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27

September

By Alan Lockey, Head of Research at Demos

The biggest issue facing British politics is what CapX editor Oliver Wiseman has called ‘the Ebbw Vale’ question.

But it could just as easily be called the Hartlepool question, the Blackburn question, the Dudley, Grimsby or Bradford question. Striking to the heart of the Brexit conundrum, it implores us to discover a wealth creation strategy that also offers our poorest communities dignity and security in a globalised economy. Both now and, in all likelihood, the future, the key questions surrounding the future of work will be important primarily for their connection to this fundamental question of political economy. Does our labour market policy help us meet this challenge?

At the moment, it is question without a straightforward answer. Labour market flexibility is generally a desirable quality, but as ever one can have too much of a good thing. In his landmark report, Matthew Taylor found more than a little evidence of ‘one sided flexibility’ – where flexible employment arrangements such as zero hour contracts come at the cost of severe insecurity. Worse still, there may even be strong arbitrage reasons – avoiding benefit entitlements, pension enrolment or national insurance contributions – why companies want to hire workers on such employment patterns. Which as well as a profound issue for social justice is also probably not helpful for alleviating Britain’s already meagre productivity performance.

On the other hand, just as we look longingly at continental wage growth and productivity levels, so too do some look enviously towards our jobs miracle. It may well be an economic puzzle all unto itself, but the fact remains that the defining character of the British labour market is high labour participation at least as much as it is stagnant wages. Of course, we all want an economy with soaring wages, high productivity, full employment and regional equity – but rarely in human history is anyone so lucky. The more pragmatic truth is our ultra flexible labour market model is almost certainly responsible for our high employment which, in turn, may also be partially responsible for our low productivity: if labour is too easy to hire, it can disincentivise more productive investment. We might have to be careful what we wish for – yes, we should work tirelessly towards a ‘good work’ labour market, but a crisis of insecure work is still infinitely better for society, if not necessarily for the economy, than a crisis of no work.

Yet while such macroeconomic considerations are undoubtedly big political issues, they can also obscure a big strategic decision about how we improve life for individual workers. For if, viewed from the other end of the telescope, our labour market goals are flexibility and security for workers, then we should not ignore that the rise of flexible employment patterns – and self-employment in particular – have primarily been driven by worker choice. Nobody denies that debates about company tax arbitrage, fake and unwanted self-employment are important, real and in many ways concerning. But the best evidence does suggest that for the overwhelmingly majority self-employment is chosen freely, happily and without many regrets. Moreover, for most self-employed workers, self-employment seems to be enjoyed and chosen in the full knowledge that it is insecure and, more often than not,certainly when compared to employment, low paid.

This is important because in the rush to tackle the social injustice of fake self-employment, policymakers risk missing a very profound signal about the unattractiveness of conventional employment for an increasing number of British workers. In fact, Demos research suggests that self-employment has become, to some extent, Britain’s de facto flexible work strategy – particularly so for people with disabilities, or long-term health conditions. Therefore, responding to rising self-employment by trying to push people back towards unreformed employment – which, unconsciously or consciously, appears to be the sotto voce approach of some policymakers – would seem to be a particularly perverse strategy.

And indeed this is where overblown commentary about the imminence of platform capitalism does, almost by accident, highlight the big strategic issue facing both the future and the present of work. To suggest a choice needs to be made between making employment more flexible or self-employment more secure (not to mention less fiscally damaging for the exchequer) would be wrong – we need policies for both. Nevertheless, a strategic approach to boosting flexibility and security for all workers should also make a pragmatic assessment as to which of these might be the easier labour market aspiration. We should at least be open to the possibly that it could be the latter – particularly if the cultural desire for flexibility continues to grow.