Stop forcing benefits down my throat and give me hard cash, dammit

Maybe this gig economy means we need to redefine work?

Worstall @ the Weekend 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 and all the rest – should really be employees. I am putting the idea to you that OK, things have changed. So instead of that, let's work the other way: let's make everyone a contractor.

I say this because I am, of course, a running lackey capitalist plutocrat dog and wish only to grind the faces of the poor into the dust. For my suggestion will mean that we entirely abolish the concepts of statutory maternity pay, statutory holiday pay, statutory sick pay and all the rest.

And we'll have to build more chimneys to deal with the subsequent distressing surplus of waifs upon the streets of this land. I'm not entirely joking, either. At least, not about all of it.

It's at Recode that we see the basic underlying point that I'm getting at. One of the companies in this gig economy has just closed down over precisely this problem: whether the law is going to define their workers as employees or contractors (and the confusion in the law as a result of that case against Uber a couple of weeks back).

This is one of the first startup casualties to come as a result of the worker classification issue that has gripped the tech industry. Many companies in the gig economy – such as Uber, Postmates, Luxe and Sprig – classify their workers as contractors instead of employees. As a result, they don’t have to pay out for payroll taxes, social security benefits, vacation time or other fees.

But workers have filed lawsuits over the issue and it’s now become a heavily debated talking point among the US presidential candidates.

There's two points of economics about this. The first being that of course any such mandate operates in exactly the same way as either a tax on employment or as a legally mandated rise in wages. There's going to be some economic activity that will not take place as a result of the imposition.

Given that we rather like economic activity, since it is the thing that makes us all collectively richer over time, it might not be all that wise an idea to tax it in this manner. So, remove those strictures, those insistences that holidays be paid for, and see employment rise and the country get richer as a result.

The second is that we always have a problem when we insist upon the same bundle being offered to everyone. For everyone has their own utility calculation, their own set of preferences. Some people will value cash more than security, some will value flexibility more than cash, some will value paid holiday more or less than either.

If we insist on everyone getting the same package then we are, by definition, offering something that is of less value to nearly all than simply offering them the equivalent amount of cash. For there's going to be very few people indeed whose personal preference bundle exactly matches that statutory one.

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.