Written evidence from Bill Wells (WOW 95)

 

The future world of work and rights of workers:

Old wine in new bottles?

 

INTRODUCTION

 

  1. As a former chief analyst in the Labour Market Directorate of BIS I was responsible for publicising evidence on labour legislation and its effect on the labour market to parliament and the public. Key documents that you might wish to revisit for this inquiry are:-

 

‘Employment regulation, employment and growth: consideration of international evidence.’

 

https://www.gov.uk/government/publications/employment-regulation-employment-and-growth-consideration-of-international-evidence

 

and, in the context of the debate on zero hours contacts (you may wish to ask BEIS to update these analyses):-

 

‘Zero hours contracts: Supplementary Analysis Note:’

 

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/307341/zero-hours-contracts-supplementary-analysis-note.pdf

 

  1. The Business Department also carried out more detailed information about what actually happened in workplaces – the 2011 Workplace Employment Relations Survey. The First Findings document touches on job satisfaction and insecurity.

 

‘The 2011 Workplace Employment Relations Study: First Findings.’

 

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/336651/bis-14-1008-WERS-first-findings-report-fourth-edition-july-2014.pdf

 

and it is covered more fully in the main publication.

 

  1. A key result of WERS 2011 was that job satisfaction and perceptions of job security improved over the period 2004 to 2011 despite the recession – particularly in the private sector. Interestingly, the perception of improved job security in this period contrasts with previous periods where perceptions of job insecurity rose. See for example, Chart 5.1 in Chapter 5 of the OECD Employment Outlook of 1997.

 

‘Is Job Insecurity on the Increase in OECD Countries.’

 

http://www.oecd.org/els/emp/2080463.pdf

 

  1. In what follows I draw on this evidence to pick out what might be key elements for the inquiry. Also, what it might imply for policy. It also draws on my experience at the EU and the OECD and the effect of different labour legislation systems.

 

KEY ELEMENTS FOR THE INQUIRY

 

POSSIBLE POLICY DIRECTIONS ARISING FROM THE EVIDENCE

 

DIVERSITY NOT FLEXIBILITY OR EXPLOITATION

 

  1. The UK legal tradition is that anything which is not illegal is legal. In general, there is a floor of universal basic minimum standards and above that individual buyers and individual sellers are free to enter into a contract that suits both of them – everyone gains from trade. This approach of universal basic minimum standards also tends to be reflected in the welfare and tax system.

 

  1. There has also been, particularly since 1979, a decentralisation of both product and labour markets. Both sides of industry have become more decentralised and less collective. In the labour market the system of national collective agreements by firms has been dismantled and the importance of collective labour – has also diminished. Also, even within individual workplaces, there is much greater diversity of types and patterns of employment – partly because there are many fewer legal restrictions on terms and conditions of the individual contracts in the UK.

 

  1. And because there is an enormous number of different buyers and sellers with different needs wants and tastes, the resulting range of contracts is enormous. The UK probably has the widest range of types and patterns of jobs in the world. This diversity allows greater scope for individuals and business to find an agreement that suits their circumstances. It is one of the reasons why employment rates of groups that in other countries are under-represented are in jobs in the UK.

 

  1. It is this diversity that characterises the UK rather than flexibility – frequent changes in circumstances. So, for example, there are many more forms of temporary employment contacts in the UK – ‘temps’, agency workers – employees & self-employed, fixed term contracts etc. But the proportion of employment in temporary employment is amongst the lowest in the UK. Also, within a job, the range of hours, when and where people work is much greater than the variability of these patterns of work.

 

  1. Similarly, it is diversity rather than insecurity/exploitation that characterises the UK. The latest (2015) EU 6th European Working Conditions Survey found that UK firms compared favourably with most but not all other EU countries in the following areas:

 

 

http://www.eurofound.europa.eu/surveys/data-visualisation/sixth-european-working-conditions-survey-2015

 

  1. This diversity means that there is a greater possibility of a contract that suits both sides. It may help to explain why the levels of satisfaction with jobs tends to be high (e.g. in Zero Hours Contracts) and higher in the UK than elsewhere (e.g. temporary employment) even though, viewed from the outside, the characteristics of the jobs do not look very good. And workers who are satisfied with their current situation may not be as happy if the state change or restrict their terms and conditions even if – from outside it the new terms and conditions look ‘better’.

 

  1. However, if people get stuck in a job that does not suit them – mismatch – there may be barriers to either change the individual contract in ways that suit both the employer and the worker. Or, to move to another better job quickly.

 

JOB INSECURITY

 

  1. OECD evidence  http://stats.oecd.org/Index.aspx?DataSetCode=TENURE_AVE shows that in the UK the average duration of employment is growing. In addition, the proportion of (unfinished) employment who have been in a job for a short period has fallen since 2000. For example, the proportion in a job for less than 6 months has fallen from 11.1% in 2000 to 8.6% in 2015.

 

  1. For people who leave employment fewer people are moving next quarter into unemployment and inactivity. If anything, the levels are below pre-recession levels. Job-to-job moves are also back at pre-recession levels.

 

 

  1. Previous work on the reason for all job separations are voluntary – around three quarters - with involuntary separations redundancies, dismissals and ending of a temporary contract – making up the other quarter.

 

  1. It would be useful to replicate this analysis but what evidence we do have suggests that this proportion of separations that are voluntary may have improved. Only a small proportion of the job separation that led to this job-to-job move – less than 10% - are due to redundancy or dismissal and it has fallen over time.

 

  1. What is more, see Graph 2, workers tend to progress (net) by moving from job to job. More people move to high and medium skill jobs than leave them.

  1. In summary, therefore, it seems that job insecurity has improved over time in the UK, compares favourably with other countries and job moves tend to lead to better not worse jobs. However, some job insecurity remains.

JOB SATISFACTION AND INCOME VARIABILITY WITHIN A JOB

  1. Graph 3 sets out the ONS analysis on under- & over-employment. Over 80% of all people in employment (employees, self-employed etc.) are neither under- or over-employed. Of the rest, around 10% are underemployed and around 10% overemployed. Since 2002 slightly more people tend to be overemployed except in the post-recession period. In 2015 it reverted to normal.

  1. Graph 4 below replicates one of the graph from previous analysis. [It would be worth BEIS updating it.] It sets out the trend in workers who were working less than their usual hours because of management action. Zero Hours Contracts where the hours have been reduced will be a subset of this.

 

 

  1. In terms of income variability, the labour market the numbers working less than usual hours because employers vary their hours have fallen over time. [It may be worth updating this.] However, within this total, there has been a growth of around 100-150 thousand in the number working zero hours.

 

  1. In summary, over three quarters are satisfied with their jobs. Of those who are not, less than 10% are underemployed and the proportion is falling. However, a mismatch of around a fifth – including over-employment – does suggest that there is scope for improvement.

 

  1. There are many workers – around 1 in 8 – who actual hours are less than their usual hours due to management action. This is likely to lead to variability in pay. However, both the number and the share has fallen over time.

 

 

  1. The clarity of this approach is much clearer for employees where the contracts with their employer is more well-defined than for other forms of employment. For example, for self-employed the relationship with their buyer – in this case the customer of their labour services – is less well-developed.

 

PROBLEMS IN THE WORKPLACE (RATHER THAN FOR WORKERS)

 

  1. The UK approach – through the Health & Safety at Work framework – imposes a duty of care by the owner of the workplace/shop etc. on all the people who use the establishment – customers, workers, visitors etc. The historical picture is set out in http://www.hse.gov.uk/statistics/history/historical-picture.pdf with some of the summary replicated below: -

 

Between 1974 and 2015:

 

 

IMPLICATIONS FOR POLICY

 

ALIGNMENT OF DIFFERENT LEGISLATIVE APPROACHES.

 

  1. Health and Safety policy has adapted successfully to changing patterns of work – increased stress, more services, retail factories (like Shirebrook). However, the ability to adapt has been compromised by the inconsistency between the UK legal approach and that of the European Union. For example, in Shirebrook, some of the terms and conditions of workers are covered by the Agency Worker Directive – which aims to provide help for individuals – and it is difficult to reconcile this with the Health & Safety approach where Sports Direct – as owner of the workplace – would have complete responsibility for the health and safety of the individuals.

 

  1. There is similar confusion about other terms and conditions. For example, Agency Workers are supposed to be paid the same as the people working alongside them. However, the application of this element seems inconsistent and, thus, uncertain and confusing. One of the other recent pressing issues is the payment of agency workers in the Health Service where the payment of agency workers is believed to be substantially higher than the permanent Health Service workers.

 

  1. Other examples of differences between different legislative approach leading to confusion and the possibility of exploitation by employers of the differences and confusion between the different legislative approaches – the regulatory equivalent of gross tax avoidance. In addition, the legislative confusion – equivalent to tax breaks in the tax system – sometimes leads to uncertainty about the rights and responsibilities of the various parties.
  2. To enable better employment matches to occur it is proposed here that the various legislative systems are aligned – employment status, the tax treatment of employment; - in a clear and coherent fashion. Possibly through a Red Tape Challenge to include both EU and Tax Law in the review. Previous Red Tape Challenges specifically excluded these areas of policy.

 

  1. After the review, publication of clear and comprehensive information about what the law is – perhaps alongside standard contracts – would supplement this.

 

COMPLIANCE AND ENFORCEMENT

 

  1. For those cases where there is a problem the compliance Extending the approach of universal basic minimum standards to Employment Tribunal Fees would imply a system where there is a nominal fee paid by everyone.

 

  1. In addition, the system remains costly in terms of time and uncertainty for the claimant. They are not certain how long the case will last or, if they win, whether they will receive their awards from their employer. Establishing Citizen Charter style customer service targets on the Employment Tribunal system in terms of how long the process will take and the time it takes for them to get their award.

 

  1. It might also be worth considering whether fines could be paid to the worker not the state. They, after all, are the person that has suffered.

 

REMEDYING IMBALANCES OF POWER BETWEEN EMPLOYER AND WORKER

 

  1. Mismatches in work – either through management action  or through wrong choices by the worker – can persist if the worker feels they can do nothing about it. The most effective response is to either change the job or move to somewhere better.

 

  1. On changing the job it would help the (wrongly named) ‘Right to Request Flexible Working’. In fact, it is a way of increasing the bargaining power of an individual – both by informing the employer (without prejudice) of changes in terms and conditions that would be acceptable and initiating a discussion.

 

  1. On leaving the job the worker’s bargaining power is increased if there are either other jobs to go to or if they can claim benefits after leaving because they cannot stand the job. Continuing to promote product and labour market competition and removing barriers to entry helps to achieve the first. Abolishing retrospective sanctions in the benefit regime – where you lose money because you leave a job ‘voluntarily’ or hit the foreman through exasperation – would help with the latter.

 

PROVISION OF INFORMATION ABOUT OPPORTUNITIES 

 

  1. There are big advantages in terms of opportunities in the UK’s diverse system but it is very costly in terms of acquiring information. That is the market failure reason for Jobcentres and a National Careers Service. Changes over time have meant that a National Careers Service no longer really exists not are the jobsearch facilities easily available to non-benefit recipients – particularly workers. It is very difficult to get into a Jobcentre and use the facilities to get a job.

 

  1. As well as extending access to information permanently it might also be worth a more targeted approach. An extreme example of this might be to set up a Jobs Fair at Shirebook or other workplaces to help people where there are large numbers likely to be unhappy with their job.

 

 

Bill Wells

December 2016