Brexit and the Temp Economy

The attempt by the United Kingdom to leave the European Union, or “Brexit” — a portmanteau of the words “British” and exit” — has been making headlines worldwide. A referendum back in June resulted in 51.9% of U.K. citizens voting to leave the European Union.

The turnout country-wide for the referendum was 72%, meaning that a significant portion of the country was not only paying attention to the issue, but wanted to make their voices heard. Although not legally binding, the referendum set into motion the process of the U.K. leaving the European Union, through the appealing of Article 50 of the Treaty of the European Union.

Article 50 is the biggest step in any country’s withdrawal from the European Union, as it lays out the process for departure. Primarily, it ensures that the party wishing to withdraw from the union notify the European Council of said decision, and that the union negotiate with the state in question the terms of departure.

Since the U.K. is the first country in the European Union’s 58-year history to withdraw, all parties are experiencing many firsts.

Not to understate the obvious, this secession by the U.K. is a very big deal. Among the many aspects of the UK’s economy that will be affected is the area of temporary workers.

Impact on U.K. Temporary Workers

The number of temporary workers in the U.K. has grown over the past decade, as around 744,000 people in the U.K. were employed on zero-hours contracts in 2015. This figure represents 2.4% of the U.K. workforce, and is a 0.4% increase of the same group from 2014.

Zero-hours contract workers are usually women, or in young or older age groups. While the hours of a full-time job are typically 40 hours or more per week, a zero-hours contract worker will likely work a maximum of 25 hours per week.

At least a third of those 744,000 part-time workers would like more hours.

However, some part-time workers, like mothers or elderly people, don’t have much of a choice in how much of a workload they can take. Because they can’t take on full-time work, they would often be denied certain benefits and rights that are afforded to full-time employees.

The European Union helps provide these benefits to zero-hours workers, such as better pay rates, more paid vacation time, and better working conditions in general. Without the support and advocacy of the union, it’s difficult to say whether or not these assistances would still be available to temporary workers in the U.K.

The average temporary employee makes minimum wage, which is 7.20 pounds per hour if they’re 25 or older, 6.95 pounds per hour if they’re 21 to 24 years old, and 5.55 pounds per hour if they’re 18 to 20 years old. This translates to $8.82 per hour for employees 25 years and older, $8.51 per hour for 21 to 24 year olds, and $6.80 for 18 to 20 year olds, respectively.

The lowest minimum wage rate of any state in the U.S. is $7.25 per hour, although in states like New York and California, the rates climb to $9.00 per hour and $10.00 per hour. It should be noted that the cost of living in these states is much higher, but temporary workers putting in 25 hours per week in the state of California would be making $1,000 per month — that’s $12,000 per year — before taxes.

In the U.K., an 18-year-old part-time employee would only be making $680 per month — or $8,160 per year — before taxes. Therefore, a part-time employee can’t afford to take any extra time off, even in the event of an injury, death in the family or even pregnancy.

This is where the benefits afforded by the U.K.’s membership in the European Union become crucial, as it makes the living situation for a part-time worker easier.

So the obvious concern for temporary and part-time workers is that the benefits and rights they received because of the U.K.’s membership in the European Union will be repealed. As these rights exist in the U.K. largely because of the union, it seems only natural that they would be subject to termination.

Should this happen, temporary workers already struggling to make ends meet will face even greater challenges paying their bills each month.

The Temporary Worker System in the U.S.

Compare the state of the temporary worker industry in the U.K. to that of the U.S. You already know that the average minimum wage earner in the U.S. pulls in more than the average minimum wage earner in the U.K.

As per the Fair Labor Standards Act, all employees — either part-time or full-time — are required to earn at least $7.25 per hour, even if they are “tipped employees” such as waiters and waitresses making a base of $2.13 per hour.

If their total income doesn’t equal $7.25 per hour, the employer is required to make up the difference. At minimum, even a part-time worker putting in only 25 hours per week should be making $725 per month before taxes. And this figure is not dependent on the age of an employee.

In the U.S., 2.87 million people work temporary jobs — meaning 0.88% of the U.S. workforce is currently employed on a contract basis. This status would keep employers from having to hire workers in an official capacity.

It also would prevent employers from being held liable for inappropriate workplace actions or workplace injuries. In short, businesses could hire temporary workers without having to treat them like full-time employees in any way.

Until August, anyway. A case known as Browning-Ferris saw the Obama administration give a positive ruling to the National Labor Relations Board that classifies contractors as employees. Basically, this ruling redefined what it means to be an employee, according to labor laws.

Under this new ruling, contract workers are now subject to the same benefits as full-time employees, as long as they are legally employed by a company. According to the Browning-Ferris ruling, an individual is legally employed if the hiring company agrees upon the contractor’s shifts, workload or expected production level and wage.

Under its own government and authority, the U.S. has established fair labor laws for its temporary employees, conditions that don’t depend on membership to an outside organization.

Naturally, there is risk that the same government that put these laws in place can just as easily take them away, but those risks aren’t absent from a massive organization such as the European Union, either.

What Happens Next?

If the U.K. follows through with its invocation of Article 50 and leaves the European Union in two years’ time, the effects on the economy as a whole will be widespread. Although experts predict that the U.K. economy will be largely unfazed by Brexit, these figures pertain to the entire country.

There are still the temporary workers who make up 2.4% of the U.K. workforce, who, quite frankly, will likely be losing many of their benefits without the backing of the European Union.

Yes, the unemployment rate in the U.K. is low, the housing market has remained steady and the forecast for the overall economy even points upward, but the question is whether Brexit will truly be a benefit to all parties involved.

Remember that the referendum vote showed 51.9% of voters in favor of the move. The other 48.1% must’ve had strong reasons to vote against it.

Comparing the current landscape of the British economy to that of the American economy could shed some light on the potential outcome of Brexit.

Because over 744,000 people — and counting — in the U.K. are working zero-hours contracts, many believe this proves low-paid and insecure work is “ingrained” in the British economy. The steady increase in zero-hours contracts in the U.K. runs contrary to the hope of many that the U.K.’s economy would recover, therefore reducing the need for temporary contractors.

However, the trend has been moving in the opposite direction, and the consequences of Brexit could be direr than most realize. Without the benefits afforded by the European Union, nursing mothers, the elderly and those with disabilities will be dealing with much more strenuous living situations.

Naturally, outside of the jurisdiction of the European Union and free to make its own economic decisions, the U.K. could enact laws that provide more stability to temporary workers, like the ones in place in the U.S. However, it’s difficult to know if the government will be willing to hand out such benefits if the number of zero-hours contract workers continues to rise.

The U.S. provides better benefits for its part-time workers, but also sports an economy with only 0.88% of its workforce being part-timers. This same group makes up 2.4% of the U.K.’s workforce.

From 2013 to 2014, the number of temporary workers rose by 110,000, and then by another 47,000 in 2015. At that same pace, the number of temporary workers in the U.K. could rise to an astounding 822,000 by the end of 2016.

Once Brexit is complete, only time will tell whether or not the temporary worker industry will sink or swim.