CIPD Voice: Issue 10
Labour focuses mainly on the fall in real pay since 2008, which is true, but also says that jobs are increasingly low paid and insecure which is not. The Conservatives reiterate their commitment to full employment, but do not define it.
The Conservatives propose a new employment subsidy – a one year national insurance holiday - for some disadvantaged groups and the long term unemployed. Past experience suggests this will be wasteful and ineffectual. Most employers who get the subsidy will have made the hires anyway and few employers will find it attractive enough to make new hires. A better use of the cash would be to support more targeted and bespoke initiatives.
Labour market institutions
Labour wants to create a new institution, a Ministry of Labour. Most OECD countries have a labour ministry but it is not clear what functions the new Ministry would have. Labour would also set up an independent commission to help “modernise the law” around employment status. It is not clear how this relates to the Taylor report, which will be covering similar territory.
The Conservatives say they will await the Matthew Taylor report on employment rights in the gig economy, which the previous government had set up, but with the strong implication that at least some of Taylor’s recommendations will be implemented to “ensure that the interests of people on traditional contracts, the self-employed, and those working in the gig economy are properly protected.” The Lib Dems take a similar position.
The Labour Party does not refer to Taylor and is more prescriptive, saying it will ban unpaid internships and zero hour contracts. The former is reasonable – anyone doing some work should receive some pay. The latter is not, as it fails to recognise that many people on zero hours contracts value the flexibility they offer. The Lib Dems would introduce a right to request, which seems a more reasonable option.
Labour would also introduce a default option so that workers are assumed to be employees unless employers can demonstrate otherwise. This appears confused – the default option is to assume people in the gig economy are workers rather than self-employed. This might be appropriate for some individuals who are notionally self-employed contractors for companies such as Uber or Deliveroo, but looks unworkable for genuine freelancers.
Rights at work
Labour would introduce “equal rights” for all employees from day one, whether full or part time or temporary or permanent. This is a bit of a puzzle, but if what the Party means is that, for example, protection against unfair dismissal should be effective from day one, then this may make employers more wary of hiring and reduce employment opportunities. It would be more sensible to return to the pre-2010 position of a 12-month wait.
Labour would abolish the Trade Union Act and “roll out” sectoral bargaining. As the arguments in favour of some of the Act’s provisions was never very strong, its abolition is unlikely to have much impact in either direction. Also, it is not clear what roll out means. Most bargaining in the private sector today is undertaken at company not sectoral level and generally works well. It is unlikely many employers would welcome the imposition of new bargaining arrangements. Other measures look more reasonable or at least are changes most employers could live with, such as a guaranteed right of access for trade unions to the workplace and the abolition of tribunal fees. The Lib Dems also favour the latter.
Labour would also consult with employers and trade unions on strengthening redundancy requirements, on the grounds that multi-nationals find it easier and cheaper to make workers redundant than in the rest of the EU, with the implication that cut-backs have unfairly targeted UK plants and offices. Although believed by some, it is not clear this is true – market access and other factors such as workforce skills seem to be more important in determining the ebb and flow of foreign direct investment.
The Conservatives say that they will deliver the previous commitment to increase the National Living Wage (NLW) to 60 per cent of the median by 2020, and then impose a period of stability by ensuring it stays at this rate. Labour wants to align the National Minimum Wage with the voluntary Living Wage (which is higher than the NLW) and expects the latter to be £10 an hour by 2020. The higher wage would also apply to all workers over 18.
On both proposals, the UK would have one of the highest NMWs in the world. So far there has been little aggregate impact on employment from the first increases in the NLW, but it remains to be seen if this continues in the face of continued steep increases. Labour’s proposal would accelerate the rate of increase between now and 2020 and impose a very sharp increase in the wages of some young people currently on the NMW. This must increase the danger of some adverse impacts on employment, especially for the young.
The LibDems say they would establish an “independent review” to determine how to set a Living Wage across all sectors and pledge to introduce a Living Wage for central government and encourage other public sector employers to adopt it.
Under the Conservative and Labour proposals rates are going to be set by politicians between now and 2020. All the proposals imply a more formulaic approach after 2020, tying future rises to changes in the Living Wage or to median earnings. All three parties sideline the Low Pay Commission, even though in uncertain times the value of a credible and independent social partnership body in helping determine future increases should have been obvious. This is a pity, and in our recently published Manifesto for Work we call for the restoration of the full independence of the Low Pay Commission so that future rises are based on evidence-based judgements and not politicians. We also suggest the widening of its remit to look at the underlying causes and solutions to low pay as part of a modernised industrial policy which seeks to raise productivity in all sectors of the economy.
Ian Brinkley, Acting Chief Economist
Ian Brinkley has been acting Chief Economist since July 2016. He was previously director of socio-economic programmes at the Work Foundation and held the positions of head of the economic and social affairs department and chief economist at the TUC between 1996 and 2006.