How can we create a fit-for-purpose labour market?

Author(s): Rebecca Florisson; Ross Mudie; Niamh O Regan; Professor Len Shackleton

May 25, 2022

Government must do more to tackle insecure work in the UK

By Rebecca Florisson (The Work Foundation)

The recent Queen’s speech indicated that the much-anticipated Employment Bill has again been delayed. This Bill could have played an important role in addressing severely insecure work.

Proposals to improve job quality and security as set out in the 2017 Taylor Review have been only partially addressed, with fundamental questions around employment status and labour market enforcement still unresolved.

Recent analysis by the Work Foundation shows that insecure workers were at higher risk during the pandemic of losing their jobs, hours and wages and were ten times more likely than securely employed workers to lack access to sick pay. This meant the crisis had a differential impact for disabled workers, women and people from ethnic minority backgrounds, who are more likely to be in insecure work.

The crisis also highlighted the challenges faced by some self-employed workers, including those in the gig economy, with many falling through gaps in essential support.

With inflation at 9%, these insecure workers will be at the sharp end of the cost of living crisis. Government should act now to provide those in greatest need, through uprating Universal Credit and other benefits.

In the longer term, Government should remain committed to setting up the Single Enforcement Body, taking a more comprehensive and coordinated approach to enforcing worker rights. This should be coupled with a rethink around not only how employment status is determined, but also around how it defines access to important rights and protections.

Government cannot hope to deliver on its ambition to Level Up the country without improving rights, protections and employment standards for all workers.

Expand flexible working to transform Britain into a true 21st century economy

By Ross Mudie (Centre for Progressive Policy)

While the government continues to idle away hours debating whether or not its piecemeal ideas to tackle near double-digit inflation are “un-Conservative” or not, ministers have used their time on the airwaves to hammer home their vision of a “high-wage, high-skill economy”, as the long-term route out of this crisis. But actions speak louder than words. The omission of the Employment Bill from the Queen’s Speech has delayed indefinitely an opportunity to embed  flexibility into our working culture, and the hounding of civil servants by Jacob Rees-Mogg is completely at odds with the high-wage, high-skill vision.

Recent analysis by the Centre for Progressive Policy shows how expanding flexible working practices could unlock additional earnings for those whose access to the labour marketed is hindered by  caring responsibilities. CPP found that expanding flexible working could support additional annual earnings of around £3000 for those caring for both children and elderly relatives. It could also help to reduce gender disparities, boosting the earnings of women by around £24.8bn annually and providing an additional £60bn annual boost to the British economy through wider productivity gains.

Given the immense popularity, and economic and social benefits of flexible working, it is striking that the government has taken such a firm stance against something with such potential to support the “high-wage, high-skill economy” vision that ministers are longing for, that could also address some of the inequalities forming the government’s Levelling Up Agenda. As the cost of our daily essentials spirals, we need government policy to focus on supporting people to access good jobs and work more of the hours that they would like to boost their incomes.

Good career guidance is a fundamental part of creating a fit for purpose labour market

By Niamh O Regan (Social Market Foundation)

Career guidance provides a crucial link between education, training and employment, and as such good career guidance is fundamental part of creating a fit for purpose labour market.

In the context of schools, career guidance should provide children and teenagers with the opportunity to explore all the avenues of education and training,  and experience areas of work they may not have previously considered. As the world of work continues to evolve, and the demand for green skills rises, those who have been in the labour market for some time may need to retrain or upskill, and to that end, adults can also benefit from guidance. Irrespective of age guidance can help people to determine which programmes best suit their needs. It helps them to plan their education and training to line up with what is needed in the labour market now and in future.

To get the benefits of career guidance however, it needs greater investment. Personalised guidance that is individually tailored is really important, but it does have a financial cost and requires qualified careers professionals, who are familiar with changing labour markets and the plethora of education and training options. One would hope that investing in guidance services to improve labour market outcomes would be a cost worth bearing for the long term benefit. In recognizing that people now may have multiple careers over their lifetime, people also need to know that they can actually access guidance; taking the time and effort to promote the benefit of engaging with careers services at any age is essential.

The ability to adjust to change is crucial to the health of the labour market

By Professor Len Shackleton (Institute of Economic Affairs)

A fit-for-purpose labour market makes it possible for employers to find workers they need for tasks they have in hand, at a wage which enables the business to make a reasonable profit. Workers need to be able to find jobs matching their skills and aspirations, fitting in with family commitments and lifestyle, and giving them a satisfactory income.

As the needs of employers and workers alter constantly, the ability to adjust to change and offer a continually-expanding menu of alternatives is crucial to the health of the labour market and the growth of productivity.

Our complex and dynamic decentralised labour market probably achieves this as well as any conceivable system of employment ‘planning’. Compared with some continental European economies, our jobs market works pretty darned well. We have lower unemployment – particularly among the young – than Spain or Italy or Greece. Unemployment duration is shorter, and we have few of the ‘temporary’ jobs which are the lot of marginalised workers in these countries.

We could improve on the current situation. Not by more government, but by less. We need lower employment taxes, fewer restrictions on contracts firms and individuals can form, less occupational regulation (currently requiring government licences for one in five jobs), limitations on privileges accorded to obstructive trade unions, a simpler minimum wage system, scrapping of the Apprenticeship Levy (which distorts skill training and privileges larger firms), and radical recasting of the employment tribunal system.

Most politicians think that more restrictions and mandates improve matters. But they rarely do.