Contracting is not a "problem" that needs "solving"

Roger Partridge
Insights newsletter
14 February, 2020

Counting by the number of times the phrases “gig economy” and “future of work” are mentioned by the news media, you could be forgiven for thinking full-time employment was a thing of the past.

Yet last year the Productivity Commission reported the so-called gig economy was both small and showed no signs of rapid growth, either in New Zealand or in the 30 other countries for which data was available.

The Commission’s findings provide useful context for assessing the Ministry of Business, Innovation and Employments Better Protections for Contractors discussion paper. Released in November last year – and with submissions due today – the discussion paper proposes no fewer than eleven “options” for regulating the status of contracting.

But before MBIE goes looking for solutions, it needs to ask whether there is a problem that needs solving. Unfortunately, problem identification is the discussion paper’s Achilles’ heel. In the opening “Message from the Minister,” Workplace relations and Safety Minister Iain Lees-Galloway claims the deregulation of the labour market in New Zealand in the 1990s resulted in both structural problems and increased inequality.

Both claims are unfounded. As we showed in our 2019 report, Work in Progress: Why Fair Pay Agreements would be bad for labour, since the early 1990s New Zealand’s labour markets have been working very well. Wage growth has been tracking productivity growth. We have high levels of labour market participation and low levels of unemployment. And over the last 30 years we have had one of the highest levels of job growth in the OECD.

MBIE’s discussion paper is no doubt correct when it identifies instances of exploitation by unscrupulous employers treating their workers as contractors when the law requires them to be treated as employees. 

But there is no evidence presented that this is a systemic problem requiring wholesale changes to the status of contracting. The problem of workers not receiving their entitlements is a problem of enforcement. It is not a problem that requires contractors to be reclassified as employees (or into some hybrid, halfway house as suggested in one of the “options”). 

The government must also be mindful that non-standard forms of work such as contracting emerge in response to real needs of both employers and workers. When our labour markets appear to be working well, the government must resist the urge to find solution to problems that do not exist.

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