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From the Desk of the Executive Director

Ken Phillips is co-founder and Executive Director of Independent Contractors of Australia. He is a published authority on independent contractor issues and directs research on related commercial and trade practices issues. Through his numerous articles in newspapers and think-tank and academic journals, Ken is known for approaching issues from outside normal perspectives and is frequently sought out for media comment.

Some revolutionary thoughts for the New Year

Saturday, December 31, 2016

2016 a year of revolution
The Foreign Affairs Editor for The Australian, Greg Sheridan, has described 2016 as a year of revolution.  From Brexit to Trump, the rise and (current) fall of ISIL, global terrorism, the game play of Putin, military muscle-exercising by China and the election of the drug-pusher killer President of the Philippines all indicate revolutionary shifts from the status quo. Sheridan says that 2016 will be seen by historians as a “fundamental year of change of direction on par with other great pivot points of global history”.

The revolution of self-employment
Similarly, how work is organized in societies is also undergoing a revolution. But it’s more a rapid evolution without specific pinpoints in time. However, 2016 saw yet again another surge in self-employment in the UK. In Australia we saw a surprising rise in independent contractor numbers. There are 44 million self-employed people in the USA. It’s a trend that’s been picking up speed since the turn of the century, but dramatically symbolized by the spectacular recent explosions of app-driven businesses such as Uber and others built around the ultimate small business model of self-employment.

The status quo fights back against self-employment
But this work shift is hated, despised, and viewed as evil and socially destructive by many. Uber drivers were declared to be employees by a London employment tribunal— something that the ‘Socialist Worker’ declared to be a great victory.

However, I commented in The Australian that I expect a higher court to overturn the tribunal’s ruling on appeal. This is similar to a November 2016 decision by New York State's highest court which declared yoga teachers to be independent contractors. This top US State court ruling overturned a London/Uber-like, lower tribunal decision which earlier found the yoga teachers to be employees.

Quite recently, in serious academic discussion, Andrew Henley of Cardiff University argued that self-employment does not create jobs. He reasoned that:
If self-employment growth is beneficial and indicative of entrepreneurial dynamism, then a critical indicator of success is in the extent to which the (newly) self-employed are able to venture business activity capable of sustaining employment for others.
The findings in this paper would suggest that the vast majority of such start-ups are unlikely to lead to further job creation, and that this criticism has recently in the UK become more salient.
I disagree with Andrew. He takes the view that self-employment is only justifiable if self-employed people employ others. I think this misses the point of the workspace revolution. People want to be their own boss, but they don’t want to employ others.

I’m very much in accord with the opinions of Ken O’Neill and Simon Bridge of Ulster University. In the publication Understanding Enterprise Entrepreneurship and Small Business they say that:
‘The model of success that people have in mind when they talk about small businesses and consider how well they are doing is likely to fall into one of two categories, depending on whether they are looking primarily at the business or at the person behind it:
  • The business professionals' model. Many business professionals (which term could include the professional managers of larger businesses, as well as business commentators, advisers, institutional shareholders and academics) look primarily at the business and appear to have as their model of the successful, or 'perfect', business one that is achieving its highest potential (which may be assessed in terms of growth, market share, productivity, profitability, return on capital invested or other measures of the performance of the business itself). Professionals may not be conscious that they are adopting this ‘default’ model, because they may fail to see that there is an alternative. Whether the model is consciously adopted or not, the result is that a business is often judged by how close it comes to what a 'perfect' business might do in particular circumstances. Small businesses often score badly in such comparisons.
  • The small business proprietors' model. Many owners of small businesses do not have the same model as the one just described. Their main concern is whether the business is supplying the benefits they want from it. These benefits are often associated with an income level to maintain a lifestyle and if that is achieved satisfactorily then there is no need to grow the business further. Business success for them is being able to reach a level of comfort ('satisficing') rather than achieving the business's maximum potential when managing it can become more complex, time-consuming, risky and costly.’
That is, the rise of self-employment where the self-employed person does not employ anyone is in fact a revolution in business models. The ‘big firm’ centrally controlled and managed-through-employment model is being challenged and replaced. It’s a new world!

Simon Bridge puts this into an historical context in a paper in the Journal of Management and Organisation. Simon gives an excellent run-down on the history of work from hunter-gatherer to the Industrial Revolution and Fordism. In doing so, Simon gives context to the changes happening today. He says:
'In many countries self-employment has increased recently. But, despite evidence that many people enter self-employment willingly out of choice, there appears to be an instinctive aversion to it, possibly based on an assumption that employment is more desirable and beneficial and is, and should be, the norm.'
And suggests that
'…in historical terms, employment is the exception not the norm. The age of the job, it is claimed, lasted only from1840 to 1980, but its influence continues and many government regulations and union practices are still based on the era of the big business, big labour and big government triumvirate.'
Simon asks us to accept the change:
'Often we become accustomed to thinking and acting on the basis of received wisdom but should we now recognize that often much of our received wisdom about employment is out of date? Instead should we recognize that the world of work continues to change and, while new thinking may not all be correct, not recognizing that change, and not responding accordingly, will only serve to hinder progress, not to prevent it?'

I agree.

 

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