Work in progress

Ahead of his Review of Modern Employment, Matthew Taylor explores how and why employment policy has evolved over the post-war period — and where it might go next.

By Matthew Taylor

Follow Matthew on Twitter @RSAMatthew

The Review of Modern Employment that the Prime Minister has asked me to undertake is not yet up and running. When it is I will need to be reasonably careful about what I say, partly because I won’t want to speak for the other members of the Review team (still to be appointed) until we have agreed our collective views. But before we get going, I wanted to explore a way of framing the broader question of policy in relation to work. I have had lots of interesting — and generally kind — input from people since the Review was announced and I am not yet up to speed with the policy detail so feel free to tell me whether this approach has any merit at all.

Government employment policy (and the wider ideology that has accompanied it) can be said to have had three broad phases since the Second World War.

From full employment to work first

In phase one, from the end of the war until the mid-1970s, the goal was full employment defined primarily in terms of employment of men earning a wage sufficient to support a family. The assumption of full or nearly full employment underpinned the design of national insurance, unemployment benefits and employment services based on the Beveridge model.

Phase two — ‘welfarism’ for the want of a better term — emerges from the economic crises of the 1970s. Poor economic performance, fiscal imbalances, industrial strife and the triumph of ‘new right’ economic and political ideas all went towards an effective abandonment of full employment as a goal. In the 1960s unemployment of a million was considered unacceptable for anything other than the depths of downturn. But by the late 1970s unemployment of over a million became the norm, while in the early years of the eighties it breached two million, and later in the decade, three. The response was to provide a welfare safety net to those workers — mainly older men — who had been displaced by industrial restructuring. This was principally done though a massive expansion of the numbers of people claiming Invalidity (later ‘Incapacity’) Benefit. In the decades following the early eighties the numbers on IB and related benefits more than doubled, reaching 2.7 million in the early 2000s while, even more starkly, over the same period the number on IB for more than six months quadrupled to 2.2 million.

Politicians and officials turned a blind eye to the explosion of IB and other unemployment-based benefits in the eighties and nineties. But few foresaw that IB would become the norm for claimants across swathes of the country — nor that many would stay on it until reaching pension age. This disaster — for individuals, communities and the public purse — heralded the third phase, which has been termed ‘work first’.

From the mid-1990s onwards, Governments implemented a range of active labour market policies — from Employment Zones and Pathways to Work, to Capability Assessments and the Work Programme, including a major expansion of in–work benefits. Underlying these policies was the principle that the absolute priority was for people to take a job, regardless of that job’s characteristics.

In many ways, ‘work first’ has proved successful, particularly since welfare conditionality and capability assessments have been intensified, something which has had many painful side effects. Despite the continuing impact of the credit crunch and austerity the unemployment rate has fallen from a peak of 8.5% in 2011 to 5%, and 2.75 million new jobs have been created since 2010. The numbers of people on sickness benefit (now renamed Employment and Support Allowances), although still high, has also begun to fall.

Underlying trends and new problems

There are several problems with my periodisation. The stages aren’t neat or consistent. Most obviously, throughout the last fifty years and including the ‘work first’ phase, there have been moves to support employees, ranging from the first equalities legislation in the 1970s to the minimum wage in 1998, as well as a number of steps to enhance the rights and entitlement of parents and carers.

What’s more, behind these changes of policy and opinion have been underlying trends; the most pronounced has been the increase in the labour force since 1945 by a factor of a third (almost 10 million more people) driven largely, but not exclusively, by the increase in the female employment rate. The nature of work has also changed dramatically with the shift from manufacturing to service employment and more recently the rise in self-employment. Associated with this, the size and power of the trade union movement has been in long-term decline, with total membership down from its peak of more than 13 million in the late 1970s to around 6.5 million today. The decline in the power of unions along with the impact of technological change helps to explain the apparent paradox that so many legal enhancements of employment rights and entitlements have done so little to improve the experience of those at the bottom and margins of the labour market.

However, despite these complexities and trends, the three periods illustrate how differing base assumptions and core goals affect policy decisions and social outcomes. The question now is whether some of the problems with modern work (see below), combined with changing social attitudes and political alignments might be taking us into a new period. If ‘work first’ was a response to the failings of ‘welfarism’, is it now time to address its own shortcomings?

Pay statistics would suggest so. One in five employees are low-paid on the definition used by the OECD. 5% of employees are earning the minimum wage — a figure that is rising steadily. The pay gap between the low and average paid and top managers has grown. Overall, living standards for those on average or below average incomes have remained stagnant for a decade, something exacerbated by cuts to in-work benefits.

Conditions hardly paint a more optimistic picture. More British workers work very long hours (over 48 a week) than any other European country, the number of people on temporary or zero-hours contracts has increased dramatically in the last decade and more workers — particularly the low paid — report both insecurity and anxiety at work. There has also been a major increase in self-employment, much of which is chosen and positive, but some of which is involuntary and bringing in low incomes.

And in terms of skills and productivity, while the picture is complex, overall Britain lags behind its major competitors. Skill shortages have driven the increase in immigration (an issue taken up at the Conservative Conference), even though some of it has been into low pay low skill jobs.

Fair work, wellbeing work?

These factors — and the corresponding rising public concern — may be contributing to a fourth phase of employment policy: might we call this ‘fair work’? In this phase, the goal is that maximising employment should be combined with a set of rules and expectations that ensure decency for all workers. The living wage (which of course builds on the minimum wage) is part of this reset, as are other small changes such as banning exclusivity in zero hours contracts. The Labour opposition has been arguing for stronger employment protection. But it is the fact Theresa May, a Conservative Prime Minister, has put fair work so high on her agenda that suggests we are moving into a new phase with new assumptions. The Prime Minister put disparities in pay and the lack of employee voice at the forefront of her pitch to be party leader. In office, her Government has continued in this vein by announcing less stringent conditionality procedures for people with disabilities. My Review, focussing on ‘non-standard’ employment’ is part of that shift in thinking.

To use the word ‘fair’ to describe the goal of employment policy raises many questions including, of course, ‘fair to whom?’ Is fairness about pay, about conditions, about voice, about autonomy and control? These things often go together as recent research showing low paid workers have less flexibility illustrates, but they don’t always. RSA research on self-employment shows that many who run their own business choose to sacrifice income and security for the autonomy and flexibility it provides. Most part time workers, and even most zero hours workers, say they have chosen to work this way.

Policy on employment is hard to separate from policy on welfare and industrial policy. Despite increases in the minimum wage and in tax thresholds, it is inevitable that many families will continue to rely on benefits to turn their wages into an income on which they can live. In view of our poor performance, improving employment needs to be combined with enhancing productivity as we pursue national competitiveness in a post-Brexit world.

These are the kinds of issues and implicit dilemmas the Review will need to explore, and it will be vital for the team to get out and about hearing the different perspectives and experiences of employers and employees across the country. We will, no doubt, produce recommendations for Government, but I hope our report also speaks to the things that we can do ourselves to promote fairness as workers, managers, consumers and citizens.

I hope also that we will look further ahead to a possible fifth stage in the modern story of employment; ‘wellbeing work’. Shouldn’t our ultimate aspiration be that work is part of what provides us with wellbeing in our lives, directly through meaning, fulfilment and personal growth as well as indirectly through income? Some of us are privileged enough to feel this way already (although, speaking personally, I could do with a three day weekend), but for many it must seem like a distant prospect. The drivers for an era of wellbeing work will not just be policy but deeper shifts in public expectations and social norms.

I don’t subscribe to the view that the robots will eat all the jobs; such predictions have been proven too often wrong in the past. But technology combined with wise policy and a commitment to social justice and dignity for all could and should enable a step change in the quality of our working lives.

The Review I am leading may be only a small step but as we take it we should have in mind the exciting possibilities of that longer journey.

We are the RSA. The royal society for arts, manufactures and commerce. We unite people and ideas to resolve the challenges of our time.

We are the RSA. The royal society for arts, manufactures and commerce. We unite people and ideas to resolve the challenges of our time.