed to Germany as a more responsible and socially just model of capitalism – the respectable counterpoint to the Anglo-saxon flavour of financialisation and short-termism. And while the academic literature is mixed, there is evidence that greater co-determination leads to higher wages, less short-termism, greater productivity, and even higher levels of income equality. If the aim is to give workers a fairer deal, McDonnell looks to have hit on the right polices.

On the other hand, detractors point to the scandalous lapse in corporate governance show by the Volkswagen emissions scandal, as well as industrial inefficiencies – Toyota makes as many cars as Volkswagen with half the workers. In the wake of the scandal, the cosy relationship between union leaders and the dominant shareholding families was blamed for facilitating the cover up. This would suggest that Germany’s more worker-friendly model has some worrying flaws.

The desire to look outside our borders for inspiration is not uncommon – market fanatics, for example, extol the virtues of Singapore, while anarchists wax lyrical about Kurdistan – but it is foolish. Because what the proponents of international examples too often ignore is national context. McDonnell’s plan would be implemented in a system institutionally distinct from its European cousin. In the UK, the form of banking, the concentration of shareholders, the character of industrial relations, and the basic corporation structure are all substantially different from Germany, rendering comparisons meaningless.

Further reading

The second half of the VW scandal is that many guilty managers kept their jobs

By Harriet Maltby

Rather than trying to copy and paste policies from abroad, politicians and policymakers need to examine how reforms will interact with our own institutions, and consider what other policies might be necessary as complements.

In the UK context, co-determination may not be as susceptible to the scandals it precipitated in Germany. The cover-up at Volkswagen was not the fault of the workers’ councils alone, but the product of easy collusion between them and the dominant shareholders in the Porsche and Piëch families. While such a setup is par for the course in Germany, ownership in the UK is much more broadly dispersed – in about 90% of companies listed on the London Stock Exchange, no shareholder owns more than 25%. Comparatively, the Porsche family has majority voting rights in Volkswagen. In theory, this may minimise the risks of co-determination experienced in Germany, making it a safer bet in the UK.

Ultimately, however, it will take more than co-determination and shared ownership to rebalance British capitalism towards workers. The UK has myriad, long-standing economic problems which amount to a new British disease. For a start, the UK’s financialised model is driving a culture of short-termism, which sees big business prioritise share buy backs over investment in training and wages. It’s difficult to see how McDonnell’s reforms will shift the obsession with quarterly earnings – shareholders will still expect those returns.

Further reading

Corporate buyback culture is financial engineering not value creation

By Charlotte Pickles

It is also far from clear how the reforms will boost private sector R&D investment – the UK has the lowest level in the whole of the OECD – which is essential for driving innovation; and innovation is key to boosting productivity and therefore wages. And nor will they help the many towns around the UK struggling to attract jobs and stimulate growth – yet a geographical rebalancing of the economy is essential if workers are to thrive outside of Britain’s cities. McDonnell’s commitment earlier in the year to Community Wealth Building funds, aimed at supporting co-operatives and mutuals at a local level, hints at a model of inclusive growth unmoored from Whitehall bureaucracy, but the idea needs fleshing out.

Yet with UK capitalism in desperate need of comprehensive reform, it is nonetheless the Labour party that seems to have the most promising plan. McDonnell has pledged that a Labour government would take on socially irresponsible businesses, overhaul the accountancy cartel and introduce legislation to strengthen the rights of insecure workers. If you look past a few headline nationalisations of public utilities, despite the much-noted Marxist connections of the leadership, Labour’s plan is about reforming capitalism, not replacing it.

According to a report published by the US National Academy for Sciences, the answer is the military. Of course, one might expect that of an environment in which men greatly outnumber women – if nothing else because of the ratio of potential perpetrators to potential victims.

However, writing for Brookings, Dick Startz notes that the second worst sector is a seemingly very different environment – academia:

“According to the National Academy: ‘[Among employees], the academic workplace … has the second highest rate of sexual harassment at 58 percent (the military has the highest rate at 69 percent) when comparing it with military, private sector, and the government, where a broad definition of sexual harassment is used.’

“Worse than the private sector? 58 percent? (Reports of harassment of students by faculty or staff are also high, in the 20-50 percent range.) Despite surface appearances, sexual harassment in academia turns out to be a major concern.”

More from this author

Who let the thought police invade our universities?

By Julie Bindel

But perhaps the military and academia have more in common than meets the eye:

“Something true in both the military and in the academy is that there are many relationships in which the power between two people is extremely unequal. In the private sector, usually the worst someone can do to you is fire you, and even then there are always other jobs. In academia, one person may be in a position to effectively end the other person’s academic career—not just interfere with their current position.”

Similar factors appear to be involved in other workplaces afflicted with the same problem. Hollywood, the British House of Commons, Roman Catholic seminaries: all have featured in recent reports of workplace sexual exploitation.

And despite the very different character of these environments, what they have in common are new recruits inspired to do a job out of some sense of vocation – but via career pathways that are limited in number and tightly controlled by people further up the pecking order.

Sexual exploitation is an especially damaging way in which such power can be exploited, but it’s not the only one. For instance, there’s the financial exploitation of unpaid interns and poorly paid junior staff, which is notorious in careers pursued more for love than money – yet where people still have to eat.

More from this author

How 'speech codes' discriminate against vulnerable people

By Peter Franklin

For academia, there’s the special danger of ‘intellectual corruption’. The social sciences and even the natural sciences, have severe problems with replicability of supposedly significant research – which can be the fault of poor methodology and, occasionally, outright falsification of data. Younger researchers need to be in a position to whistleblow or at least ask difficult questions. However, they are less likely to do so when their careers can be so easily blighted by vengeful superiors. As for the humanities, we’ve seen entire disciplines taken over by bogus, post-modern ideologies – a process surely facilitated if ‘activist-academics’ gain control of the means of preferment.

It’s quite an irony that some of the most idealistic institutions in our society, those that typically have a great to say about equality, simultaneously operate on the basis of some of the most unequal power relationships to be found outside of a sweatshop.

I don’t mean right now: not unless you have a particularly traumatic kind of dream. Please don’t move to Kettering on my recommendation and then sue me for the blisters you’ll get, trudging up and down miles of racking in search of obscure consumer goods, a pedometer tracking your every move. Right now, in the baking summer of 2018, this is probably in the top ten worst ways to spend your waking hours.

But I believe it wouldn’t take much to fix those warehouse jobs and make them satisfying, meaningful work.

If you’re one of the people who gets a bit misty eyed about the jobs of the past, how fantastic they were, and how they’ll never be replaced, I can hear you scoffing at the notion that putting stuff in boxes could ever be meaningful. Those who hark back to the pit villages and steel towns that gave working men a sense of pride and identity will tell me that putting stuff in boxes isn’t ‘man’s work’.

Further reading

Work is worth more than a wage

By Henry Olsen

But those people are wrong about where meaning comes from in the workplace. True, some jobs are meaningful because of the direct impact they have in the world – some people save lives, educate children or create works of art. But there’s no such direct meaning in bashing coal off a rock face. Mining is gruelling, physical labour, but if that were enough to create meaning then the warehouse jobs could match it, exhausted limb for exhausted limb.

Perhaps miners spent their days picturing the collective fruits of their labour: families cosy in front of the grate, or factories and power stations whirring into action with coal-fired engines. But if this was what mattered, a warehouse worker could find this kind of meaning too, after all, every package is a story – a child’s new lego, a lawyer’s new folders, a start-up’s new laptops.

So let’s be realistic. No amount of sentimentalising about families using coal or opening boxes could make up for the day-to-day reality of a terrible job. The practical impact of coal in the nation’s life wasn’t the reason that mining jobs were loved by the communities in which they played such a central role.

What do people really miss? It’s pretty simple: a decent wage, sufficiently large and sufficiently predictable to support your family, and a sense of community and belonging, that came as much from the working men’s clubs and the unions as from the mine or the factory itself.

The problems at the bottom end of our labour market are not because the work itself is menial or difficult – they’re because the jobs are structured to exploit, to weaken rather than strengthen community and solidarity. And rather than focusing on how to rectify this, we wallow in a sense of fatalism.

Of course we can take action to regain what has been lost, and even do better than in the past. Nobody really wants back the opportunity to breathe toxic air and be crippled by pneumoconiosis. One advantage of a warehouse is that it isn’t full of coal dust.

Further reading

Why we can't ignore the working-class identity crisis

By James Bloodworth

We often hear that the towns and villages around major distribution hubs hold the jobs offered in these warehouses in contempt and workers have to be bussed in every morning from the cities. This is a huge contrast to the esteem in which the pit or the steel mill would have been held. Those who run these warehouses and factories should be aiming higher, making the jobs they offer worth having, worth keeping, and worth aspiring to. High staff turnover, and rock bottom motivation cannot be good for business in the long run.

We have to start with wages. We need a new approach to the minimum wage, so people are paid extra if they take on unstable jobs, or if they sacrifice employee rights like sick pay and holidays. At the moment the minimum wage creates a huge incentive to shift people off payroll to self-employed or worker status. I’m glad those flexible employment options exist – lots of people love them, and the economic theory suggests they should result in more work being available in total.

But everywhere else in the economy, if you shift risk, you pay a premium to do so. Normally, freelancers earn more per hour than employees because they take all the risk of finding work and covering holidays and periods of sickness – but if you’re only at the minimum wage that doesn’t apply. ‘Self-employed’ workers not receiving these employee benefits should therefore get a higher minimum wage. And people on unpredictable hours, like zero hours contracts, should get extra too, to compensate them for taking on the risk.

It’s just as important that employers support workers’ efforts to organise themselves collectively, to exert their rights and gain influence within the company. It’s a sense of purpose, status and value that brings meaning to a workplace.

If employers are frightened of traditional unions, they should get ahead of them, rather than exhausting their workers so much they don’t have the time or energy to organise. Some gig platforms are now offering access to bespoke insurance or income protection programmes, which is a great start – employers should do the same, or facilitate unions and co-ops that offer this kind of support.

Work is changing, and fast. We can’t go backwards, so instead of dreaming about the past, we should be proactive in securing what’s most valuable in the workplace: purpose and belonging. Proper pay and a lasting community of colleagues are as achievable in the modern workplace as they ever were in the past – that is, if government is willing to regulate and employers to aspire to be something more than the lowest common denominator.

Suggested listening

Audiocast: How dead-end jobs killed small-town pride

By James Bloodworth

How do you think such a company would use its power? The answer, of course, is to make as much money as possible – through maximum extraction of value from all the economic activity that depends on access to the roads. In one way or another, we’d all end-up working for the road company.

Competitors would be doomed – rival companies either being purchased before they became a threat or having their roads disconnected from the main network .

Of course, no sensible government would tolerate such a situation – and especially not if the big road company were foreign-owned and shy of paying taxes. 

And yet, in the digital sphere, we’ve allowed tech companies to establish increasingly dominant positions in one market after another – such as search, social media and advertising. 

Further reading

Time to topple the technopoly

By Charlotte Pickles

Even in sectors where the products aren’t digital, online platforms are becoming key to market participation and coordination (online retail and ride-hailing being obvious examples). Therefore, these sectors too are becoming vulnerable to domination by big tech.

Is this future of the digital and digitally-enabled economy? A sequence of gated markets in which the gate-keepers collect all the money and then decide how much to give to the people who actually do the work?

Writing for the American Conservative last year, Elias Crim was full of foreboding:

“It turns out that the sharing economy is mostly about exploitation of workers and earning yourself an enforced membership in the precariat, that mass of short-term (‘flexible’) contract employees who now make up about 40 percent of the worldwide labor force.

“These are people who live precariously with no guarantee of a job beyond the short-term, generally less than 40 hours of paid work per week, as well as no unions or industry regulation to speak of, given the dramatic disparity in bargaining power here. Where is this all going, we may well wonder.”

Is there an alternative?

Yes:

“…platform cooperativism, a marriage of the historic cooperative model of business and digital platforms aimed at bringing genuine democracy to the internet, especially in the form of distributed ownership…

“What if Uber drivers set up their own platform, or if a city’s residents controlled their own version of Airbnb? How about if enough Twitter users got together to buy the company in order to share its ownership?”

There are some examples of successful cooperative enterprises (Crim mentions the Mondragon Corporation). However, from a worker’s point of view, the predominant model of capitalism is employment. In most cases, where an enterprise is too big and complex for self-employment, there is no other option.

The growing influence of the digital platform offers a new model (Crim refers to it as “uberisation”), in which technology replaces many of the coordinating functions performed by a conventional employer, thus enabling a looser relationship with the workforce. This can be criticised as giving the platform owner most of the benefits enjoyed by employers, but few of the obligations. Yet, the same technology that enables “uberisation” could facilitate cooperation instead. It would largely depend on who owns the platform.

In the case of a national road network the only practical means of mutually owning the ‘platform’ is state ownership. But in the case of digital platforms for smaller-scale markets, a workers’ co-operative could conceivably run the show.

But how would a workforce of, say, taxi drivers in a particular city find the resources to buy the digital platform they depend on – or, perhaps, develop their own?

Further reading

"Sneckdowns" and desire lines: A parable for the big data age

By Peter Franklin

Crim emphasises the importance of “digital commoning” – the “public ownership of civic data” in support of “new forms of social innovation”. There’s plenty of potential for that – because unless the stale stays resolutely analogue, it is simply too big and its reach too wide not to become a major player in the digital sphere. The tech companies are using their control over data flows to empower themselves; the state must therefore use its digital resources to empower us.

Building platforms for the people will require money as well as data. This could be obtained by taxing the tech companies’ revenue streams at source – not once they’ve been filtered through the usual avoidance schemes. In a previous UnPacked, I proposed a platform tax for online advertising. This should apply to the other online monopolies too – indeed the more complete the monopoly, the higher the rate of taxation.

Further reading

Tech companies need their own tax regime – but not one of their choosing

By Peter Franklin

Do I care, then, about the fate of Uber and its 40,000 drivers in London? Yes, because protectionism is ultimately bad for all of us. It stands in the way of productivity growth – the very lifeblood of wealthy societies.

Transport for London’s reasons for refusing to grant the licence are unconvincing. It cites Uber’s approach to reporting crime and obtaining medical certificates – matters which surely would be easy enough to solve through talking to the company. According to Uber, the issues quoted by Transport for London were never raised in discussions – it claims that a series of meetings prior to last week’s announcement were cancelled.

The decision looks rather more a case of a public body stepping in on behalf of two vociferous vested interests: left-wing unions and drivers of black cabs. Uber has been squashed because it is a threat to existing labour. We have become used to industries falling to the disruptors but this, it seems, was a disruption too far. You don’t have to support all of Uber’s employment practices to be concerned at the implications for the future of other innovations which powerful interests might find inconvenient.

That Uber has worked in the interests of the consumer is hard to deny. In a study of 21 US cities, in all but two Uber was found to have undercut existing taxi services. In Its 2016 survey ‘Mapping the World Prices’, Deutsche Bank found a knock-on effect of reducing fares charged by existing taxis – by 30% in the case of New York. As for the suggestion that passengers are paying for their cheap rides through reduced safety it doesn’t stand up to the evidence. In New York complaints against taxi drivers saw an overall reduction after Uber began services in the city. That suggests, if anything, that the coming of Uber forced existing taxi companies to improve driving standards and the civility of their drivers.

But has it all come at the expense of taxi-drivers themselves? Inevitably when industries are disrupted someone gets hurt. An Oxford University study of taxi-drivers in US cities in 2015 found that the earnings of drivers employed by taxi firms fell by 10% in the wake of Uber. Yet this was matched by a 10% rise in the earning of self-employed drivers – which include Uber drivers. This came in spite of 50% rise in the number of self-employed drivers. Uber hadn’t damaged the existing taxi industry to anything like the extent it had created new opportunities for taxi-drivers. The overall effect of Uber was to grow the taxi industry substantially. Through lower fares and a more efficient system for summoning a cab, Uber has enabled the taxi sector to win passengers from other modes of transport, be it public transport or the private car. It has also persuaded people that a night out is affordable where previously they might have stayed at home.

Urban planners won’t be pleased to think that Uber is diverting passengers away from buses and metro systems, but if it is helping to dissuade people from driving their own cars around cities that is surely a good thing. Our cities struggle hard enough to cope with cars, but more particularly in finding somewhere for them to park while their occupants are at work, shopping or at the theatre. If, as many cities are trying to do, we are going to reduce the number of parking spaces in urban areas we are going to need a far more innovative and budget-priced taxi sector – of which Uber is surely part.

On one issue, I do sympathise with existing taxi firms. They are not on a level playing field with Uber, thanks to the huge costs of buying their licences. In New York, for example, a taxi firm might pay $700,000 for a licence, while Uber pays nothing. Metropolitan authorities have been using taxi licenses as a form of taxation, which Uber has cleverly managed to find a way around. Surely, however, that doesn’t justify banning Uber from operating – it just demands that governments review their taxation structures so as to capture the activities of Uber in the same way as traditional taxi services.

As for the charge that Uber drivers don’t get paid holidays, sick pay and so on, it strikes at the wider issue of the gig economy. For the worker there has long been a trade-off between employment and self-employment: security and regular hours on the one hand and flexibility and (often) the chance of higher earnings on the other. Many Uber drivers are attracted to the business because flexibility is vital for them. They are doing it to supplement earnings from other employment or business. Last year, Uber lost an employment tribunal case in London brought by two drivers over their legal status as self-employed contractors. Yet many other value the freedom to choose their working hours.

As the Oxford University study showed, the net effect of Uber has been to increase the earnings available from taxi work, by more effectively matching demand with supply. Go to any railway station or city centre taxi rank and it is the same: lines of taxis waiting for a fare, often in vain. By enabling passengers to hail a cab online, Uber has reduced that slack time. That is how societies grow rich: by increasing productivity. London’s move against Uber, by contrast, is making its own little contribution to economic stagnation.

The case against Uber

London takes a stand against Uber and its "extreme capitalism"

By James Bloodworth