Does the minimum wage encourage the gig economy?

There is much joy in the Sunday papers and also elsewhere that the minimum wage is due to increase from the Ist April.

This is certainly good news: good news too that that after a full twenty years of operation jobs have not, as was initially feared, been destroyed by the minimum wage. Indeed jobs, we are continually told, are still actually being created and never has the UK had so many – even if zero hours contracts count as a job.

Whilst I am generally agreed that a minimum wage is a good idea, I find more difficult the idea that it does not affect jobs.

My feeling is that it encourages (some at least) employers to farm out as much as they can to self employed subcontractors – typically in the van delivery market there is pervasive ‘overhead shifting’ when drivers often lease their vans from the company they are contracted to, whose hours are controlled by that same employer, and often their delivery routes as well. How this is self-employment I can never understand.

Some office services are also easily contracted out to the self-employed, even if it is more difficult to keep the same control – at least you can subcontract by task and not the hour, getting a fixed budget rather than an uncertain number of hours.

In short, I fear that the minimum wage, without any proper and enforced legislation as to actually what constitutes ’employment’, is offering continuous and effective encouragement towards expansion of the so-called ‘Gig’ economy.

I cannot find any studies on this but surely logic dictates that if you are employer under pressure it could be a help in order to keep a lid on costs, and if you aren’t, it is tempting to explore in order to increase profits?


  1. Graham -

    There is a rise in self-employment and I wonder how much of it is as you describe – pseudo self-employment as a way of employers saving on overheads such as sickness, NI contributions and pensions and so on. HMRC are supposed to have strict regulations about what constitutes self-employment but they don’t seem to be properly enforced.

    While the National Minimum Wage and the cynically stolen term, National Living Wage, set a floor, though again it is ignored by some employers, I worry that it also sets a ceiling. Like you, I wonder if there is any robust research on this.

  2. Peter May -

    Absolutely agree about the stolen term of ‘National Living Wage’ -it’s why I didn’t use it! And like you, it seems to me there is vitually zero enforcement, which disadvantages those employers trying to do it right.

Comments are closed.