The latest batch of labour market statistics appear to offer positive news. Unemployment has fallen, the claimant count is down and the gap between earnings and prices has narrowed. But we are not out of the woods yet – far from it. Dig a bit deeper and the statistics show that the Britain’s labour market has been characterised by profound structural problems for some time, all of which have worsened as a result of the global crisis. The UK is a low-wage, low-skills, long-hours economy, with far too many insecure, poor-quality jobs. For the majority of people, fair pay, flexible working patterns and genuine work-life balance remain an illusion.
While the profitability of UK companies and executive pay has recovered from the recession, average wages still lag behind the cost of living and are around 6 per cent below what they were in 2007. One in five employees now earn less than the Living Wage (£7.65 outside of London); youth unemployment remains stubbornly high; underemployment is a persistent problem, with 1.4m part-time workers saying that they would like to work full time but cannot find a job. Recent falls in national unemployment disguise stark regional differences, with almost half of all the net employment growth taking place in London and the South East.
These short-term problems have compounded the difficulties that predate the recession. Wages and salaries for most people have been stagnant for nearly a decade, even while top pay has continued to rise. Despite the National Minimum Wage (and the Living Wage campaign) the numbers of people experiencing in-work poverty has increased. Recent employee surveys also show that British workers are feeling more disengaged, less secure and more pressured at work than at any time since the 1990s. The quantity of employment may have increased during the boom but the quality of employment certainly didn’t.
Work (or the lack of it) can have a big impact on health, life expectancy and the wherewithal to fully participate in society. The way in which low pay impacts on inequalities, family relationships, problem debt and social mobility have been extensively documented. What is less well known is that the quality and nature of today’s jobs present challenges for those on decent earnings too. Work can still be pretty awful even if you are paid decently and have a permanent contract. The world of work has changed dramatically since the days of typing pools and assembly lines employing thousands. The decline of skilled and unskilled male manual work, more managers and professionals, and the rise in the number of women at work; all have transformed the labour market. Many people have benefited from these changes, with more satisfying jobs and career prospects. But at the same time there has been an expansion of low-quality, low-paid, insecure employment (especially for women). We have also seen an increase in low wage self-employment as those made redundant make a virtue of necessity and try working for themselves. These trends are often said to be due to the rapid growth of small businesses which need to be free of employment regulations, yet despite the over-enthusiastic rhetoric about the importance of small firms, three in five employees continues to work for an organisation with more than 250 workers.
There has been greater employment flexibility, for both employers and employees, with a wider range of working patterns enabling people to balance work and their family responsibilities. But at the same time there has been a decline in the level of control people experience at work, the extent of their ability to participate (both individually and collectively) in decision making processes and a consequent decline in the level of trust in senior managers. For the majority working life seems to have got tougher. People report that they are working harder and are subject to more intrusive performance management systems. Even though skill levels have been rising many employees report that they rarely use all their skills in the workplace. One third of the workforce report a recent experience of unfair treatment. Barely a third of employees are committed to the success of their employer’s business.
In most workplaces, employees have no mechanism to influence (or even express views) about the critical decisions affecting working life, which probably explains why we now have the second lowest level of employee participation in the whole of the EU (only Lithuania is worse). This woeful performance in employee “engagement” has been exacerbated by the decline in trade union membership – which has nearly halved since the late 1970s (and even more so in the private sector).
Union decline, while welcomed by many employers, is at least partially responsible for the growth of income inequality. Productivity growth drives wage growth and improvements in living standards; there can be no guarantee that employees will receive their fair share if there is a dramatic difference in bargaining power between workers and their employer. Recent experience proves that all the gains have gone to those at the top of the income scale. There is also evidence to show that giving workers voice boosts productivity and trust in the workplace. A sustainable economy is an economy that guarantees a degree of workplace democracy and a fair distribution of rewards. Rather than stand aside, should the government help extend the coverage of collective agreements and support fair-wages policies or new forms of worker voice, such as works councils?
Some of the country’s employment problems are rooted in the structural weakness of UK PLC: our poor labour productivity record (UK output per worker is a long way behind the US and most of the EU), ever-worsening regional divides, a culture of short-termism, and weak corporate governance. Others are a symptom of labour market deregulation and the declining bargaining power of workers and clout of shareholders. What is important, as we emerge from the depths of recession, is to understand where the world of work is heading and how we can make tomorrow’s workplace better than today’s.
Over the coming months, I will be leading an independent inquiry for the Smith Institute into working life in Britain. We will be looking at all these issues and taking evidence from workplaces and boardrooms from across the country. We aim to challenge government, employers and unions, to show how they can work in social partnership to create more productive, more inclusive, more secure, and fairer workplaces.
We are now at a crossroads. We can continue with a race to the bottom, reducing labour costs, denying employees a voice and ignoring the rising inequality and insecurity at work. Or we can try and forge a new deal which places a premium on co-operation for excellence, fair pay and higher standards of employment where the best employers are copied by the rest.
Ed Sweeney is the former chair of Acas and is leading the ‘Making Work Better’ Inquiry for The Smith Institute