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Economic insecurity in our times: the RSA’s new analysis

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  • Economics and Finance

There are two distinct stories that are commonly told about the UK economy as it enters 2018. One is an optimistic narrative of record levels of employment, increasing full time work and median wages in the past year or so, low numbers on out–of-work benefits, and diminishing levels of inequality as measured by the gini coefficient. With the goals of the modern early 21st century welfare state in mind, underpinned by tax credits and Universal Credit, expanding flexible and widely distributed work opportunities, this all looks like a resounding success. It is one the current Government readily claims, as would previous Governments have done.

Yet the pessimistic counter-narrative would appear to be just as strong. Alongside record employment rates, so-called ‘atypical’ contracts (essentially, non-full time employment) have grown. Wage levels have stagnated – albeit with some growth at the lower level due to the new National Living Wage. In part, this reflects low overall productivity growth. In-work poverty has grown to the extent that it is now more common than out-of-work poverty. Social mobility is stagnant or even sliding backwards. Inequality within the UK remains high compared to other similar societies. And the experience of the modern welfare state is often a harsh one.

The post-war settlement relied on economic security supported by individual action underpinned by full employment, contributory welfare and universal public services. Over the past fifty years this settlement has in many ways been eroded. In the UK, we lost confidence and faith in the economic role of the state beyond market regulation, the erosion of the contributory principle saw a separation between public services for all (health, education, policing etc) and ‘welfare’ seen largely as handouts to the poor (despite the distributional reality of tax credits and pensions), and large swathes of the population – particularly in areas left behind by economic change – no longer believe either in their own family’s prospects or those of the country as a whole. Security was to be re-established through work.

And yet, now we know that work alone is not enough. But we also know that we can’t understand fully a person and household’s well-being just by knowing what work arrangements someone has. So both the optimists and the pessimists have an incomplete picture.

The RSA’s paper, Addressing Economic Insecurity, published today gathers convincing evidence that economic security is far broader and the challenges, for individuals, communities, firms and policy-makers far greater than we as a society have seriously focused upon. The impacts on the individual of insecurity are greater in terms of their opportunity, health and well-being. And the economic costs can be great as individuals can become stuck in low pay and precarious forms of work. So we pay a heavy price for failing to confront economic security where it causes most harm.

We define economic security as:

“The degree of confidence that a person can have in maintaining a decent quality of life, now and in the future, given their economic and financial circumstances."     

This definition adds understanding of the subjective experience of insecurity to more traditional measures that focus on job security alone. So, for example, when someone is in work with insufficient ability to meet their family’s care and income needs, with little prospect of developing and progressing, with a disempowering working life, they could be seen as experiencing insecurity when narrow measures such as ‘job security’ might miss the reality of the situation they face.

The evidence within the report establishes that economic security matters alongside more traditional policy goals such as employment, inequality and poverty. Furthermore, a focus on these other goals, whilst very important, is insufficient. Economic security itself should become a prime focus of national debate, policy and institutions. There are a number of reasons why: 

  • Unlike poverty or even inequality, the idea of economic security and insecurity is one to which most people – including many families with above average incomes – relate.
  • Economic security, and hence a person or households opportunity and prospective well-being, cannot be understood purely as a data-based designation but as something which combines objective factors and subjective experience and expectation. Two people with the same jobs and the same income can both have, and feel they have, very different prospects.
  • The economic price to be paid as a result of economic security results in a vicious circle. Unless there is security, progression in work and life become difficult, and this in turn has a cost in terms of economic growth and productivity. That then makes it difficult to ensure further policy measures to support economic security through investment in people, places and services become more difficult to sustain.

Ultimately, economic security is not just about income but about assets, resilience, adaptability, confidence, support - from the family to the state. The state can create the conditions for economic security but individuals and families must make the right choices too. Community, place and identity as well as personal finances are key factors shaping life chances and wellbeing. So policy can only go so far. 

However, policy makers have a fundamental role in shaping people’s life chances, and the trajectory of different parts of the country. There are political choices and policy choices to be made. At times when the economy is systematically failing to provide economic security for a majority, politicians have used the power of the state to respond. In 2018, 10 years after the crash and with significant political upheaval, we argue that those shaping the future of policy and public services must orient their work to addressing economic insecurity.

To follow today’s report, we will be publishing in the near future a new analysis of the reality of modern work based on seven portraits derived from survey data and interviews. It underpins our analysis published today. This will be followed by a new exploration of how to invest in people, provide them with an income floor taking a form similar to a Basic Income. And beyond, we will be continuing to develop wider understanding of the reality of 21st century economic insecurity. The conclusion we have come to is that now we know increasing employment is not enough, a greater push combined with innovative thinking matters. It is one of the causes of our time.  

Download the report Addressing Economic Insecurity [PDF, 1.5MB]

Read the report on Medium

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  • The economic security will never happen. We must know what the truth is. We cannot talk about multiple views – pessimistic and optimistic. Truth is unique and universal; otherwise Galileo would still be wrong. Laws of nature are the only truths. We must be able to recognize these fundamentals.

    Thousand years back, kings used to declare war against kings to (1) Steal their wealth and (2) Enslave their people. That is the principle of every economy. You cannot become rich without stealing from others. Win-lose is a law of nature. Today also we do the same thing by using false money. Money is false because money is not an object of nature. Therefore money is free and abundant at its source, which is the central bank. We now use this false money to steal our wealth.

    We employ people, give them free money to build physical wealth, then we create recessions, make them unemployed, homeless, and steal their wealth. Those who are working remain unsecured and deeply enslaved. There is no government, to give us protection and economic security. Government is controlled by money power. Take a look at the poverty chapter in the free book at https://theoryofsouls.wordpress.com/


  • Apologies: replied on Medium, so this a duplicate:

    Was anybody involved in this report in a-typical employment? Was there a review panel including people who have been in a-typical employment for many years?

    Here’s a few things you missed:

    Taxation (and therefore calculations of wealth) as a self-employed person are a year behind. This means one feast year results increased taxation in the famine year. Also, Student Finance calculates that you are rich enough on one year’s earning to fully fund your child at university but you must fund that year from your famine year’s meagre earnings.

    Pension limits mean you may have several years when you cannot afford to put any money into your pensions during the famine years but you cannot make up for that in the feast years.

    Contracts between a multinational and a sole-trader are considered to be between two equal businesses in the eyes of the law. That is patently nonsense and results in unfair conditions for the smaller of the two. We need a law of fair contract with free tribunal access to decide whether a term, or an entire contract, is fair.

    Late payment is a curse of the freelance. The law needs to be toughened so the burden for paying late payment fees and charges falls on the late payer. Every business, including sole traders, should have to identify how quickly they paid each invoice each year and pay the necessary additional fees and interest on any paid late. The fees and interest needs to be greater than it is currently to stop the deliberate late payments while money in invested on high overnight rates and other treasury management.

    Anti-discrimination legislation applies to employment contracts but not contracts for supply of services, adding greater insecurity to a-typical workers who have no protection against age discrimination, for example. An employer may not be able to sack a worker as they get older and replace them with a younger cheaper member of staff but a contracted supplier may be replaced with another younger, cheaper supplier without fear of penalty. The word discrimination does not appear in this report once.

    A second version of this report after speaking to long-term freelances would be a better-informed report.

    • Hi Chris,

      Thank you for your comment. Yes, these are all issues and we have picked up these up as part of our ongoing work on self-employment. I would recommend the following:

      https://www.thersa.org/discover/publications-and-articles/reports/the-entrepreneurial-audit

      There are also a range of other analyses available here which touch on all the issues you raise and they have involved a lot of direct engagement with the self-employed and freelancers over a period of time:

      https://www.thersa.org/discover/topics/enterprise?ContentType=Publications

      Hope this is of interest and helpful. I would also look out for our second report in the economic insecurity series to be published very soon.

      • The day you replied thousands of subcontractors in the construction industry faced ruin because Carillion has gone bust. Some may have done the work but not invoiced. Some may have completed work and invoiced but had money held back as a "retention". These are all issues that create economic insecurity.

        HMRC set up a special tax scheme so that individual construction workers could be taxed as staff for tax purposes but have no employment rights. The government and law makers have been complicit in allowing these poor and unfair practices to continue.

        And what about regulators such as the Financial Reporting Council and and the pensions regulator. Their abject failures in the Carillion case permitted the company to increase its dividend to shareholders each year while failing to pay into the pension fund. That has created massive economic uncertainty.

        Gordon Brown's dire decsions to alter tax and accounting regulations for pensions effectively closed hundreds of final salary pensions schemes - creating more economic uncertainty.

        You called the report "Economic insecurity in our times" yet missed several significant sectors of economic insecurity. The solutions offered, therefore, are inadequate and miss the main areas of concern.

        If this report had covered pension theft, dividends paid to shareholders from companies with excessive debt unfair contracts, unfair tax/employment regimes, and the need to reintroduce final salary pensions scheme and improved the pensions of a-typical workers, it would have been timed to perfection and might have been a useful rallying point given the news of the past few days. Instead it's a wasted opportunity.

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