Back to the Future: Direct employment, the ‘gig’ economy and the lessons from history

Talk of a ‘gig’ economy, and many people assume that ‘flexible’ labour practices are a shiny innovation of the past few years.  Direct employment, they say, is old school. The history of work in the UK and other developed countries tells a quite different story.

In his recently published direct employment report for the JIB, Prof. Howard Gospel of King’s College, London, concludes that excessive levels of self-employment have negative effects on training and therefore the ongoing development of the workforce. History supports his view.

Roughly 100 years ago, direct employment was an innovation. It revolutionised the labour market. It replaced much older traditions of labour-only subcontracting, gangmasters and ‘independent’ craftspeople. People who describe gig-economy employment practices as ‘Dickensian’ are literally correct.

The demise of the nineteenth century ‘gig’ economy, and its replacement by the ‘contract of employment’, came about because businesses needed more control over their workforces to ease the introduction of new technology and work process improvements.

the ‘gig’ economy in construction is ill-equipped to support technological or work process innovation

The contract of employment gave the employer greater control over what the employee did.  More importantly, it also gave control over how they did it – opening the way to new and more efficient ways of working. With prospects of secure employment and employers investing in upskilling and reskilling, employees proved far more willing and able to support innovation than their ‘independent’ predecessors.

This story has important lessons for Government’s and the Construction Leadership Council’s current desire to increase take-up of new work techniques and technologies.

Today’s UK construction ‘gig’ economy shares many of the characteristics of its Dickensian predecessor. Alongside, the outsourcing of production and employment, the civil and building sector has experienced the systematic breaking apart of previously connected activities into separate contract ‘packages’ and occupational disciplines. Eight core trades eventually became 80 narrowly defined, semi-skilled occupations. This contrasts with Germany, where levels of direct employment are far higher than in the UK. Here recognised construction occupations still number only 15.

Such fragmentation arguably fulfilled its primary purpose – which was to facilitate a massive transfer of responsibility and risk to an expanded and weakened supply chain.

The problem with this set-up in 2021, just as it was in 1871, is that the ‘gig’ economy in construction is ill-equipped to support technological or work process innovation. Which is why, on direct employment, upskilling and reskilling, the time is now overdue for us all to contemplate an exciting journey ‘back to the future’.