This is part of a series of posts on UK policy. Find out more here.
Economy, Business & Trade Consultation document available at Scribd.
Statistics on the UK Economy available from the FT (free account required).
How has modern employment changed in recent years?
Conservative led governments since 2010 have faced a problem; they’ve been trying to reduce government spending against a backdrop of low private sector investment and aggregate demand. If they reduced spending they’d create unemployment, which they’d have to pay for through the social security system.
The Conservatives solved this by scaling back eligibility for social security, making it more difficult and slower to access, and engaging in a public relations campaign to stigmatise claimants. This created a significant push factor upon the unemployed. They needed to get a job. Any job.
As a result, the UK now boasts one of the highest employment rates not only in our recent history, but worldwide, at 75.3%. Unemployment is one of the greatest ills of a depression, so this is not to be dismissed out of hand. The downsides, however, are underemployment – you only need to have worked one hour in the last week to be counted as ’employed’, shockingly low productivity and stagnant or falling real wages.
Furthermore, it’s inequitable. As the experienced unemployed pushed the wave of 2008-2015 graduates out of good starting jobs, so then those graduates with family contacts or family wealth secured internships. They could prove themselves to now risk-averse businesses in a risk-free (wage-free, responsibility-free) way and secure a socially desirable job that way. Those without had to accept the underutilisation of their skills.
Combined with house prices that just keep rising, and interest on student debt now charged at over 6% (yes 6.1% when the average fixed rate mortgage is 1.5%) this chronic underutilisation is storing up significant intergenerational inequality. Former Chancellor George Osborne loved to remind us that he was reigning in our belts so as not to saddle the next generation with debt. Instead, he saddled us something much worse.
I’ve a new job that I’ll be starting soon. I have a degree but it’s not a degree level role, so it’s highly likely that by getting this job, I’ve pushed a skilled and qualified, but not degree qualified, applicant into an even lower skilled job. They probably won’t be paid as much or receive so much training and professional development in that job, creating a permanent and lasting disadvantage to them, and the British economy’s hopes of becoming more productive. The destructive cycle continues.
Following the Financial Crisis, there was hope that the short term focused, share-price maximising investment practices that got us there might see some reform, but this has not happened. Listed companies are still much more likely to use profits to pay out dividends, institute stock buybacks or just sit on cash offshore where they can avoid paying tax than invest in their business and their workforce. This is driven also by the fragmented nature of modern companies. They can’t get enough horizontal integration – buying up competitors to create mammoth multinationals – but vertical integration has been almost completely replaced with outsourcing, franchising and self-employment job contracts (delivery people, taxi drivers etc…).
As a result, the privileged elite of R&D, management and ‘talent’ have seen significant improvements to their remuneration and working environment. Initiatives like Deliberately Developmental Organisations show great promise. Meanwhile the ‘average worker’ has gained only the flexibility to quit working for one employer who doesn’t pay him enough to live, and work instead for a boss who pays him slightly more in exchange for mandatory weekend shifts and no holiday or sick pay.
I’m at the end and I’ve not even mentioned the effect of the National Living Wage. My brief conclusion is that it was a great policy, our high level of employment proves that minimum wages are fine, and that it could (and should!) be higher.