The gig economy starts to bite

This week the Trades Union Congress released research that suggests the rise of the gig economy and zero-hours contracts is costing the government £4bn a year in lost tax and benefit pay outs.

Government figures show that the number of self-employed people in the UK has grown 26% over the last ten years to 4.8million (15% of the total workforce). The TUC believes that the number of low paid self-employed people by 21%.

While experts assert that this growth is primarily driven by the increased ease of setting up a business, the growth of the gig economy and zero-hours contracts are also significant factors.

The TUC is keen to point out the effect on public finances – the exchequer loses the equivalent of £75m a week because low paid self-employed workers and people on zero-hours contracts pay less tax and national insurance, and are more likely to rely on in-work benefits.

In fact, the whole financial system is being impacted. Lower, less regular pay impacts on immediate purchasing power, informal pay can take money out of the banking system altogether, and a lack of job security makes it harder to plan and save for the future.

There may be short-term benefits for some – if not all – players in the gig / zero-hours game, but the long-term consequences could be problematic for everyone.