With the launch of its Good Work Plan, the government has renewed its commitment to a flexible UK labour market. Critics say business interests have once again been put ahead of those of workers. But with unemployment at a 45-year low and real wages growing at a clip, has the government’s hands-off approach paid off?
Eighteen months on from the launch of The Taylor Review of Modern Working Practices, the government has finally published its response.
The upshot? 51 of the Review’s 53 recommendations will be enacted. The government promises to introduce a day one statement of rights for all workers, scrap the Swedish derogation rule that allows agency workers to be paid less than permanent employees, and quadruple the maximum tribunal fines for negligent employers.
The reaction from unions and economic pundits has been noticeably frosty. While welcoming some of the reforms, Frances O’Grady of the TUC lamented that the overall package “won’t shift the balance of power in the gig economy.” The IWGB went further, saying that “exploited workers in this country are sick of press releases, rhetoric and self-congratulatory government announcements”.
Other critics repeat the same message: the government’s commitment to flexibility has gone too far and workers must be granted more protections.
But are these valid complaints?
It is no secret that UK workers have struggled over the last decade. Median wages are still below their pre-crisis level in 2008, and 7 million people in working households now live below the poverty line. What’s more, much of the jobs growth since the economic crash has come in the form of contingent work, which is by definition precarious.
One could argue, like O’Grady and others, that these challenges merit strengthening employment regulation. Some have called on the government to ban zero-hour contracts. Others argue that we need to extend full rights to all workers, including to the self-employed and so-called limb (b) workers (a legal status of employment that sits between employees and the self-employed).
Yet many of these demands are either undeliverable or unwarranted. Ban zero-hour contracts and you deprive thousands of workers of a job that suits their lifestyle. Just under 60 percent of people on ZHCs are satisfied with the hours they work. Many businesses, particularly small ones in the hospitality sector, could not survive without access to short-term labour.
As for extending rights to all workers, what does this mean in practice? As my colleague Brhmie Balaram explains, the reason the self-employed do not have access to full maternity pay and other rights is because they pay lower rates of National Insurance contributions. Do those who demand those protections understand the tax implications of what they ask? It seems not.
The reality is that by taking a moderate approach to labour market regulation, the UK has managed to encourage hiring and business creation. At 4 percent, our rate of joblessness is at its lowest since 1971, over 45 years ago. This is a remarkable achievement, especially when compared to the experience of our European neighbours; France has an unemployment rate of 9 percent and Spain 15 percent.
Many would expect flexibility to deliver such an outcome. You get low unemployment, critics say, but at the cost of meagre wage growth. Yet something curious has happened over the last year. Not only has unemployment continued to fall, wages have started to rise in tandem. In fact, UK wages grew by 3.1 percent in the last 12 months, amounting to the biggest pay rise in nearly 10 years.
The good news doesn’t end there. The composition of jobs in the economy also appears to be shifting – away from contingent roles towards permanent positions. The number of UK born full time employees grew by nearly half a million in the year to September. As Michael O’Connor points out, this is a new post-recession record. Meanwhile, the growth in self-employment has flatlined, and the number of people on ZHCs has startled to tumble.
While workers have a long way to go before they see a return to meaningful improvements in living standards, it is difficult to ignore what Bank of England Chief Economist Andy Haldane has called a ‘new dawn’ for UK workers. Ten years is a long time to go without substantial wage growth. But it has finally arrived. And thanks to our pragmatic approach to labour market regulation, millions have been kept in jobs along the way.
What does all this mean for the Good Work Plan? It suggests we should think twice before calling it unduly timid. No doubt further reforms could be made. The injustices of Universal Credit, our dysfunctional tax system and our inadequate pensions system are all ignored. But the Plan will make a meaningful difference to the lives of millions of workers, and it will do so without jeopardising the flexibility of our labour market.
Pragmatism in politics is hardly a crowd pleaser – but we are beginning to find that, in the long run, it delivers the goods.
Find out more about the Future Work Centre.