Wednesday, 23 December 2015

Have yourself a casual Christmas: 21st century ‘entrepreneurs’ and bogus self-employment in the Irish construction sector

Alicja Bobek: For the majority of us across Ireland, Christmas means holiday. It is a festive season, providing us with a few days that we can spend with family and friends. Most of us will also be off work while being paid in one form or the other. At the moment, more than 90 per cent of Irish working population is classified as ‘employees’, which means that they have their holiday time guaranteed by law.
These are either free days which are covered by the salary for those with regular jobs, or extra 8 per cent payment for those on flexible and casual contracts. Yet, some of us will not be paid for the time off this Christmas as those who are self-employed only get their money when they are actually working. This type of employment has been recently on the rise, most notably amongst those who work in the construction sector. 

Work in the Irish construction sector was regarded as good employment during the boom time. This was mainly related to the high wages available across the industry. In addition to the Minimum Wage Act, construction sector was also guided by the so-called ‘Registered Employment Agreements’ (REAs). The REAs set the payments above the industrial average even for those with who were unskilled. In 2007 the average weekly wage in construction stood at the level of 743.50 Euros, compared to 687.50 across all sectors (and compared to 399.11 Euros per week in hotels in restaurants)

The temporal character of construction projects was also not a major issue: building sites could be found everywhere, and therefore it was relatively easy to find employment even it was on the fixed term basis. 

This changed dramatically during the recession. Due to the specific nature of the Irish economic bubble, construction sector experienced the most drastic fall in employment. At the peak in 2007 there were more than 270.4 thousand people working directly in this industry and they accounted for almost 13 per cent of the total employment across all sectors. By 2013 there was only 97.3 thousand people employed in construction, almost three times less than during the boom. Not only the number of people employed in the industry declined; a similar trend applied to the number of enterprises, which also now have fewer workers on average when compared to the boom. Self-employment in this sector, on the other hand, has been growing, especially amongst trade workers. With most of ‘firms’ however consisting of one person only, there is a strong notion of bogus self-employment spreading across this industry. This has further implications on various elements of job quality, including the benefits that most of us take for granted: paid holidays, job’s seeker’s benefit or pension entitlement being a few of them.

With very few projects around the country, jobs in the Irish construction sector during the recession became scarce and the competition was fierce. Main contractors were thus forced to cut their costs as much as possible. With the REAs still in place for the first few years of the crisis, this could not be done through lowering the wages. Direct employment was shifted to outsourcing most of the work and engaging self-employed workers instead. While subcontracting has always been a part of this industry, this form of employment is now widespread: in 2005 it accounted for 24 per cent of total employment in construction; by 2013 it rose to 40 per cent.

This resulted in broadening of the ‘subcontracting chains’, which are largely present on most project and which involve a solo-self-employed worker at the bottom end of the chain.  With 73 per cent of self-employed not employing anybody in their ‘firm’ in 2013 (CSO, 2015), this raises a question of the so-called ‘bogus self-employment’ and its implications for the working conditions. 

Internationally, there is evidence from other countries that self-employment has been present even throughout the boom, partially due to the seasonality and cyclical character of construction work. However, the widespread use of this form of employment becomes problematic when it is no longer voluntary. According to the trade unions’ representatives, these workers were previously employees on proper contracts and have been recently pushed out to self-employment by larger contractors. With tender-based contracts within this sector, there is no doubt that under current economic climate there would be a preference for the lowest bidder. Larger contractors, presumably, would reduce their prices by cutting the labour costs. These firms are also now bidding for smaller jobs (Tansey et al, 2013) which means more competition for medium size firms, and the possibility of what other researchers call ‘degenerative competition’ (Harvey, 2000; Whitley, 1999). As a result of the subcontracting chain, everybody involved in the different stages of this bidding needs to cut their costs.

Solo-workers at the end of the chain are the ones who are mostly affected. Those who are not employing any workers can only reduce their profit margin by lowering their own hourly rate. While it is not clear to what extent this is widespread in the Irish construction sector, there is evidence of trade workers not only accepting pay lower than the REA rates, but in fact working for less than the national minimum wage. There is not enough work available and the workers do not have enough bargaining power to enforce the proper rates. They depend on the contractors and on the short term job they tender for, and therefore they often accept any subcontracting offer from a larger and more powerful firm. This is how a trade union organiser described the situation:

There are contracts, but the reality is… where is the subbie going to enforce it? The employer has deeper pockets. The last five or ten years has been [like this]: one contractor after another, going for a lower rate. They’ve been going on the basis that ‘listen, we can go with who we want’. So the rates have been down. (…). Bare mind that the subbie is looking at the person who is going to be the person who will decide his next contract. So, you know, he is expecting 140, he hits at 80. And taking the net for 60 [Euros per day].
(Trade Union representative, 04/08/2015)

Bogus self-employment is legal in terms of employment relations and tax compliance, yet it has many characteristics associated with irregular work. It is precarious, unpredictable and short term, which is especially problematic during the times of the downturn. Jobs in construction have been scarce and they can only last for a few days. There would also be no work done on sites this Christmas. By definition, those who are employed on these sites during the year, will not receive any payment over the festive season. While the government has been enthusiastic about the ‘entrepreneurial’ spirit amongst those who are becoming self-employed, we should perhaps pause and look at the situation from a different perspective. Yes, there are those who are self-employed and happy. Nevertheless, let’s not forget about those who were forced to move away from their regular employment and maybe are not so happy anymore.

Dr Alicja Bobek is the researcher on TASC's Working Conditions in Ireland project.

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