- Applied Institute for Research in Economics
The government’s independent review on modern working practices in the UK contains some important messages. Put together by Matthew Taylor, head of the RSA think tank and former policy chief to Tony Blair, the review highlights the fact that job creation alone is not sufficient to create a “thriving economy and fair society”. Rather, progress is also needed to create “better jobs”. The focus on the quality of work underscores a broader goal to promote “good quality work for all”.
But the review stops short of recommending major changes in employment regulation and adopts an approach that is ostensibly business-friendly. Beyond the high principles, there is a failure to tackle the underlying causes and drivers of bad work. The fact that the government has welcomed the review speaks to its essential conservatism.
Paying the price for higher employment
The years since the 2007-08 crisis have seen employment rise to record levels in the UK. This situation would imply a favourable environment for workers to improve their pay and their terms and conditions of work. Higher employment, in theory, means that workers have stronger bargaining power to gain concessions from employers. Yet, in practice, the opposite has occurred. Workers have had to forgo both higher pay and job security to gain access to and maintain employment.
The UK is the only country in the EU where employment has risen at the same time as real pay has fallen. The flexible labour market has delivered to employers the labour they require at lower rates of real pay. For workers, it has delivered work that is barely able to cover the cost of living.
The review recognises how the country’s move to full employment has been at the expense of more low quality jobs. Workers have been required to become self-employed and to take jobs in the so-called “gig economy” to make ends meet. These forms of employment have not only yielded poor financial outcomes for workers; they have also meant greater insecurity, exploitation and control by bosses.
“Bad work” (insecure, exploitative and controlling), the review says, has wider economic and social impacts. It erodes the health and well-being of workers. It also holds back productivity – the amount workers produce per hour – and makes the economy in general less productive. Resolving bad work is therefore seen as key to overcoming the UK’s productivity deficit and as a vital ingredient in building a more cohesive and participatory society.
Beyond full employment, in short, the goal should be to maximise “good work”.
The review recommends changes to the status and entitlement of workers in the gig economy. There is a new recommended category of “dependent contractor”, which sits somewhere between full time employed and self employed status, and is designed to prevent bogus forms of self-employment.
There are also recommendations to make it easier for gig workers to gain benefits such as sick and holiday pay. Plus, it is recommended that agency workers and those on zero hours contracts gain the “right to request” a more formal working relationship after a 12-month period.
To many, the recommendations will appear too timid. Why not outlaw all zero hours contracts, for example? Others may argue that the recommendations are simply harmonising existing workers’ rights – they are bringing gig work up to what is a minimum standard of labour protection and are downplaying issues of the non-enforcement of existing legislation.
Unions have declared their disappointment that the report is no game-changer. A sentiment that is likely to be shared by many millions of UK workers who will continue to face real hardships at work.
The review resists imposing greater costs on employers. It refers to the fact that “the ‘employment wedge’ (the additional, largely non-wage, costs associated with taking someone on as an employee) is already high and we should avoid increasing it further”. The stress is on exhorting businesses to change – a policy stance that has failed over many decades to deliver a better deal for workers at work.
There is also a scapegoating of the low paid for working cash-in-hand, but no condemnation of the bosses of big corporations for not paying tax. This unbalanced commentary suggests a review that favours businesses more than workers.
Theresa May declared that the review is consistent with her commitment to “make Britain a country that works not for a privileged few, but for everyone”. Yet, her government lacks the political will to tackle the injustices at work and beyond. The need to protect and promote workers’ rights goes against the grain of the market-based approach that May’s government avows.
“‘The British way’ works and we don’t need to overhaul the system”, proclaims the review. Yet, years of “the British way” have brought us a low wage economy wherein employers lack the incentives to invest in labour and workers lack the power to push for progressive reform. The system, in truth, is broken and needs overhauling if Britain is ever to achieve higher quality work for all.
The review, in policy terms, looks destined to change very little. Indeed, it can be seen to reinforce the view that vested interests still rule in UK workplaces, frustrating progress towards fairness and dignity at work.
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The views expressed in this article are those of the author and may not reflect the views of Leeds University Business School or the University of Leeds.