The evolution of false self-employment in the British construction industry: a neo-Polanyian account of labour market formation

Governments in Europe and elsewhere have renewed their attention to the fiscal regulation of their economies in order to close tax loopholes and boost revenues in response to the financial crisis. The article uses a neo-Polanyian ‘instituted economic process’ approach to explore and explain the uniquely high level of bogus self-employment in the UK construction industry, facilitated by confused law and stimulated by a bespoke construction fiscal regime, resulting in endemic tax evasion. It examines how the co-evolution of employment status law and a sector-specific fiscal regime maps tightly onto the emergence of mass self-employment, as evidenced by comparative labour market and sectoral statistics. Seeing competition as an instituted process within these distinctive market arrangements, it identifies a form of ‘degenerative competition’, driving out both genuine direct-employment and self-employment, and driving in bogus self-employment, with its attendant substantial fiscal losses, failed skill reproduction and poor productivity.