Policy Papers


Flexible employment and casual labour: a historical perspective on labour market policy

Noel Whiteside |

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Executive Summary

  • Modern ‘flexible’ work (sub-contracts; self-employment; the gig economy) is causing political concern. Poverty rises. State revenues fall.
  • This is not new. Social investigation into urban labour markets in late nineteenth century Britain revealed identical problems. Poverty resulted from irregular work, not low pay.
  • State reforms and ‘decasualisation’ policy aimed to improve economic performance and eliminate poverty under a pre-1914 version of the British welfare state.
  • Success proved elusive. Employers and workers resisted state intrusion and defended established practices, even when reform secured trade union support.
  • Permanent full-time contracts after the second world war derived from negotiated agreements, not economic imperative. As these agreements are unpicked, old employment patterns and the working poor reappear.
  • Better management of casualised markets is required: the registration of workers and the introduction of legal obligations on employers and IT platform owners. The Taylor Review into modern employment, to report in June 2017, should take note.

Introduction

Over the last 30 years, British policy makers of all political stripes have displayed a profound faith in flexible labour markets and have promoted their use. Employment has shifted away from full-time permanent jobs. Increasingly workers are hired on temporary, part-time or zero-hour contracts, often as ostensibly ‘self-employed’. Aided by new technologies, a range of tasks – from cleaning and catering to marketing, web design and finance – are sub-contracted out to self-employed teams. Work is arranged in networks, not hierarchies. This trend culminates in the ‘gig’ economy where IT platforms offer task-based services at highly competitive prices.

Flexible labour markets create more jobs and make the UK economy more competitive. More jobs translate into a reduced welfare bill and remove taxpayer burdens. Britain’s recent unemployment rates have consistently been lower than those experienced in other European states. Flexible employment offers individuals autonomy to determine their working hours, improving work-life balance. Disabled people can enter the world of work on reduced hours. Female labour market participation rises as women combine waged work and motherhood. Work offers a safe route out of poverty. What’s not to like?

One million workers in the UK are on zero hour contracts and a further five million are ostensibly self-employed, often casual workers supplementing an existing income.  The decline of standard employment has corroded working people’s rights to sick / holiday pay, parental leave and pensions. Job insecurity has grown. The emerging gig economy enables firms like Hermes, Deliveroo and Uber to recruit self-employed drivers at minimal rates. As businesses under international ownership, they evade corporate tax obligations. Flexible work and low earnings reduce state revenues. Households on very low incomes can claim public support, so the burden on taxpayers grows as firms use these subsidies to secure ‘efficiency savings’ by cutting labour costs. In retaliation, governments raise minimum wages to make employers pay more, to reduce the in-work benefit bill.

The end product is poverty (the population living on less than two-thirds of median income) which now embraces nearly 13 million people living in the UK. In a climate of constant austerity, low job security widens income inequalities. While self-employed barristers and management consultants protect themselves against lost income if ill or on parental leave, those working solely in the gig economy have no such security. Growing inequality and job insecurity may help explain the rising tide of nationalist populism and anti-immigrant feeling, as displayed in the election of President Trump in the USA, the Brexit vote to take the UK out of the European Union and the growth of nationalist politics across Europe. It also explains the soft words of Prime Minister May, expressing concern for those ‘barely managing’ in the current climate. In October 2016, Matthew Taylor was appointed to review these ‘new forms of work’ that undermine workers’ rights to the national minimum wage, annual paid leave, parental leave and sick pay. Improving the quality of work, Taylor claims, should be a national goal.

However, the issue is neither as novel nor as simple as it initially appears. Over a century ago, the founding fathers of British social statistics investigated the causes of destitution among Britain’s labouring poor. Irregular and insecure work (termed ‘casual’), then as now, proved a fundamental cause of poverty and social dependency. However, unlike today, it was also understood to threaten future prosperity. Economic and social fears combined to promote a politics of ‘decasualisation’. The earliest UK labour market reforms sought to achieve this goal. These reforms were not promoted by the early Labour Party, but by the Liberals aligned, as that party had been from its origins, to the interests of British industry and commerce.

Social enquiry and policy prescription before 1914

Social investigations by Charles Booth (East London), Seehbohm Rowntree (York), Eleanor Rathbone (Liverpool) among others revealed the problems casual employment caused. General labourers in seasonal trades (construction, dock and warehouse work, gas production and clothing, for example) might only be employed for an hour or a half-day. This ‘flexible’ labour market was unreliable, expensive and inefficient. Survey findings fed political debate at the start of the twentieth century. Labour market rationalisation was advocated by Liberal reformers (including the young Winston Churchill and William Beveridge). This gave ‘unemployment’ a national identity for the first time and its causes (structural, frictional, etc) became associated with fluctuations in the market economy, not simply with individual laziness as the Victorians had supposed. This normative agenda underpinned policy-making for the next 60 years, forming the criteria against which the ‘unemployed’ came to be identified and ‘standard’ employment contracts developed.

Social inquiry was partly provoked by recurring social unrest in major cities since the 1880s, the consequence of repeated slumps in trade. As Guy Standing has recently argued, an underemployed underclass was potentially politically unstable and dangerous. ‘We have a festering mass of human wretchedness in all our great towns’ the philanthropist Sam Smith noted in 1883. ‘… The time has come when the neglect of these social questions will exact a terrible vengeance on the wealthier classes.’ Then as now, evidence of organised revolutionary intent proved thin on the ground. However, concern about social conditions grew. The last two decades of the nineteenth century also witnessed the creation of the Settlement House movement, the publication of General William Booth’s Into Darkest England and the Way Out and Joseph Chamberlain’s national programme of public works to relieve the plight of the jobless. Against this background social scientific investigations, based on house-to-house enquiry, documented statistically the causes and consequences of poverty.

The results were clear. Irregular earnings led to poverty, poor diet, undermined working capacity and made saving impossible. Casual workers led a hand-to-mouth existence. When times were hard, they fell into debt, resorted to the pawn shop or, if all else failed, to a punitive poor law (the detested workhouse). Social observers noted that many casuals could not work regularly even if the opportunity offered. Physical incapacity aligned with ‘demoralisation’: the inability to attain independence or the desire to try. Casuals formed the poor law’s permanent clientele and thus burdened the communities where they lived as well as the industries they served. Economic argument reinforced social evidence. Casual labour markets were inefficient. As casual hourly rates were high, so the market attracted outsiders. Rural workers migrated to the cities, exacerbating the competition for work. Overstocked and disorganised, urban casual labour markets were blamed for the declining performance of British commerce which in turn threatened the future of the British Empire. This made politicians sit up and take notice.

The most famous social investigator was Charles Booth whose Life and Labour of the People in London was published in 17 volumes (1902-3). This offered a compelling critique of the East End, the largest concentration of cheap, casualised ‘sweated labour’. Five classes of household, from Class E (comfortably off) to Class A (the vicious, semi-criminal), were mapped onto the area, depicting degenerating zones of habitation. Between A and E, Booth distinguished three intermediate classes, all at risk of (or living in) poverty: Class D (the low-paid in regular work) Class C (irregularly employed) and Class B (the habitual casual). The chief cause of poverty, Booth concluded, stemmed not from low pay, but from irregular work. He informed the Royal Statistical Society in 1888 that ‘…neither Class B nor Class C work much more than half their time …most of the work of Class B is inefficiently done, both badly and slowly … if the whole of Class B were swept out of existence, all the work they do could be done, together with their own work, by the men, women and children of Classes C and D’ with the result that ‘these classes, especially Class C, would be immensely better off.’ Not only was too little work being spread among too many people, but casual labour was expensive and high wages made the surplus labour problem even worse. ‘A man engaged by the hour or by the day is paid at a higher rate than if engaged by the week or given what is called permanent employment’ he argued. ‘    This policy of short tenure and high wages tends to increase the number of those required to do a certain amount of work.’

The solution, Booth concluded, was ‘decasualisation’. Far from forcing the elderly and incapacitated to search for work (as encouraged in the UK today), he proposed that they should be removed from the labour market, to foster a more efficient industrial and commercial performance.  An advocate of pensions for the elderly and infirm, he prescribed labour colonies as disciplinary institutions for Class B. He also devised a decasualisation scheme for the London docks. A complex system of preference lists was adopted by the London dock companies from 1890, in imitation of hiring practices used by Liverpool’s liner companies (Booth’s family owned the White Star Line). This would concentrate available work in the hands of regular, registered men, identified by tallies numbered in accordance with their working capacities.

Booth was not alone in advocating decasualisation as a cure for poverty. Similar reform programmes were proposed by Sidney and Beatrice Webb (the founders of Fabian socialism), Canon Samuel Barnett (the first warden of Toynbee Hall from 1884) and William Beveridge (the sponsor of state-based decasualisation). The Webbs took a more sympathetic view of the casual worker’s plight than Booth: ‘The unskilled labourer ... half fed and whose clothing is scanty’ they wrote in 1897, ‘ cannot by any incentive be stimulated to greater intensity of effort for the simple reason that his method of life makes him physiologically incapable of either the mental or physical energy involved.’ Sickness (mental or physical) bred poverty and poverty sickness, forming a vicious circle of social degeneration that, reformers argued, undermined efficiency, created problems for industry and threatened Britain’s commercial and imperial future. German and American manufacturing enterprise was outperforming Britain’s own. It was this threat that attracted the attention of senior politicians in the Liberal Party.

The young journalist William Beveridge focused less on the damage casual labour did to workers  than on the damage it inflicted on industry. Managerial discipline, far from being strengthened by casual labour, was undermined by it. As he wrote in 1907

‘… those who come to be casual labourers are almost inevitably demoralised by their circumstances. Irregular work and earnings make for irregular habits; conditions of employment in which a man stands to gain or lose so little by his good or bad behaviour make for irresponsibility, laziness, insubordination’

The young Eleanor Rathbone (the future advocate of family allowances), investigating port workers in Liverpool, also discovered that there the regular working week was unknown. ‘They [dockers] have adapted the habits of their lives only too well to the conditions of their work’ she observed in 1904, ‘and are said to prefer long spells of continuous work by day and night, followed by two or three days of complete idleness, to regular and moderate hours’. Such working habits were encouraged by ship-owners. Port dues were high and turning a ship around quickly was rewarded by bonus payments. However, commercial preferences did not stop reformers promoting regular employment to reduce poverty.

Beveridge himself strongly supported this strategy. Visiting Germany in 1906-7, he was impressed by urban bureaux that managed local labour markets, to distinguish the efficient worker from his degenerate colleague. Adopted in Britain, they could restore liberal principles of citizenship and personal freedom through the agency of the state.

‘The line between independence and dependence, between the efficient and the unemployable, must be made clearer. Every place in ‘free’ industry, carrying with it the rights of citizenship – civil liberty, fatherhood, conduct of one’s own life and government of a family – should be … a ‘whole’ place involving full employment and earnings up to a definite minimum.’

Under-employment bred unemployability. If treated like a pauper, the unemployed regular man became one. To break this cycle, he must be protected and his treatment distinguished from that of the pauperised ‘residuum’. Inter-linked labour exchanges could rationalize the labour market: to remove the idle, the vagrant and habitually irregular. ‘For the man who wants to get a casual job now and again, the exchange will make that wish impossible’ Beveridge informed a Royal Commission in 1908, ‘ … the result of the exchange is the direct opposite from that of assisting the lazy and incapable: it makes it harder for them and compels them to be regular.’

Introduced in 1908 by the Webbs to Winston Churchill, then President of the Board of Trade, Beveridge was appointed Director of Labour Exchanges to realise his plan. This contributed to an early British welfare state: old age pensions (1908); labour exchanges (1909); national insurance (1911). Decasualisation was a major objective underpinning these reforms. Old age pensions would stop the elderly being forced to work beyond an efficient age. Health insurance offered a small household income and basic medical attention to manual workers, preventing a physical problem from deteriorating into a chronic condition that undermined future working capacity. Advice for school-leavers (1911) discouraged young workers from being used as ‘boy’ labour and, on reaching maturity, being tossed aside to become the next generation of casuals. National labour exchanges would rationalise labour supply and demand. Using the latest technology (the telephone) the exchange would send workers where needed, promoting labour mobility between as well as within trades and towns. State officials could select the best applicants, isolating the inefficient. Contributory national insurance reinforced this strategy. Employers would avoid hiring day labourers as each required a weekly contribution for health insurance purposes. Taken together, these reforms promised to concentrate work in the hands of the most capable.

The first world war created a shift from essentially voluntary to increasingly compulsory measures. As manpower shortages bit, so decasualisation became essential to national survival. This did not make it popular. However, the work of both pre-war labour market analysts and social reformers created a lasting legacy. Official statistics still denote labour market status in terms of employment, unemployment, sickness, disability and retirement (albeit the construction of such categories has changed radically over time) – with the implication that those ‘in employment’ do not need state support. Unemployment statistics are still used to measure national economic well-being. Whether such assumptions are still justified, however, is a more open question.

Aftermath

The decasualisation agenda proposed before 1914 failed to achieve very much. Social scientific solutions were imposed unilaterally from above and employers resented state intrusions into their private business. Neither labour exchanges, nor the employment exchanges (or the job centres) that succeeded them have ever had much impact on labour market placement  - except for the lowest paid and least skilled jobs. Proposals to create ‘special schemes’ in the immediate pre-1914 years to organise casual labour markets (dock work, ship repair, construction) were generally ignored. In the few instances where schemes were introduced (in Liverpool and Goole, for example), tallies identifying bona fide dock workers were loaned or sold. Port employers registered additional men as and when they were needed and casual dock work functioned much as it had always done. After the war, unemployment rose and the jobless reverted to the docks in search of work, as their fathers had done before them. Following the second world war, two initiatives (1947 and 1967-70) decasualised dock work, provoking wildcat strikes and industrial disruption. The ‘solution’ was only apparently reached when the Thatcher government scrapped the whole idea in 1987 in the name of labour market deregulation. By that date the casual dock labour problem was dead. Containerisation had removed the need for vast and fluctuating numbers of workers to process cargoes.

As indicated by this saga, decasualisation was not popular among workers either. Some trade union leaders made common cause with government to limit numbers on casual labour markets.  This offered organisational advantages. The T&GWU supported schemes in Britain’s ports provided registration was confined to men who carried the union card. Leaving aside the conflicts this provoked with rival organisations, union compliance was not supported by the rank and file.

The problem was (and remains) that casual (flexible) labour markets cover a diverse range of occupations and incomes. Those with specialist skills, or using casual jobs to supplement existing earnings, enjoy the autonomy to choose when and for whom to work. Should their market sector get crowded this attitude might change, but resistance is provoked when such people are invited to work at lower rates in permanent employment. In contrast, marginal workers fear rationalisation will lose them the chance of any work at all. The pre-1914 reformers were unclear about the fate of this group. The sick, disabled and elderly were covered by new welfare measures, but those surplus to requirements were expected to fend for themselves. Remarking on the Liverpool dock scheme in 1912, Ben Tillett (leader of the London dockers) claimed that the founders of this arrangement wanted those surplus to port requirements to be poisoned or shot.

Civil servants in other state departments also questioned the wisdom of imposing uniform working lives on diverse practices. Work arrangements should be determined by industry. German labour bureaux included industrial representation and organised local – not national – labour markets. The UK created the first national unemployment scheme (1911) and, with this, national criteria to identify claimants. During the interwar years of high unemployment, these criteria were constantly recalibrated and recast to contain claims while avoiding (sometimes unsuccessfully) political protest. At shop-floor level, trade unions defended their members against job loss by protecting manning levels and spreading work, to keep optimum numbers in the trade. This reinforced casual work practices. Some work was better than none. In some sectors, negotiated working agreements allowed state benefits to supplement reduced incomes.

The implicit conflict between collective bargaining and the state in determining work practices reached its apotheosis after the second world war. The social insurance scheme, designed by an older and wiser Beveridge (1942) and introduced by the post-war Labour government, could not touch labour market organisation and remained limited to rescuing its casualties. After 1945, in conditions of full employment, standard work contracts became the negotiated norm. Beveridge’s wartime writings reveal how he planned to secure productive capacity lost by idle labour: unused capacity found among the unemployed and also embedded in traditional (not least casual) working practices sustained by unions and interwar management to protect jobs and spread work. Developing his earlier vision, Beveridge argued that, if full employment and subsistence benefits became central tenets of state policy, then workers might accept job rationalisation. Such expectations were never realised. Past experience of mass unemployment formed a fulcrum for trade union defence of collective bargaining as the template of job control. Nor were employers any more responsive to the siren calls of post-war governments to accept state intervention in private industry. The influence of a liberal British state on labour markets: to train, to redeploy, to fix hours or manning levels, has remained highly constrained.

Labour market reform then and now

Since the 1980s, the disintegration of employment protection has allowed the re-emergence of in-work poverty, highly reminiscent of the casual labour markets found in British cities before 1914.

Of course, work and labour markets have changed radically over the last century, as have the political contexts and economic assumptions that underpin policy. The decline of trade union influence, the transfer of many public services to private providers and the reduction of official interventions in business operations, all indicate renewed faith in the superiority of private enterprise as the source of collective prosperity. The focus of labour market investigation has also changed. The social enquiries of the late nineteenth century focused on households and on the male breadwinner as the person responsible for that household’s well-being. Evidence of female (particularly wives’) casual work was noted, but as a symptom of poverty, not its cause. Recently, this focus has shifted. Today as historically, families can only be kept from poverty if both partners work but women are now officially expected to be labour market active. So are the elderly and the infirm. As official statistics show, these groups dominate the rising numbers of part-time self-employed.

Policy prescription has also changed. Late nineteenth century social reformers concluded that regular work, not higher wages, formed the foundation for household financial security. Permanent employment, they argued, increased managerial discipline, rewarded good workmanship and compliance while enabling sub-standard or idle workers to be removed, thus improving economic performance. Spreading work over larger numbers increased poverty, fostering demoralisation and social dependency. State intervention to organise labour markets would control these trends. Today, in contrast, employment (any employment) is promoted as a cure-all for poverty. ‘Flexibility’ through part-time work, zero-hours contracts and self employment is extolled as the means to balance work and family life. But few of these workers control their working hours and, by raising the minimum wage, governments have encouraged immigration – today from poorer parts of Europe, rather than rural areas of the UK.

As flexible work expands, so the labour market categories born in the early twentieth century disintegrate. Retirement age is corroding and, in the foreseeable future, could disappear. Disability is redefined, throwing impaired lives back onto the labour market. And who are ‘the unemployed’? The Labour Force Survey identifies anyone with one hour of waged work per week as ‘in employment’. The categories used by policy-makers to analyse trends and fashion new initiatives are increasingly meaningless. And incentives to take on a regular job are inverted. Rights to social benefits based on NICs have virtually disappeared. Currently,it pays to be self-employed.

Policy has to change. The public finances cannot afford this situation. In-work poverty must be reduced. This does not mean post-war standard employment contracts must reappear. Historical precedent shows that forcing the flexible into rigid working lives provokes opposition. Rather, associations between employment rights and permanent work have to be modified. The registration of workers in identified sectors (under agencies or IT platforms) should involve employers in the payment of a specific contribution per hiring, on a pro-rata basis. Casual employment deserves and needs better management. To neglect this situation will excerbate social and economic decline.

Further Reading


Beveridge, W.H. (1908) ‘The curse of casual labour’Sociological Review 1 (June)

Harris, Jose (1997 ed.) William Beveridge: a biography (OUP)

Phillips, G.A and Whiteside, N (1985) Casual Labour Oxford (OUP) chs. 1-3

Standing, G. (2014) The Precariat London, Bloomsbury

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