Taylor and the Labour Market

By Ian Brinkley, Acting Chief Economist, CIPD

The Taylor report published on July 11 sets out a number of recommendations on changes to employment law and practice to improve the quality and fairness of employment. Although billed as having a particular focus on the gig economy, much of the report is taken up with broader issues for those working as self-employed, agency work, and those on zero hours contracts and also more broadly about lower skilled, lower paid work in general. The report’s stated ambition is to create a framework which can be developed over time to deliver good work for all.

Taylor’s report is soundly based because it takes a realistic and balanced view of the overall performance of the UK labour market. His report notes that while the public is rightly concerned about what has gone wrong with employment, there are also some significant strengths. All economies have to balance the need for flexibility and high levels of employment against protection of workers, and Taylor suggests the UK has broadly speaking got the balance right.

This in turn means that Taylor has been sensitive to the need to preserve the UK’s labour market flexibility while seeking improvements that are likely to improve the position of those who at present lack bargaining power and may suffer from what the report calls “one sided flexibility”.

In the report this is described as the British Way. This rather puzzling description might suggest that the UK is uniquely successful. Among the G7, the UK has a lower employment rate than Germany and Japan, but higher than the US, Canada, France, and Italy. Across the OECD, the UK’s overall labour market performance is good, but not the best. There are still things to be learned in some areas from other economies with even higher employment rates and better productivity performances.

The notion that we live in a time when permanent employment is on the way out with zero hours contracts and the gig economy becoming the new norms is rightly dismissed. The report notes that full time permanent employee employment remains the most common form of employment, with the share not greatly changing over the 20 years since 1997. It also notes that most forms of what the report terms “atypical” employment are valued and taken out of choice by most people.

Other myths dismissed are that the labour market has been “hollowed out” with the only growth in employment coming from good jobs at the top and bad jobs at the bottom. In reality, the middle of the labour market has been recolonised with different jobs, often requiring different or higher levels of formal qualification than those they replaced.

Although quality of employment is a major theme of the report, there is remarkably little analysis of whether the quality of employment is improving or worsening overall and for different groups, and in what ways. Recent work suggests that on average work quality in the UK is at least as good as in other major European economies, that the UK has a relatively high share of good quality jobs, and that overall work quality has improved over time. Yet as Taylor notes, there is no agreed framework or official definition for measuring work quality and it would have been possible to fill the whole report discussing the relative merits of the plethora of measures and definitions available.

Taylor makes some useful recommendations to develop a set of official measures of job quality and undertake on a more regular basis the Workplace Employment Relations Survey (WERS), a valuable source of evidence from both employers and employees on workplace change. The review also acknowledges the work being undertaken between the Institute for Employment Research (IER) and the CIPD to get a better understanding of quality of work frameworks and indicators and how they might be used to improve both workplace practice and policy.

There is also a welcome strengthening of the role of labour market institutions, including giving the Low Pay Commission (LPC) a wider remit to look at the quality of work (albeit, an even better focus would be for the Commission to look explicitly at the underlying causes and solutions to low pay).

The reforms put forward by Taylor are for the most part sensible and reasonable. They will bring about some incremental but important improvements for many of those who suffer from one sided-flexibility without compromising some of the underlying strengths of the UK labour market.

However, the wider transformational changes that Taylor aspires to over the long term is still a work in progress. It will require patient and consistent effort by employers to improve the quality of work while preserving jobs and reasonable flexibilities, supported by labour market institutions, trade unions, and other stakeholders and a wide range of relevant policy levers including skills and industrial policy.

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