John McDonnell To Lower Wages In The Gig Economy – Or Kill Jobs


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

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

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

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

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

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

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

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

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

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

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