20
Examination of witnesses
Mike Clancy and Kate Bell.
Q25 The Chair: Thank you both very much for coming. I am sorry that we have detained you somewhat. Welcome to this hearing of the Economic Affairs Committee, where we are trying to answer the question, “Where have all the workers gone?” We have a whole series of questions to run through. You are quite a long way away. I am sorry, but there is not much I can do about that. Maybe you could start by introducing yourselves.
Kate Bell: Thanks so much for having us here. I am head of the rights, international, social and economics department at the Trades Union Congress.
Mike Clancy: Good afternoon. I am the general secretary of the Prospect trade union.
The Chair: Thank you both. We are meeting on a day when this topic is in the news, given today’s release from the ONS. I am going to start by asking the big picture question, if I may put it like that. From each of your perspectives, could you summarise why you and your organisations think people are leaving the workforce?
Kate Bell: There is a range of factors. I have categorised them into three areas. We know this is concentrated in older workers. You start off with a set of blocks. We have seen an increase in health issues and the inability of the health service to deal with them. Long waiting lists at hospitals, unmet care needs and huge pressures on the NHS mean that when health issues arise—and we have seen health issues increase due in particular to long Covid—they are unable to be resolved rapidly.
You then have a set of push factors, which mean that some people may be leaving the labour market who might not otherwise have done so. A lack of decent terms and conditions is one of those. We have had significantly below inflation pay rises. Today's figures show one of the largest falls in real pay on record. Other factors such as work intensification may also be playing a part. The latest national survey data is from 2017, but you saw a big jump in the number of people who say they have to work at very high speed three-quarters of the time. That increase in work intensification may also be one of the push factors.
Then you do not have the pull factors. If we had organised this in a rational way, you would think we would have had a long-term workforce strategy. Employers would have been planning their long-term strategy for engaging people in the workforce and changing their levels of skills, such as investing in workforce training and skills, running mid-life career reviews and ensuring they have the right pay and conditions to keep people in the workforce.
Over quite a long time—we can discuss how—we have had a lack of that workforce planning, which might have put some of those pull factors for staying in the labour market in place.
Mike Clancy: My evidence will be based upon the nature of the members that we represent. I will just say a little bit about that to help you situate Prospect as a union. We have 153,000 members across the public and private sector. Most of our members are in the private sector, but we have membership in central government, the BBC, energy, defence and the whole creative sector. When you look at the end credits of your favourite film and TV programmes, we represent all the crew.
I emphasise the broad nature of our membership, because one thing that unifies them is that they all know a thing or two. Whether you are an air traffic controller, a sound engineer or a government scientist, you are required to go through a significant degree of training before you can actually undertake your occupation.
As for our experience of this reduction in the size of the workforce, there are two or three factors that I would emphasise. The first is a long-term structural failure to adequately value in our economy what I might describe as STEM skills, broader engineering and similar occupations. That is a significantly ageing workforce, where there is a struggle or a war for talent. If you are numerate and adaptable, there are a number of better-paid occupations you can go into. As the workforce has continued to age in engineering, energy and defence, replenishment has been a challenge.
The second thing I would highlight at this stage is the impact of the Covid pandemic. I think you want to explore this further in questioning, but there are about 700,000 fewer people in self-employment. We represent the freelance group, which are crucial to the huge success of film and TV as an industry, in which the UK is a world leader.
Self-employed people generally, and our members in particular in film and TV, were deeply affected by the degree of cover provided by the Government through the self-employment scheme. It exposed another labour market problem, which is the lack of definition and clarity of self-employment and, indeed, the absence of government data on which you could have a proper conversation. That is recovering somewhat now, but around 3 million people were excluded from the Government’s self-employed scheme.
Finally, there is an impact from Brexit. A lot of the commentary on the shrinking workforce relates to less differentiated skills in the labour market, but I can tell you that across our membership groups we are seeing the impact of fewer people being available from the European Union. It is not easy to talk about that fact, because it has been such a friction-based debate for several years, but there are definitely contributions now coming through.
In a way, Covid delayed some of the issues. We were diverted because we had to deal with other labour market matters, but there is definitely an impact. We can see that in our heritage members, where we represent curatorial staff, and we can see it across parts of the energy sector and more generally.
Lord Livingston of Parkhead: Kate, you gave three reasons. The third was the lack of long‑term workforce planning. I do not disagree with you that it exists, but I have two questions. First, why has that had such a sudden effect? We had reduced inactivity for a long time. Why did it suddenly turn on a dime?
Secondly, as the TUC looks at this on a cross-sector basis, if there were a lack of long‑term workforce planning, you would see certain sectors having too many workers and certain sectors not having enough. This is a discussion we were having before. Are there any sectors where you are saying, “Actually, we have an excess of workers”?
Kate Bell: To take your first question first, we had a significant labour market shock in the form of Covid. We had a huge rise in the number of people leaving the labour market during that period. The number of redundancies during that period outweighs the number of vacancies we have had. You then have a question about the reallocation of labour. That is where the long-term planning kicks in.
Lord Livingston of Parkhead: It is creating friction.
Kate Bell: The hospitality industry, for example, let an enormous number of people go. When people were thinking, “Will I go back and work in hospitality?” the answer was often, “No, I won’t, because I can see that the terms and conditions are terrible here”. A quarter of the workforce are on zero-hours contracts. I cannot remember the proportion below the national living wage, but it is huge. The shock exposed a long-term problem that has happened over a significant period.
We are not currently seeing industries that are not experiencing labour shortages or that have excess labour. There are long-term shifts in the labour market and the types of skills, but we are not seeing any of those. We would say we need to be doing much more long-term workforce planning to deal with the need for a net-zero carbon future and a more technologically driven economy.
Lord Livingston of Parkhead: I agree with all of that.
Kate Bell: We are not now seeing overallocation of the workforce in some areas and underallocation in others.
The Chair: To what extent is it search misallocation and friction, to use Lord Livingston’s point, or long‑term sickness, if you had to choose one or the other? Maybe both of you could answer very quickly, because we are going to come on to long‑term sickness in a moment. Could you just give us your views on that broad question?
Kate Bell: It is not just the long‑term sickness; it is the inability to deal with long‑term sickness. You stay sicker for longer.
The Chair: That is very good. We are going to come back to this topic.
Mike Clancy: If your point, Chair, is about friction, we have had a huge issue with the aviation industry, which we have all been aware of since the turn of the year. It is a good illustration. Even if there was excess labour elsewhere, the jobs in that sector are not attractive. The industry had to downsize. It was in a potentially existential crisis in 2020, but there were signs that the public were returning to flying even in the summer of 2020, when we could first do that with some degree of confidence.
What has been laid bare is that, in a number of sectors, the underlying attractiveness of the jobs means that people are not prepared to go back to them, having left them, and there are easier alternatives elsewhere. In aviation, there is shift work; you are dealing with the public sometimes not at their best; you have to be on board for extended periods because of the security considerations; and there are a number of jobs that are tricky, interlocked and demanding.
When you put all that together, they have to ramp up numbers, but they could not do it quickly because the jobs were not attractive enough. That is a form of misallocation, but it is down to the fundamentals of what the employment model was before Covid. We were probably a bit optimistic that they would come back post Covid.
Q26 Viscount Chandos: In analysing the state of play, you have already flagged things that should be addressed. If you had an action plan to encourage retention, what would be its key points? How would you portray the sentiment in the workforce? How has that changed over the last three or five years?
Kate Bell: The best way to retain your workforce is to pay them decently and to give them decent terms and conditions. We would think that is true generally, but when you look at the recent evidence from the ONS, for example, on older workers who have left the labour market, which I am sure the committee has had a chance to see, the two key things that people say would tempt them back to the labour market or make them stay there are pay and flexible working rights. That bears out the truth of that statement right now.
We have been encouraging this longer-term approach to planning. We have talked about every worker having the right to a mid-life career review. That would be backed up by another policy we have been putting forward for a long time of an individual learning account. That would give you a clear entitlement to a set of skills that you could access, in order for you to think, “This is where I want my career to go in the next 10 years”. Let us say you had that mid-life career review when you were 50. You could then start identifying those skills and have some clear advice about how to do that.
There is a need for pay rises, which are pretty fundamental in terms of whether it seems worth staying in work, improved terms and conditions and an increased voice at work, but also for specific targeted support around an analysis of your skills, the skills you might need to stay in your job or, if you might want to move career at that point, how you can get the support to do that.
Mike Clancy: I would echo some of that, but I do not want to be too repetitive or too dystopian about the presentation of the labour market.
I will start with the sentiment point. If you are in our public service membership, you have experienced a decade of real-terms cuts of up to 20%. We suspect that some people delayed their decisions to leave the workforce during Covid because they were able to take a bit of a longer period as departments settled down and did things differently. With the commentary that is coming from government currently, we are not clear where that is going to land. People are thinking, “Do I want to be part of this? Is there another round of cuts?” That will have an effect.
Among members more generally, I have the privilege of representing people who are in the organised middle class, one might say. They have a technical background; they have learned to apply their skills; they are often key to mission in their organisations, be it infrastructure, film and TV, and so on.
I have never known people be more disorientated by what is going to be expected from them in the next period. There are some advantages for people coming out of the flexibility that goes with hybrid working—a degree of working from home and so on—but we have spoken a lot about the impact of work intensification, surveillance and the right to disconnect. More and more, people are making this connection. We are going to have a labour market that is more deregulated than a lot of people have the appetite for. “Do I want to be part of that?”
The commentary about reductions in working rights, particularly the intensification that could arise from changes to the working time directive, is being distilled to this: if you can sustain yourself away from the labour market, that might be the choice you are now making.
There has to be a fundamental conversation about the value of regulation to good businesses. Certainly, the businesses we deal with are not proponents of a race to the bottom, a Singapore-on-Thames or a Britannia Unchained approach to business. Good businesses do not want that. We need to have a conversation about good regulation and the place for employment rights, which give people the confidence to be in the labour market.
Workforce voice is very much an issue. I am a member of the ACAS council. There are so few spaces in our economy where we convene and talk to each other about these issues. We have lost the infrastructure in which we can work through what the right way forward is for the labour force. So many of these things have a lineage from the challenges we had before the onset of the pandemic. Our labour market has had a range of challenges that you might want to explore.
Finally, what is the nature of work going to be in the future? That is a really big intergenerational challenge. As people want to stay in the labour market, what is it going to look like, particularly for young people? The debate about working from home is a good example. If you are in a comfortable environment, you might stay in a workplace. For a lot of people who are in multi-occupancy environments, this is not the nirvana that some people describe it as. You have quite a volatile mix. Some of it is being expressed in pretty pointed ways at present.
Viscount Chandos: Unemployment benefit is very low in the UK relative to our developed peers, but that does not appear to have any effect on incentivising people back to work. I know it is complicated and much of the change is in terms of people not classified as unemployed but who are economically inactive.
Kate Bell: Unemployment benefit is worth around 14% of the average wage. It is the lowest in the developed world, as you say. If anything, it decreases the ability of people to find a job that is right for them. Of course, unemployment is not the main issue at the moment; it is extremely low. But if you are reliant on unemployment benefit, and you are forced through financial circumstances to find a job, you are more likely to take any job rather than a job that suits your skills and abilities.
It was quite bizarre to see the Government announce in the mini-Budget, if that is what we are calling it, that their approach to this problem will be to ask people on unemployment benefit to increase their level of job search. We know that most of the people who have left the labour market have left it for inactivity and will be totally untouched by that measure, even if there were evidence, which there is not, that it would be effective.
Lord Griffiths of Fforestfach: To what extent does the debate about working from home or not affect retention?
Mike Clancy: It is very mixed. First of all, there is a commentariat on working from home, which has developed its own pace and energy. Some of the last figures that I saw suggested that working from home is possible in only about 20% of jobs in the economy.
We see this in our different employment groups. Some people have really wanted to embrace, and rightly so, the freedom and flexibility that can come from a degree of working from home. For other people, depending on their residential status—whether they are in multioccupancy, whether they have a space to work in, and so on—and their own personal natures, it is much less the panacea.
There is an increasing debate about what the wraparound law or the appropriate regulation is when you work from home. Employers’ responsibilities, in this new environment, do not end when they leave an office. When people are working from home, there are a whole range of responsibilities in terms of safety and work intensification.
Our surveying of the general public has found that people probably want to work two to three days in an office and then have some flexibility for a couple of days a week, but we have had a lot of traction on the right to disconnect. When do the boundaries of the working day begin or end? Those can definitely be blurred. Our research suggested that about 45 minutes a day extra is being worked by home workers. That is against the background that we work some of the longest hours in the developed world.
It is a debate you have to take very carefully. There are benefits to supporting caring needs and so on, but you have to be talking to the whole of the workforce about flexibility and not just about the ability to work at home.
Q27 Lord Fox: Mike, you talked about how some sectors are deeply unattractive. We also have high inflation. Why is wage inflation not higher than it is? Why are wages not going up more, to keep pace with inflation but also to enable sectors that find recruitment difficult to pull people in? What is inhibiting wage inflation?
Mike Clancy: I would say it is three or more decades of the reduction in the impact of collective bargaining. In so many parts of the economy there is no one to ask on behalf of employees, particularly in the private sector. We have built in a process whereby you get what you are given.
When labour supply becomes an issue and labour is more in the ascendency—it is in shorter supply or skills are harder to find—you start finding more of the expression, “We’re not going to put up with this any more”. When you then add in levels of inflation that we have not experienced for so long, that is what drives gains in union membership. More people want to articulate a voice in the economy.
We have failed to think through adequately the long-term consequences of driving down collective bargaining. I have often asked HR directors and other audiences, “What do you want from public policy when it comes to collective bargaining? Would you like to see no unions in the economy and zero collective bargaining?” When you ask it that way, no one wants that. Then you ask, “Do you want a union in your company?” Of course the answer is no to that as well.
There is a bit of schizophrenia here at times. In other economies that we can talk about, there is still a degree of social partnership, collective consultation and engagement on a national and a sectoral level, which allows the wage-work bargain to be properly resolved. I put it absolutely down to the fact that workers in this country have less voice than most of their counterparts elsewhere.
Kate Bell: I completely agree with Mike, but we would mention three other factors. First, pay in the public sector has been significantly suppressed. You will now see that public sector wage growth is at 2% whereas private sector is at 6%. That is nominal; obviously, they are all falling in real terms. That has had a significant impact on pay-setting across the economy.
The increase in insecure work has been another reason why workers’ power has been actively reduced. There is a set of business models that mean it is harder for you to ask for a pay rise because you might be told, “You’re not working next week” because you are on a zero-hours contract. Coupled with the lack of collective bargaining, that has meant a reduction in workers’ bargaining power.
Lastly, when companies are thinking about whether it would be a good time to invest in their workforce and give them a pay rise, the system of corporate governance that we have, which prioritises shareholder returns over anything else, and the level of short-termism that has produced have made it harder even for company decision-makers who might like to give their workers a pay rise to make that decision within the corporate structure in which they sit.
Lord Fox: I take your points, but say you are sitting on an enterprise—for example, an airport—where there will not be any profits because you do not have enough people to staff it. What has stopped a stronger push on increasing people’s wages to fill those roles?
In other words, what has collapsed in the market? I am not a leading market proponent, but people would say that the cost of labour should go up once there is a shortage. What is preventing that happening?
Kate Bell: It is employers’ unwillingness to pay.
Mike Clancy: Aviation is an industry built on forward planning. We have tried to be constructive about it, but they have failed to forward plan for the increase in the appetite for flying. They have failed to think about the fact that they had some good years in which they were able to run a business model that suited them, which was just-in-time and very pared down. There are shift patterns; these are quite demanding and intense jobs. Rates were held even where there was a degree of collective bargaining.
Suddenly, in a tightened labour market, in the same community, you can get more pay for less intense work with no shift patterns and get your caring responsibilities supported better. They could not get the workforce back. These are some of the frictions and tensions.
Lord Skidelsky: I want to follow up on Lord Fox. What is wrong with the economic model of the inverse relationship between quantity and price? Is it too simple for the real world? You would expect that to operate whether there were strong unions or no unions.
Kate Bell: At the moment, it clearly is not operating. We gave you some evidence in our written submission about the lack of a correlation between vacancies and wage growth in sectors.
We have had a decade of very low pay rises. Employers have got away with giving 1% to 2% nominal pay rises. I think they are out of the habit. There has not been significant pressure. The Government that have been in place have significantly reduced workers’ power, whether that is through the Trade Union Act, the imposition of employment tribunal fees—they have now been removed—or a lack of action on insecure work. There has been no message that workers should be allowed to ask for more, and employers are out of the habit.
We are seeing some places where that is changing. In the supermarket sector, we have a very, very slow race to have wage competition to attract labour. Last year £10 was a great pay deal. This year—I am going to get the supermarket wrong—one of them has just gone to £11.50. You are starting to see a little pay competition, but it is taking a long time because unions do not have enough power to push for it to go more quickly and employers are out of the habit.
Lord Skidelsky: In the economic model, it is not a question of workers asking for more. It is a question of employers offering more if they cannot get enough workers.
Kate Bell: I would say that economic models do not account for power sufficiently.
Q28 Lord Griffiths of Fforestfach: Are you seeing evidence of people re-joining the labour force because the cost of living crisis is making them?
Mike Clancy: We have not seen evidence of that in our sectors. We are representing a particular stratum of people. There has been media coverage to suggest that some people may be deferring their retirement or the next phase of their lives, but we are not seeing it.
Kate Bell: I was having a look at the latest ONS release on this, which also suggests there is a tiny bit of movement from cost of living pressures putting pressure on people to return to work. There is a mixture of push and pull factors. If you are waiting for a hospital appointment and you cannot work until you have that, unfortunately for you the cost of living pressures will add only to your cost of living and not to your ability to return to the labour market.
There are some people who are better off, who have also left the labour market. There is an interesting question, which I absolutely do not have the answer to, about the role of pensions freedoms and allowing people to take their pensions earlier in enabling some of those people who are better off to take those options. They may be under less pressure from the cost of living crisis, but it is also the case that more pull factors from a decent job might have kept them in.
Mike Clancy: There is no doubt that the complications around pensions are not sufficiently understood. We are seeing the final unwinding of the golden age of DB occupational pension schemes. The people who can still rely on those—there are some, even though the schemes are closed in large measure—are in a position to make certain decisions in the labour market successfully.
I have felt for a long time that our pension system is going to be one of the key political issues of the day in 20 years. That is because of not just what is going on in the bond markets now but the paucity of pension provision for people in DC schemes and what that will mean when they need to rely on them.
The Chair: Can I pick up on the point about people rejoining? If you look at the ONS over-50s lifestyle study, 47% of those aged between 50 and 70 who have left the labour market since the start of the pandemic said they had left work to retire. Mike, does that fit with what you are seeing in terms of why your members have left?
Mike Clancy: Our members are still relative beneficiaries of decent pension provision, which is something we are proud of in terms of our ongoing influence with employers. They will be people with a relatively stable employment history, who are therefore able to have built up a degree of final salary pension, even if the scheme itself is not open to new entrants any more.
Those people can ease into retirement much more successfully. They may also have skills that mean they can do a degree of consultancy as another transition. Then the challenge is in getting people in behind them, training them and making those industries sufficiently attractive.
The Chair: I am sorry to interrupt. I am probably not making myself clear. Coming back to your very first answer, 47% are saying that they are leaving to retire. From what you are seeing among your members, that is not necessarily why there is a rise in inactivity.
Mike Clancy: It is a confluence of factors. You are seeing an intensification of your work demands, as you have been for some time, and have reached a point where your personal finances and pension allow you to step away from that demand. That is what we see. They might call that retirement in response to a survey, but there are more complicated actuating factors at play in our experience.
The Chair: We might come on to that.
Lord Fox: To clarify that, you are saying that they are using retirement to get out of work because they can.
Mike Clancy: Yes. There is pension age, clearly, but there is no retirement age. In common nomenclature in a survey, people might reply to it in that way, but it is very much about whether they can cope with these demands any more.
Particularly for a lot of older people, the next round of technological insertion in their environment could be something they do not want to have to deal with. They have made a significant contribution to their organisations. “Do I want this again?”
We have been having this conversation with some very complicated infrastructure providers in the last week or so. They are really concerned about where their next generation will come from. The current generation do have an option, with their current pension provisions or buy-outs, to take some steps.
Of course, this is an unpredictable area because there is not a retirement age. You have to go on what the average retirement age has been and how people have behaved in the past. You need much more qualitative data about the real actuating factors. “I’ve retired so I’m in that box, but the reason I have done it is a confluence of other things.”
Q29 Lord Livingston of Parkhead: I feel I am going back to a previous life, talking to Prospect union about infrastructure providers and pension schemes. I spent many years doing that.
Can we carry on talking about the over-50s group, where the main change in the level of economic activity has been? We are trying to focus on the changes in population. Is it going to be possible to get a segment of these people back and, if so, how?
Mike Clancy: It depends on what is going to be asked of people. There were some positive periods when a number of the types of people I represent were able to do reasonable forms of transition from full-time employment using their technical skills into degrees of consultancy, but that was often on the basis that they could bank their pension. That gave them the security to be able to meet their outgoings and then top up and use their skills. That can actually help some employers where there are peaks and troughs in production or output challenges.
There is another thing, which is much more difficult thing to dig into. We have just been through everything we have been through. Everybody has a story to tell and a personal demand arising out of Covid. People may have lost loved ones. There is so much more evidence about the state of people’s mental health in the post-Covid environment.
If you put all of that together, and the workforce is going to be a lot more intense and demanding, this is the sense from a lot of our people: “We’ve done our time.” It is going to be very difficult to attract them back into full-time employment.
Lord Livingston of Parkhead: When you look at the breakdown of what is happening in the over-50s—this may very much represent your members—the lower-middle wage people, going up from the second quartile, seem to have had a much greater increase in inactivity than the lowest quartile or the two upper quartiles. Do you have any sense why that might be? There has been a movement from about 4% inactivity to 12% in the lower middle wages, but it has held fairly constant in the lowest quartile at about 13%. Do you have any sense of why?
Mike Clancy: No, I would need to look a bit more at the detail. I can give you something in written evidence, if that is okay.
Lord Livingston of Parkhead: Yes, that would be great, if you have any sense of it.
Kate Bell: Will people come back? Well, we should not be writing people off in terms of whether they want to return to the labour market.
Lord Livingston of Parkhead: Do you think they want to?
Kate Bell: Some people do. One of the things I wanted to say but missed in a previous answer is that there are big demographic differences in the reasons people are retiring. For example, the research we had out at the beginning of the year, when inactivity among this age group had started rising but not quite to the levels it is at now, showed that white workers were twice as likely to retire than black workers, who were more likely to leave the labour market because of ill health. Those in so-called elementary conditions were much more likely to be leaving the labour market because of ill health rather than because of retirement.
There are three things we need to do. First, we need to fix and invest in the health system so that people are not dealing with those impossible delays. Secondly, dedicated support and programmes specifically tailored to older workers can make a real difference, but they have to be delivered outside the punitive approach that Jobcentre Plus is currently taking to those who are unemployed.
Lord Livingston of Parkhead: It could be delivered by the jobcentres but in a different environment. Is that what you are saying?
Kate Bell: Yes, I think so. There is clearly a role for programmes aimed at people who are not currently working. If it is all targeted at those who are unemployed, it is going to miss this group entirely.
Thirdly, we have to make sure that work feels like a place that is safe, fairly rewarded and fairly recognised for people to want to come back to those jobs. There is a long way we can go there.
Lord Rooker: I have a quick follow‑up on this. Some weeks ago, I read about employers discriminating based on age against people who want to come back. I was struck by a story in the Sunday Times. It was an example of someone who wanted to go back to work because she found it interesting, wanted to be with people and had been isolated at home. However, she could not get interviews. She had too many degrees. She took two of her degrees off her CV and lowered the description of the job she had held, then started getting interviews.
How typical would that be for people who want to get back in? Employers should be grabbing with both hands people whose experience of the past they could be using, yet they are effectively discriminated against and being told they are too old or overqualified.
Mike Clancy: I am not making a flippant point in response at all, but there was a reason we introduced the 2006 age regulations. There was plenty of evidence of institutionalised discrimination in the labour force on the grounds of age.
Just because you introduce regulations and law, it does not mean to say you eradicate the discrimination. The evidence you have just given is an indication that we still have that challenge, as we do across a whole range of discrimination metrics. I am not surprised by this.
A lot of employers are reconsidering. Whether they are deep converts to change is another matter, but employers are good at seeing the labour market runes and making adaptations to them. Wise employers are realising that there is a much broader spectrum of skills and experience they can use, but there will always be examples of unwise employers that have had to be encouraged into taking sensible decisions.
Q30 Lord King of Lothbury: I can assure you the House of Lords does not discriminate on the grounds of age. I want to go back to this question about generic and sector-specific explanations for the rise in inactivity. In your answers, you have both focused very much on things that could apply to people who are over 50 in any sector. There was nothing specific about the sector that stood out as relevant to that. I want to ask whether the problems we are seeing are sector specific or evenly spread across the economy.
I will give you two examples to show why I ask this. If you talk to people in construction, they say they are very worried about how it is going to be possible to build lots of houses in the future because the age structure of bricklayers is so twisted towards the elderly. They just do not have any bricklayers now. I have no idea whether that is true, but is that an example of something that is true in other sectors?
Secondly, one of the issues you mentioned, particularly Kate, was that terms and conditions have encouraged people not to find jobs very attractive. I find that not so easy to square with the fact that, among the over-50s, between the end of the financial crisis and the onset of Covid participation was going up. There were more people in that age range working than before and now there are far fewer, which is associated with Covid.
Could you say something about where you would put the weight towards sector-specific explanations or general explanations right across the economy?
Kate Bell: The real answer is that I do not know what the percentages are. We are all trying to work that out right now. If you want the change factor, if you see what I mean, the big increase in health conditions will affect you more if you work in a job that requires you to have more physical participation in that job. The lack of an ability to treat those health conditions due to the waiting lists has to stand out as the change factor. That is not sector specific.
How it is playing out in different sectors, however, will depend on the age structure of that workforce. The other example I would give you, which relates back to my point about workforce planning, is around HGV drivers. HGV drivers were the original shortage sector. We were talking about them this time last year.
When you talk to unions representing workers in that sector, they say, “We have for years been raising the point that we have an ageing workforce that is predominantly male. It’s not diversified. To some extent we have topped it up with workers from Europe, but we have been saying for a long time that this is not a sustainable strategy. We need to diversify the people who work in this workforce, and to do that we need to improve terms and conditions”.
That was bumping along for a little while, where this issue was very clearly being raised. I imagine it is very similar in construction. There are reasons why women and younger workers are not entering that workforce. You then get a sudden shock that means more of your workforce leave than you were expecting, and then you are really in trouble.
Lord King of Lothbury: That is very helpful.
Mike Clancy: Your construction example can be amplified in other areas. If you have a core set of skills as a person—let us say numeracy and the ability to adapt to technology—you may be able to make choices in terms of your wage earning to have more physically enjoyable conditions compared to other occupations that are out there for you to choose.
We have to make certain that these absolutely staple and highly important parts of our national skillset are attractive enough. I would just cite the example of air traffic controllers, whom we represent. They have very high-end skills. You go in at A-level, with two to three years’ training. It is a very demanding role. Some of the aptitudes that would make you right for that job would also make you right for other jobs. You have to make that choice.
We need to talk about how you make that role attractive, give it sufficient weight and status in the economy and bring people into it. It is the same with engineering, the science disciplines and so on. There is a need to reinvigorate the old economy alongside the digital economy, so that we can sustain the different things we need to do.
The Chair: Picking up on Lord King’s point, I should know this but I do not. Do you have data that can highlight this challenge? If one takes the view—we are going to come on to this—that a lot of the rise in inactivity is caused by those aged 50 or over suffering some form of long‑term sickness, which may have been apparent before Covid, you might begin to be concerned about those specific sectors.
Do you have data that backs up this point? As you said earlier, people have been warning us about HGV drivers for a long time. As Lord King has said, I am sure there are issues in construction. Do we have data to show which sectors this applies to and how great a problem it is?
Kate Bell: We have not collected that data, but, thinking out loud, there is data on the age profile of different workforces. We shall go away and have a bit of a look at that. It feels like a big question.
The Chair: I am thinking in particular about the workforce in skilled sectors.
Mike Clancy: If you think about the energy sector, our ambitions to build a new fleet of nuclear power stations and extend our renewable systems, and what that means for transmission and distribution systems, colossal numbers—around 400,000 or more in a decade—are needed to replace the existing workforce and to deal with the expansion and change. At the same time, there will be competition from other sectors, such as defence, for some of the same skills.
The issue of the attitude of the over-50s to work is in the context that there are some sectors where we definitely need labour, but it is not labour that you can turn on and off. One of the things we regularly debate quite keenly with a number of employers is the lead time to get people to a point where they can apply themselves safely and successfully to the task in hand. If it is post-degree, that is often two to three years more.
The Chair: If you have any data on that, that would be very helpful.
Mike Clancy: Yes, we can supply some data.
Q31 Baroness Kramer: To switch tracks very slightly, Mr Clancy, you talked earlier about self-employment. I would like to pursue that. You mentioned the number we also have heard: something like 700,000 people have left self-employment. Could you give us some granularity about that? Is this a switch from self-employment to employment or to inactivity? To what extent is it driven by the 3 million who were excluded from support during Covid or by the new changes to IR35 that are now being set aside? Could you give us some feel as to the granularity within the self-employed group?
Mike Clancy: The key thing to aid our collective understanding going forward is data. When we were talking to the Government about the self-employed scheme in February and March 2020, they did not have data that adequately described and categorised the, to be fair, myriad forms of what we call self-employment.
There are now a lot of reports on this. There is an interesting one by a group we have had with engagement with called Bright Blue, which has been publishing on the consequences of Covid for self-employment. Covid exposed structural weaknesses that a lot of people knew were there but were able to cope with to some degree in the way self-employment has developed in this country.
It is really important to make some big-theme points about the nature of self-employment. I represent a lot of self-employed people in film and TV who have differentiated skills. They cannot be easily substituted. They are sound engineers, grips, locations and so on. They have skillsets, aptitudes and training; they cannot be easily substituted. We know that bogus self-employment exists in the economy. Those tend to be people with skills that are more easily substitutable.
In the context of Covid, everyone came together and was exposed by the precarious nature of what self-employment can be when you do not have the safety net that goes with employment, whether it is the 3 million people who felt excluded from the self-employed support scheme, the design of that support scheme or the trauma it brought to a lot of them, which we can dig into if you wish to. There was also a degree of redefinition.
The IR35 changes came out of the blue in the mini-Budget. We are not quite clear on what the consequences of that will be, but what we have not solved—we have done a lot of research on this and we can give you all sorts of reports on it—is how we should define employment and self-employment in a contemporary economic context.
How does that link with tax, employment laws and the benefits system? This is an overdue piece of work to get right. Covid exposed a lot of the frailties on this, and they have not changed.
Baroness Kramer: You would find many of us agreeing with you around the need for that piece of work. If I were to look at this in the context of the report we are working on now, is much of the shift from self-employed to employed status, even if people would have preferred to have stayed self-employed? Has that been the shift or has it been towards inactivity? Is it different for particular sectors or age groups? I am just trying to get a sense of the granularity in the data.
Mike Clancy: I do not have a percentage, but there will be a degree of inactivity when experienced crew have been through what they have been through and have not gone back. Film and TV is booming again. We have a world-renowned industry. It is built on freelancers and we represent them successfully on terms and conditions, rates and so on. There is a degree of structure there. As I say, they have tremendous skills. Some are internationally renowned. Those people will have come back, but they remember the experience.
A number of engagers, given where we were on IR35 before Friday a few weeks ago, have gone through the process of redefining people, reconsidering the nature of their relationships and asking whether they fit employment better than self-employment. There has been a degree of that. Some people might welcome some of that because it has given them rights that they would not otherwise have.
Self-employment, in a number of areas, is here to say. It is about 15% of the labour force. You have a combination of redefinition and some people having left, and then you have the skills gaps that follow from there.
Baroness Kramer: To pick up a point that Lord Livingston was making earlier, if you look at people who have become inactive, it has tended to be concentrated in that second and third quartile of income. Is that a group that is well represented—or was well represented—within the self-employed workforce? Did people tend to break and either be in the lowest quartile or in the upper quartiles? Is that a characteristic of self-employment?
Mike Clancy: I know you want to do work on this, and it is not the absolute key of today. We do need a better definition. In the employment discussions with the Treasury, we found we were getting hung up on definitions. It felt it was at risk of fraud if it did not tighten some of the definitions it was using.
Working self-employed is a broad description. There are sole directors, freelancers, partners and subcontractors. All those rich descriptors go into the numerical capture we are talking about over here of the reaction from different deciles or quartiles of the labour force.
The key thing here is that it is dependent on your prior experience. It is a bit like employment as well. If you have been able to have a good self-employed career and you are seeing intensification in a number of areas, you are not going back to it. That has been our experience. If you felt exposed by the precarity of self-employment in that 18-month or two-year period when theatres and film and TV sets were closed, when suddenly your income went from being not too bad and making a good living to zero, you have reconsidered what you are doing.
Kate Bell: I have not seen any flow data from self-employment to inactivity, which does not mean it does not exist but, from the latest data from the Family Resources Survey, we do know that around half of self-employed people were earning less than the living wage. A large proportion of self-employed people are very low paid.
We might think that is correlated with ill health conditions and therefore a greater likelihood of having to leave the labour market, but I am saying that as a hypothesis right now because I have not seen data that backs it up.
Baroness Kramer: I just wonder whether you would be willing to give us any of the data you had. You talked about a very recent report.
Mike Clancy: Yes, we did a peer review and we worked with Bright Blue on this subject. It had some very interesting data. On its survey evidence from 2021, 45% of self-employed people had monthly incomes of less than £1,000 and 28% of them reported having financial difficulties. There is some very comprehensive data. We can give you the links.
The Chair: That would be very useful. Please do.
Mike Clancy: It is a very complex and fascinating area, where we need to find some solutions.
Lord Griffiths of Fforestfach: To what extent could the Government give much greater clarity about regulation for the self-employed? For example, somebody at 55 decides it would be a great thing to be self-employed and they would like to do a little bit of work. “How am I going to handle VAT and so on? If I have a home office, will that mean I have to declare it? When I sell the property, do I have to pay capital gains tax on what is the home office?” What would the criteria be for using a home office? At present it is something like “not exclusively devoted”, but it seems to me that this is an area that needs clarity from the Government if we want to attract people in that age group back into the workforce.
Mike Clancy: We did an inquiry into the future of self-employment, which was published in February 2021. We can share that with the committee. It was done with the Federation of Small Businesses, us and the Community trade union.
Why were we doing that in particular? We are exactly in the space. We are not in any way anti self-employment; we are anti bogus self-employment, but there needs to be that regularisation and ability to transition. As the opening of your question suggested, if we want more fluidity in the labour market, which will enable people to stay in it longer, we have to allow them to have periods of direct employment, periods of education and retraining and periods of self-employment.
The tax system and employment laws need to keep up with that, and they have not. That is a key issue to resolve, if we really want a fluid, dynamic labour market.
Q32 Lord Rooker: Long-term sickness has hovered over most of our discussion, but without detail. The Governor of the Bank of England told the Treasury Committee in May that the Bank of England was very uncertain about what was causing these persistently high levels. We do not have any answers.
Do people have less access to NHS care because waiting lists doubled in the decade before Covid? We do not really know the effect of long Covid yet. It may be several years before we do. To what extent would the term “long-term sickness” be a cause for losing people from the workforce. Is it particular illnesses?
Is there any evidence that the people currently in the workforce are being affected by what could be long-term illness, bearing in mind the waiting lists and that access to the NHS is even less than it was before Covid?
Kate Bell: I agree with all the points you are making. I have some stats on the NHS backlog. In February this year there were 6 million people on the elective care waiting list, and that was the highest number since records began. It was 186 times higher than in January 2020[1]. Those numbers show you the size and scale of the problem.
You also have significant unmet care needs because of the issues in social care. Although we have not seen inactivity because of caring for a family relative rising particularly, those unmet care needs must also be playing a part.
We are still developing our understanding of the impact of long Covid, but we did a non‑representative online survey of workers. About 3,500 people replied to that survey and talked about the impacts of long Covid on their work. To your point about whether people are experiencing detriment even if they are not leaving the labour market, half of the people who replied to our survey—again, this was self-selecting—said they experienced some form of discrimination or disadvantage at work. One in 20 of them said they had left their jobs because of long Covid.
We are in a stage where we are understanding more about long Covid the longer it goes on, but certainly the results from our indicative survey suggest it was causing significant health problems, which were causing people issues at work and forcing them out of work, too.
Mike Clancy: Our casework tells us that we are also dealing with a rapidly escalating mental health crisis in and around work. We are trying to work with good employers on this. I think it is simply born of the disorientation that we have all felt at different times during the Covid period.
Lord Rooker: Has the mental health issue just emerged?
Mike Clancy: It has been intensified. People had all sorts of reactions to the restrictions that were necessary and the consequences in the workplace. As I say, our casework tells us we have a much greater challenge in that respect. Many more conversations with employers are going on about how their workforce is still coming to, after that disorientating period.
The Chair: Sorry, I am going to refer to a chart you do not have in front of you, which is never a good thing to do. I have in front of me a chart that shows waiting lists in the NHS, overlaid with people leaving the workforce and becoming inactive due to long-term sickness. It shows us that the waiting lists in the NHS back in 2008, 2009 and 2010 were very high, and yet inactivity rates due to long-term sickness were very low. There is then a steady trajectory upwards in the number of people becoming inactive due to long-term sickness. Have you sensed that there was a trend towards your members leaving because of long-term sickness pre Covid?
Mike Clancy: There was a trend to our members leaving due to intensification of work and demands. That goes back to the point about whether they are in a position, with their personal finances, to relieve themselves of the pressure and the burden.
The Chair: You would not say it is necessarily to do with sickness, but it is other things that come in.
Mike Clancy: It could manifest itself at different times in their mental health or aspects of their physical health. Again, they may be actuating factors on making that decision to retire.
Kate Bell: To reframe what Mike just said, if your terms and conditions are getting worse and your work is getting more intense, the value of you staying in your job while sick might reduce.
The Chair: Thank you very much. We are way over time and that is my fault. Thank you very much for such full answers. It would be very good if you could send us the data that we referred to and the links to those studies for our inquiry. Please feel free to submit anything else that you feel we might have missed in written evidence. Thank you both very much.
