The flaws of the UK labour market won’t solve themselves

Sinner or saint? The UK labour market is lauded for reaching record levels of employment at the same time as it is lacerated for the insecurities that are said to be its central feature.

Two things can, however, be true at once: an economy can be job-rich at the same time as too many of its workers are wage-poor and insecure. The fact that these problems persist in a tight labour market at the mature phase of the economic cycle suggests that the shortcomings of the UK model won’t solve themselves.

When minds turn to improving aspects of Britain’s labour market, the temptation is always to cherry-pick desirable features from other systems — Danish “flexicurity”, German training or Japanese management. Seasoned observers, however, express scepticism. Anglo-Saxon capitalism, it’s argued, is just different. The virtues of other models can’t simply be bolted on.

What this story misses is precisely the trajectory of other Anglo-Saxon economies. California, for instance, has been in the headlines because of legislation that will re-categorise many gig-workers as employees with rights. This comes in the wake of the march of many US states towards a minimum wage of $15 and greater regulation of working schedules.

Less heralded, but potentially more far-reaching, is an experiment in high-employment New Zealand. Jacinda Ardern’s Labour-led government has appointed a former National party prime minister to work with employers and unions to establish proposals for sectoral deals — spanning pay, training and employment practices — with a focus on low-paying industries. It is an ambitious effort at national consensus-building on improving working life at the sharp end of the jobs market.

This initiative is informed by the Australian experience of using sectoral agreements to establish employment standards and pay benchmarks over and above the legal minimum. It can look messy to foreign eyes but has helped maintain labour standards.

In Britain, the minimum wage has steadily climbed in value, lifting it towards the upper echelons of the international league table. But there is only so much a rising wage floor can achieve. It is a powerful but partial tool that won’t solve the problems of volatile hours or patchy training and enforcement of rights.

Making headway on these thorny issues is likely to require social institutions capable of brokering deals between employers and their workforce in sectors such as hospitality, retail and care, where so much of the insecure workforce toils and trade unions are thin on the ground. This can’t mean simply resurrecting 20th-century works councils. A new approach would need to encompass all relevant workers regardless of employment status, recognise the extent to which working life has been transformed and be carefully introduced to manage risks.

However well-crafted, a proposal that gives workers, or their representatives, a say on condi­tions will provoke anguish from some quarters. Yet the inevitable howl of “back to the 1970s” will ring hollow. Our labour market, and its underlying power relations, has been transformed. So has public sentiment. In the 1970s, three out of four of us thought unions were too powerful; now it’s one in three. Good luck trying to spook precarious millennials with ancient tales about the “winter of discontent”.

Institutional innovation is sometimes needed to help upgrade a nation’s jobs model. When the UK’s Low Pay Commission was created two decades ago it was decried as a corporatist aberration; today, it is a respected part of the policy settlement. The UK’s remarkable post-crisis jobs performance, together with its deep social discontent, provides both opportunity and motive to improve working life. Homegrown initiative is required. Other flexible Anglo-Saxon economies are acting. Time for Britain to catch up.

Originally published in the Financial Times