Patrolling the borders of employment

In “The Nature of the Firm” – a 1937 paper which explored why we need companies – the economist Ronald Coase concluded that, rather than repeatedly going out into the open market to hire labour, it was “more efficient for entrepreneurs to hire employees who agreed simply to follow orders in exchange for pay”. A lot has changed since then, says Sarah O’connor: online freelance marketplaces have made it easy and cheap for companies “to chop up jobs into tasks and auction them off”. That hasn’t “eliminated the need for companies” (it still makes sense to keep people in-house, in “evolving roles”, or because their talents are “scarce”), but it has shifted “the borderline between a central core of employees and a periphery of not-quite-employees” – with “troubling implications” for inequality of income and security. Companies are already “straining at the boundary” of employment law; “some are riding roughshod” over it. “With technology and tax policy pushing relentlessly towards a bigger periphery and a smaller core, the Government will need to beef up employment law enforcement dramatically if it wants to hold the line.”