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Neither the labour market nor the welfare state alone are meeting economic security needs

  • New figures reveal economic insecurity is widespread...: 73% of workers fear inflation will outstrip pay, 59% would struggle to pay an unexpected bill of £500 and 36% would find it difficult to finance a surprise bill of £100, rising to 44% of those in non-typical work e.g. zero-hour contracts.  
  • …and rising: 30% of workers don’t feel like they earn enough to maintain a decent standard of living (up from 26% in 2017), while 24% of workers sometimes have trouble meeting their basic living costs because of income volatility (up from 19% in 2017).  
  • 49% of workers fear the effect of Brexit on living standards, 26% are concerned about losing their job to automation, while 35% fear that the rising cost of housing may force them to relocate. 

Economic Insecurity: The case for a 21st century safety net [**LIVE FROM 0001h, Friday 16 August**] by the Royal Society for the encouragement of Arts, Manufactures and Commerce, calls for a new ‘21st century safety net’, with a greater role for unions, digital start-ups and civil society in helping with retraining and income support.

Overall 73% of British workers are concerned about the cost-of-living outstripping pay, with a significant proportion reporting increased worries around debt, pensions and living standards compared to 2017.

 

2017 RSA / Populus Survey 

2019 RSA / Populus Survey 

My income varies from month to month and because of this I sometimes have trouble meeting my basic living costs 

19% 

24% 

I don't feel my work provides me with enough money to maintain a decent standard of living 

26% 

30% 

I am concerned about the amount of debt I am in 

29% 

32% 

I don't expect to have enough in private pensions and other savings to maintain a decent standard of living in retirement 

40% 

45% 

I would struggle to pay an unexpected bill of £100 

36% 

 

I would struggle to pay an unexpected bill of £500

59% 

 

Meanwhile those in ‘non-standard’ employment – such as zero-hours contracts – report lower financial resilience than those in typical or self-employment.  

Almost half (44%) of non-typical workers would struggle to pay an unexpected bill of just £100, the survey finds, meaning this group could fare especially poorly during a financial “shock”, such as from automation, a recession or Brexit uncertainty.  

And while both the self-employed and ‘non-standard’ workers report income volatility, the self-employed tend to report higher living standards generally and have savings to help cushion any month-by-month change, unlike those in non-typical work. 

 

Typical employees 

Self-employed 

Non-standard workers 

My income varies from month to month and because of this I sometimes have trouble meeting my basic living costs 

17% 

45% 

45% 

I don't feel my work provides me with enough money to maintain a decent standard of living 

30% 

21% 

38% 

I am concerned about the amount of debt I am in 

33% 

19% 

39% 

I would struggle to pay an unexpected bill of £100 

36% 

29% 

44% 

I don't expect to have enough in private pensions and other savings to maintain a decent standard of living in retirement 

44% 

44% 

52% 

 

Among all workers, retraining is the option most workers think would help them the most, backed by 27%. But 34% of those in non-typical work feel they would benefit most from a contract with guaranteed hours. 

But the current welfare state is too reliant on moving people into low-paid, low-quality jobs, the report warns, rather than retraining, stronger worker voice or modernising social security for the gig economy. 

It calls for a “21st century safety net” – with government taking an active but coordinating role in helping those on all-income levels, alongside civil society, unions, employers and businesses.

Singapore has introduced 'personal learning accounts' – budgets for training for every worker to help adapt to tomorrow's jobs – while in Sweden, the state encourages employers to contribute to funds to help workers transition during periods of redundancy. 

The RSA, in partnership with the Mastercard Impact Fund and the Mastercard Center for Inclusive Growth, is currently scaling business and civil society start-ups to provide support to insecure workers, putting social impact at the heart of enterprise. For instance:  

  • Trezeo is an income smoothing bank account that tops up earnings during quiet periods, interest-free, to ensure a consistent pay cheque. It works by leveraging open banking and machine learning to understand income patterns and financial behaviour, and model risk. Trezeo aims to provide a foundation for the self-employed to access financial products like insurance, pensions and even mortgages. 
  • Bob is an AI employment advisor that draws on labour market data to offer tailored coaching and support to individuals who are, or will be, at risk of unemployment and underemployment. In just a few clicks, Bob offers a complete review of a jobseeker’s profile, target market and search techniques. It then gives a personalised advice, including key next steps to move forward. Bob is available free, online from a smartphone or computer.
  • Workerbird is developing an app that enables workers to collect data on their working conditions (including working hours, travel time, breaks and pay) and reflect on their experience of work as a whole. The app will display insights in a way that helps workers see their working patterns in a broader context. It will also help workers report problems such as minimum wage violations and access further support. Workers on zero hours contracts could use this data to advocate for more stable hours. 

 

Fabian Wallace-Stephens, report author and senior researcher at the RSA, said: 

“More people are in a job than ever, but below the surface of record employment figures, increasingly we are seeing the link between hard work and fair pay collapse; work alone is no longer a route out of poverty. 

“This could not come at a worse time for millions of families amid Brexit uncertainty, the potential for another a recession and the increasing prospect of automation of many routine roles.  

“Economic insecurity is creeping-up the income scale and is no longer just confined to those on low-incomes. Many of those ‘just managing’ are a financial shock away from failing to pay rent or pay a childcare bill, while even people on higher incomes fear the grinding effect of inflation, flatlining pay and falling living standards. 

“Neither the labour market nor the welfare state alone can turn automation from a problem to an opportunity for workers. We need to see government creating the framework for employers, civil society, unions, social enterprises and digital start-ups to provide more help, including retraining and income support, while legislating for stronger rights for workers and a genuine living wage.” 

 

Matthew Taylor, chief executive of the RSA, said:  

“This report shows that levels of precarity in the economy are still rising, amid a backdrop of wider economic uncertainty. Individuals, particularly the self-employed, gig economy workers and those on zero-hours contracts are suffering from unevenly distributed pay and a lack of clarity on their employment rights. That 59 percent of people cannot afford an unexpected bill of £500 shows that more can be done to improve the financial situation of many in this country.  

“The previous government committed to carrying forward the recommendations of the Taylor Review of Modern Working Practices – a new day one statement of rights, the right to request a more stable and predictable contract after 12 months, and the closure of the legal loophole that lets employers pay agency workers less than employed staff, ‘the Swedish Derogation’. The RSA looks forward to working with the new administration as they implement these changes and explore potential solutions to the economic insecurity in the UK.” 

 

Payal Dalal, Vice President, Global Programs, Mastercard Center for Inclusive Growth said: 

“Economic insecurity is a growing problem in the UK, and this research shows a clear downward trend over the past few years. While employment levels remain at a record high, it’s clear that this is masking deeper issues in the UK’s economy. This uncertainty will only be exacerbated by the recent contraction in GDP. We’re interested to see how new business practices can begin to deal with these economic problems. Start-ups are beginning to rise to this challenge, and we’re excited by new, technology-led developments which are beginning to provide solutions to these deep-rooted issues.”  

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