Thinking big
Too many people are trapped in low pay jobs, without a way of shaping their own future. A people-focused industrial strategy should seek to make good work a reality for all, writes Joe Dromey.
There are more people in work today than ever before. The employment rate stands at a record high; unemployment is at a historic low.
But all is not well. Recent years have seen a growing and welcome debate around the quality of work. This is partly due to the decline in concerns around the quantity of work. But it relates to very real problems in our economy and in the labour market too.
In exploring the big challenges that a people-focused industrial strategy must address, it is worth thinking about what a decent job should offer.
First, a job should provide an income that is enough not only to live on, but that affords security, comfort and a decent life.
But for millions of people, work is no longer a route out of poverty. We have seen the worst period of earnings growth since the Napoleonic Wars, with median earnings yet to recover to the level reached a decade ago. The national living wage has increased wage growth for those at the very bottom, but poverty pay remains a real challenge. Some 6 million employees – nearly one in four – earn below the real living wage.
Due to stagnant wages, high housing costs and cuts to social security, the number of people in work and in poverty has increased steadily over the last decade. Nearly three million children living in poverty are in a household where someone is in work – twice the level that live in work-less households.
The stagnation in pay is related to an unprecedented stagnation in productivity. Over the last decade, the amount we produce per hour has increased by just 0.5 per cent per year. With productivity flatlining, we are falling behind other countries; the average worker in France and Germany produces more in four days than the average worker in the UK does in five.
In addition to how much wealth we collectively produce, how this is shared matters too. Compared to the decades before 1980, we have seen two worrying trends in the UK and many other advanced economies: a decline in the labour share of GDP and a dramatic rise in inequality. Put simply, less of the wealth that we all generate is going to working people, and that wealth is increasingly unevenly distributed. Our excessive levels of inequality are not just an affront to social justice; they matter for the economy and for society. As the work of Richard Wilkinson and Kate Pickett has shown, societies with higher levels of inequality tend to suffer more from a broad range of social ills, from crime to health and mental health problems. And excessive inequality can act as a brake on growth too.
It is no coincidence that the dramatic rise in inequality has coincided with the decline of organised labour. In the last four decades, we have seen the proportion of workers who are in a trade union fall by half, and the proportion covered by collective bargaining fall by two thirds. And as the power of trade unions has grown weaker, so the labour share has fallen and inequality risen.
Beyond the distributional inequalities, there remain significant inequalities between groups. The gender pay gap remains stubbornly high, and women account for nearly two in three of those on low pay. There are big pay gaps by ethnicity and disability too, and while the employment rate is at a record high, there is a persistent disability employment gap.
A people-focused industrial strategy should seek to tackle these inequalities and drive up wages for low and middle-earners, so that all workers can have a decent standard of living. Increasing the minimum wage would help, and there is a welcome political consensus here.
But tackling in-work poverty pay will require more than increasing the wage floor. In contrast to the narrow focus of the current government’s industrial strategy on high-tech, export-focused sectors, a people-focused industrial strategy should focus on boosting productivity across the low-productivity, low-pay sectors that make up the ‘foundational economy’. And while raising the wage floor would help, we need to think about how people get off it altogether. Strengthening labour power would help here, so a people-focused industrial strategy should support a renaissance of collective bargaining. But a higher wage floor would do little for those working parents who can only work part-time and who face high living costs. So we need to expand access to affordable and flexible childcare, and we must ensure that the welfare system provides the support that lower income workers need so that they can achieve a decent standard of living and ensure their children grow up free from the scourge of poverty.
Work should give you the opportunity to progress and to achieve your potential. Yet too many workers are trapped in work that offers limited opportunities for progression.
Employer investment in vocational training in the UK is half the European average, and employers are spending £5bn less in real terms than they were 10 years ago. These top-level figures are worrying, but how this investment is distributed is deeply concerning too. Employers are much more likely to invest in training their already highly-skilled and highly-qualified employees than they are to upskill their lower-skilled and lower-paid workers. Beyond this inadequate and uneven private investment, public funding is also insufficient; the adult skills budget at the end of this decade will be barely half the size it was at the start. Recent Learning and Work Institute research showed that if this pattern of low private and low public investment continues, the UK will slip behind other advanced economies in terms of our skills base, with both productivity and social mobility suffering as a result.
Lifelong learning has always mattered. It offers people who didn’t achieve their potential at school a second chance, and it offers people the opportunity to re-invent themselves and to follow their dreams. That is why Jennie Lee and Harold Wilson created the Open University 50 years ago. Today, life-long learning is more important than ever.
With lengthening working lives, and rapid technological and economic change, a people-focused industrial strategy should ensure that all workers have the skills they need to progress and to adapt in a fast-changing world of work. This means not just boosting investment by both employers and the state in training, but addressing the inequality of access too.
In addition to tackling the barrier of direct costs such as course fees, we need a comprehensive strategy for overcoming other barriers. We should think about the role of trusted intermediaries in encouraging and empowering people to participate in learning – including a greater role for union learning reps. We should consider some form of earned entitlement to ‘learner leave’ for workers who can’t afford time off to train. And we should look at the demand side too – stimulating employer demand for and investment in training.
Work should give you a voice and a sense of control. Employee voice is fundamental to good work, whether that be having a say over how you do your work or about the big decisions that affect your organisation. Yet only one in three workers in the UK feel able to influence the decisions at work. This is in part due to the imbalance of power we see in today’s workplace; the same imbalance of power which has contributed to the steep rise in inequality. In this context – with so many feeling disempowered and that they were not benefiting from economic growth – it is no surprise that the siren call of ‘vote leave, take control’ was so resonant for so many.
A people-focused industrial strategy should seek to redress the balance of power at work, ensuring that all workers have a say in the decisions that affect them. A resurgence in union membership and collective bargaining would help here, so we should consider how unions can be supported to recruit, and we should engage unions as social partners in running the economy. We need to look at how our businesses are run too. This should include meaningful reform of corporate governance so that workers are represented on boards. And we should explore how we can better promote employee ownership, so that workers have a stake in the success of their employer.
Finally, a people-focused industrial strategy must face up to the greatest challenge we face – the climate crisis. In the last few months, a remarkable coalition of the direct action of Extinction Rebellion, the generational challenge posed by Greta Thunberg and the young climate strikers, and the quiet authority of David Attenborough have succeeded in finally giving this existential threat that we face the oxygen it deserves. The UK is the first country in the world to declare a climate emergency, but with time rapidly running out, we need to turn this commitment into action.
We need a radical transformation of our economy, with a rapid shift away from carbon-intensive industries, and towards green energy and green technology. But if this is to be socially just and politically sustainable, it must not come at the expense of workers in carbon-intensive sectors. This means we need a just transition, with a drive to create good quality green jobs, and to support the workers who are affected to adapt.
At its best, work can provide not just a decent and secure income but meaning and purpose. Good work can provide the foundations for strong communities, a good life and a good society. But for far too many people, the reality of work is a long way from this. Instead of simply concentrating on the headline employment rate, and on the high-tech sectors which are the focus of the current industrial strategy, a people-focused industrial strategy should be more ambitious: it should seek to make good work a reality for all. That means decent pay, a voice at work, the opportunity to achieve your potential, and an economy that stays within the environmental limits of our planet.