The left-wing case for a flexible labour market

Labour market flexibility, if harnessed properly, can be a force for individual and collective good, says Gillian Econopouly.

The economic tumult of the last several years has profoundly shaken the UK and its workforce. The public has witnessed bailouts of major banks, the disappearance of much-loved brands from the British high street and what feels like an unending string of financial collapses and high-level resignations in major organisations, from the media to professional services to public sector bodies like the police. 

Headlines aside, on an individual level, thousands of UK workers have faced redundancy, seen household incomes squeezed by several years of pay freezes or even cuts, or simply held onto jobs they would prefer to move on from but are too nervous to leave, given the economic climate.  

It is no wonder that parties on all sides of the debate are desperately seeking growth wherever it can be found.

But however grim the latest GDP figures, this troubling state of affairs does create an opportunity – and an imperative – to look closely at what we are already good at, and develop this further to the benefit of the entire country. 

And something we should recognise more explicitly as a strength is our flexibility. 

Although as a country we feel pretty battered and bruised in economic terms, the UK’s labour market has actually fared much better than most of our European counterparts in recent years. One reason is because we have a wider variety of ways for people to access work and remain active in the labour market, rather than becoming inactive and losing their skills and confidence in the process. 

There are also more options for employers to take people on and maintain those jobs. According to the CBI, some 83 per cent of employers believe the UK’s labour market flexibility helped stem job losses in the recession, and more than a third of employers used flexible options to keep their firms going. In fact, the OECD employment outlook also showed that UK employment fell much less than expected given the drop in GDP.

So there are advantages to flexibility, but the left has often been hesitant to discuss the subject candidly due to fears of creating a race to the bottom or the erosion of hard-won workers’ rights. These are important concerns and require careful consideration. But we must engage productively with the flexibility debate so it can be properly managed to yield benefits at both the individual and macro level. 

The left’s vision of a successful labour market has traditionally focused around employment – permanent jobs and a fixed workforce. And unless it occurs inside of an employment relationship, we have shied away from talking too much about flexibility, as it has sometimes become almost synonymous with insecurity or worse, the exploitation of vulnerable workers. There is a similar habit when it comes to people working for themselves. Often we associate the words "false" or "forced" with the term "self-employment", thus casting the entire concept into a negative light. 

What has been missing from the debate until now is a willingness to take apart the wider concept of flexibility: to consider its component parts and understand which of those offers the best combination of benefits for the individual and wider economic growth. We need a more nuanced understanding of what labour market flexibility can and does mean.

There is clearly a world of difference between the types of flexibility at different ends of the labour market. It makes little sense to compartmentalise highly-skilled freelancers who actively choose self-employment with low-skilled workers who are, for example, instructed to set up as "self-employed" yet do the same job as their full-time, employed and unionised colleagues. The two share only the same label – not the same labour market profile or characteristics. 

There is no room for exploitation of individuals in a modern, well-functioning UK labour market, through forced self-employment or any other means. And whilst there will unfortunately always be some companies who attempt to take advantage of the system, the answer to this is robust enforcement, not doing away with other types of flexibility. 

Labour market flexibility, if harnessed properly, can be a force for individual and collective good. We must use it to help those who want a permanent job to secure one; and understand that particularly among higher-skilled workers, self-employment can be a positive choice which helps businesses to grow. 

And we must recognise that whilst many do, it’s no longer every worker that wants a full-time, permanent job: the labour market has moved on, and so must we. 

This piece was originally published in the Fabians pamphlet New Forms of Work, available today.

Self-empolyment is more than just blogging in your pants and eating lots of biscuits. Photograph: Getty Images

Gillian Econopouly is the former Head of Policy at the Recruitment & Employment Confederation.

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Is anyone prepared to solve the NHS funding crisis?

As long as the political taboo on raising taxes endures, the service will be in financial peril. 

It has long been clear that the NHS is in financial ill-health. But today's figures, conveniently delayed until after the Conservative conference, are still stunningly bad. The service ran a deficit of £930m between April and June (greater than the £820m recorded for the whole of the 2014/15 financial year) and is on course for a shortfall of at least £2bn this year - its worst position for a generation. 

Though often described as having been shielded from austerity, owing to its ring-fenced budget, the NHS is enduring the toughest spending settlement in its history. Since 1950, health spending has grown at an average annual rate of 4 per cent, but over the last parliament it rose by just 0.5 per cent. An ageing population, rising treatment costs and the social care crisis all mean that the NHS has to run merely to stand still. The Tories have pledged to provide £10bn more for the service but this still leaves £20bn of efficiency savings required. 

Speculation is now turning to whether George Osborne will provide an emergency injection of funds in the Autumn Statement on 25 November. But the long-term question is whether anyone is prepared to offer a sustainable solution to the crisis. Health experts argue that only a rise in general taxation (income tax, VAT, national insurance), patient charges or a hypothecated "health tax" will secure the future of a universal, high-quality service. But the political taboo against increasing taxes on all but the richest means no politician has ventured into this territory. Shadow health secretary Heidi Alexander has today called for the government to "find money urgently to get through the coming winter months". But the bigger question is whether, under Jeremy Corbyn, Labour is prepared to go beyond sticking-plaster solutions. 

George Eaton is political editor of the New Statesman.