Security, Flexibility and Work

 Gavin Kelly and Carey Oppenheim
Nexus

Introduction

Rarely has a government put so much emphasis on work as the primary objective of social and economic policy. Work is at the centre of the reform of welfare, both as the chief means of tackling poverty and reducing the costs of the social security budget over the long-term. Work is also seen as the key to social inclusion offering social and psychological benefits to individuals and communities countering the damaging side-effects of unemployment - crime, dislocation and alienation. Creating high levels and a balanced distribution of work is therefore an overriding objective, indeed in its first year New Labour has almost defined itself through its employment-centred social and economic policy. Despite this focus on employment creation, public policy towards work does not end once the employment door is opened. Though some have been quick to caricature the government’s policy towards work in these terms (the more work there is the better - end of story) there is clearly more to it than this.

For some time the centre-left has been pre-occupied with trying to chart a course between a solely deregulationist route which undermines social protection and does little for economic performance, and a strongly interventionist approach which many fear inhibits job creation and economic dynamism. The Commission on Social Justice embarked on this by making the case for ‘intelligent regulation’ and ‘fair flexibility’ which combined enhanced quality of employment with improved productivity. In government, one arm of the strategy has been the development of active tax and benefits policies to absorb some of the fall-out from flexible labour markets. A second arm is the Fairness at Work White Paper which sets out the broad approach towards the workplace based on partnership, rather than conflict, combining minimum standards of protection with competitiveness. It sits alongside other initiatives such as the minimum wage, acceptance of the Social Chapter, the childcare Green Paper, and the proposals on the University for Industry and Individual Learning Accounts (ILAs). Similarly the DTI’s focus on the encouragement of 'modern companies' which is at the heart of government thinking on industrial policy, should also have implications for the organisation of work. Together these measures and proposals are of both substantive and symbolic importance, laying out key markers for the terms of the partnership between employee and employer, the balance between work and home, and the form of public support for individuals seeking the skills required to succeed in a comparatively lightly regulated labour market. Hence they point towards a new settlement, which is only just starting to take shape, on the rights and responsibilities of individuals, companies, and government with regard to work. What is already clear however is that this settlement reflects a broader understanding of work and the type of public policy initiatives required to underpin it. For the first time a progressive centre-left government’s public policy is not confined to viewing work simply through the lens of 'industrial relations'.

There is much to welcome in this general approach. Few on the centre-left will oppose either the aspiration of employability or the efforts to upgrade individual employment rights, promote patterns of work which are sensitive to both the needs of employers and those of the family, and replace workplace adversarialism with a variety of partnership arrangements. This does not mean that issues such as trade union recognition are not a central, and necessary, component of this new debate on work - they clearly are (though they are not the focus of this article). But a new approach towards the organisation of work was always going to have to be far more encompassing then merely rectifying some of the Conservatives’ constraints on the legitimate activities of trade unions. 

In setting out these aspirations Labour has developed a clearer notion of the direction in which the government would like to steer the organisation of work. An important step has been to agree on the basic architecture of legal rights and responsibilities in the labour market, one of the primary functions of Fairness at Work. But as the government acknowledges, the truly ambitious part of the reform process will be transforming the culture of work. This clearly requires changes in the attitudes of employers and employees, but it also means thinking about how government can use a variety of policy levers and pressures in addition to the traditional focus on employment law.

The rest of the paper seeks to examine a few of the ways that New Labour might develop its emerging approach to work. It does not pretend to be comprehensive or to arrive at firm policy conclusions, rather it illustrates by example the range of issues that a reformist agenda on work will need to wrestle with. To give some context we first of all very briefly sketch out some of the core trends in the labour market and work organisation over recent years, noting the recent debate on the employment effects of labour market institutions and regulations and the shift in the trade unions’ approach to the regulation of work. Then we outline three different possible components of a strategy aiming to improve work and the workplace environment in the medium term: family friendly employment, security and employability, and corporate and workplace governance. In conclusion we note some of the problems that government faces in the use of different policy levers.

Changes in the labour market and policy context

Both the shape of the labour market and the policy context over the 1980s and 1990s changed markedly. The new government’s inheritance couldn’t be more different from that of the 1970s. This is well-trodden ground, so we merely point to key trends: self-employment, part-time work (among men as well as women) and temporary contracts (though latter less marked in the UK) have all grown; women’s economic activity has increased sharply (in particular those in couples with children), a work rich/work poor divide has opened up, the role of small and medium enterprises in job creation has increased, and wage inequality between and within occupations has accelerated. Finally trade union membership has declined significantly (by 1996 it had fallen to 31% of all employees, 20% of part-timers, 21% of private sector employees, and 6% of employees aged under 20). When looked at together these changes suggest large-scale changes in the employment landscape. They are the result of a complex combination of external and policy factors including: the fall in demand for unskilled manual work, changes in production process, the premium put on skills/education, intensification of product market competition, and the adoption of a legal framework hostile to trade unions. Although these changes have not necessarily resulted in endemic insecurity - the evidence on this and related issues such as job tenure is, at most, mixed (Corry, 1997) - they do suggest that there has been fundamental changes in the world of work which demand a reappraisal of policy objectives.

Where we are now: employment and labour market institutions

Two important contexts have been important in framing the debate about the future of the workplace. The first focuses on the reappraisal of the relationship between labour market institutions and economic performance; the second on the changes in trade union perspectives on regulating the workplace.

For a while it became intellectually fashionable to declare that the straightforward deregulationist strategy pursued by the Conservatives was the only viable future for labour market policy. More recently however there has been a slight but nonetheless important shift in the debate due in part to research that has underlined the interdependency of different labour market relationships and thereby made clear the inaccuracy of over-simplistic generalisations about the job-destroying consequences of all so-called continental style labour market institutions. Here the comparative work of Nickell and Layard (1997) is striking in its finding that there is little evidence that stricter labour standards or greater employment protection has any clear effect on aggregate unemployment levels (though there is some evidence that greater employment security increases labour productivity). Not surprisingly this aspect of their research has been plugged by those who have been pushing for tighter regulation (less profile has been given to the flip-side of their argument, that it is wages rather than unemployment that adjusts to tighter regulation). Others have pointed out that, in any case, the 1980s and early 1990s were by no means one long tale of de-regulation as there were considerable extensions in EU regulation on individual employment rights (Taylor, 1997). Useful though these insights have been as a corrective to the emerging but ill-founded consensus on the labour market, it is not altogether clear what policy implications they point to. The argument that labour market de-regulation has not delivered as promised does not mean that we can be sanguine about the merits of re-regulation, which is one of the reasons that the centre-left's critique of an exclusively deregulationist strategy was for a long time sharper than its own positive prescriptions for reform. Nevertheless, this revisionist research agenda has been important in clarifying the combinations of policy measures which tend to generate favourable (or damaging) labour market outcomes and has illuminated the parameters within which public policy can seek to increase security without undermining flexibility.

The second important context concerns the change in the position of trade unions. In terms of policy the most notable shift has been the move away from an entrenched attachment to a voluntarist tradition in industrial relations, which, together with the unyielding attitudes of some British management, was such a feature of the era of adversarial workplace relations. Today’s TUC has broadened its outlook, being at the forefront of campaigning on the minimum wage and encouraging improved standards in areas such as family friendly issues, whilst also developing expertise in the provision of key services to its members and demonstrating how responsible unionism can also help boost labour productivity and corporate performance through greater employee adaptability and skills. Given the changes in employment outlined above, it has become clear that this is the terrain on which a successful ‘new unionism’ will be built. The paradox is that this more progressive agenda has emerged at the same time as it has become evident that unions increasingly do not represent those in the most insecure corners of the labour market (95% of union members hold jobs with permanent contracts). This suggests that a priority for new thinking on work should be to consider what role there may be for innovative employee-support organisations (whether they are called trade unions or something else) which can act as a prop to those in less secure forms of employment.

 

 

Future policy directions

i) A Family Friendly Agenda

Family friendly policies are being actively pursued by the government. They underpin the work-centred reform of ‘welfare’ and for the first time are seen as an important tool of economic policy. These issues will continue to dominate the public policy agenda for a number of reasons. First, government policy has to find ways of reconciling women’s increasing labour market participation and children’s need for time with their parents which is important to educational success and emotional well-being (Glennerster, 1998). A second reason for family friendly policies staying on the political agenda is that childcare on its own is not enough. For those with children (particularly lone mothers) the capacity to sustain paid work depends on a complex interplay of factors, which (in addition to the availability and cost of childcare), include: wage and in-work benefit levels, flexible working hours, and basic levels of education and skills. Indeed, though more than a third of lone mothers identify the cost of childcare as a barrier to paid work, only 5% say that it is the cost of childcare alone which holds them back (Ford, 1996). Third, the family friendly policy agenda was developed in 1980s driven by the justifiable concern to tackle gender inequalities at work. The most visible progress was achieved in the public sector and large corporations. As a result, it is only recently that family friendly policies have been placed in the context of debates about the pros and cons of flexible labour markets and the proliferation of small and medium sized enterprises. In the future, family friendly issues will need to be fully integrated into our overall approach towards employment policy.

 

 

A framework of rights

The government’s existing programme represents a major step forward. The Fairness at Work White Paper outlines an extensive framework of minimum rights including, working time, unpaid parental leave (and leave for urgent family reasons to care for a sick child) and improvements in maternity leave rights. Alongside these initiatives the National Childcare Strategy includes funding for a national network of after-school clubs and the generous childcare tax credit. Finally, the introduction of paid paternity leave, although limited in duration, will be a significant step in changing employer/ee expectations.

 

Establishing a core of basic rights is of particular importance to the most marginalised workers, where there is least incentive for employers to take on the burden of family friendly policies. However, rights to parental leave will not necessarily filter down to the low paid and insecure. Without entitlement to pay it will inevitably be predominantly better off employees who will be able to benefit from the option of parental leave. This points to the need to explore different ways of funding parental leave (Wilkinson, 1996), from sharing costs between employers and employees through National Insurance Contributions (although this goes against the grain of current policies which attempt to lighten the burden of National Insurance), to the creation of flexible savings accounts with an element for parental leave and some subsidy for those on lower earnings.

 

However, framing rights is only one tool for achieving change and often a rather blunt one. The overall work culture will influence both whether entitlements are taken up and the scope for further change. Over the 1980s, despite a hostile regulatory environment, many public and private sector employers with high proportions of women workers recognised the business case for family friendly employment and created imaginative schemes to meet parents’ and carers’ needs. There is much to learn from these initiatives. For policy proposals need to be grounded in a better understanding of what currently constitutes good practice in relation to family friendly policy.

 

 

What employers can do

Good employers have adopted a variety of approaches such as: flexible working arrangements (including employee involvement in fixing rotas and shifts), extended leave arrangements (not necessarily confined to children), help with childcare (ranging from the provision of vouchers, and subsidised places, to help in searching for childcare), widespread dissemination of information (for example, maternity packs), workplace support groups, the evaluation and monitoring of the performance of existing practice, and the integration of family friendly approaches into mainstream training and management thinking (Parents at Work, 1994, TUC, 1998). This type of approach is predominantly associated with large-scale employers. While these advances are important in shifting our expectations of what is possible in the workplace, it is also very clear that we should not anticipate that these policies can be simply transferred to small and medium enterprises. It is the case however that the evidence on smaller firms suggests many companies are sensitive to family friendly needs, but reflect this through informal arrangements (Harker, 1995). In particular, flexible working arrangements such as time off for a sick child is often practice if not policy. The goal must be to broaden the take-up of this approach. Groups of firms could do this themselves by buying into locum support which shares the costs of advice, childcare support and the dissemination of good practice. Moreover existing publicly funded institutions such as Training and Enterprise Councils could also play a more active role in this regard, as could intermediary organisations such as unions or other employee-support organisations.

 

 

Government strategies to influence employers

What role can government play in encouraging employers to adopt progressive policies in this area? Family friendly policies have tended to be discussed in isolation from other elements of the employer/employee relationship and outside the context of debates about company obligations, which inhibits a flow of information which would assist policy discussion and intervention. Even with our current knowledge there are still policy options each of which might nudge employers in a progressive direction. The latest evidence from the Day Care Trust (1998) shows that while almost three-quarters of companies surveyed recognised the business and moral case for family friendly policies there remains a yawning gap between intention and practice. It seems that there is plenty of scope simply to get firms to implement their existing policies more effectively. Benchmarking is a useful tool in this regard and could be encouraged by government, industry, and professional associations. For example, companies could be required to detail family friendly policy and practice in their annual reports, and leading firms in each sector could set standards for the sector as a whole. Also government could play a more active role as a clearing house for good practice by using existing centres of expertise such as Opportunity 2000, Parents at Work and the Daycare Trust more extensively in an advocacy capacity. A different strategy involves the use of tax incentives. Currently employers receive tax relief if they provide workplace nurseries and some have argued that they could be extended to childcare vouchers. But given the introduction of the childcare tax credit, it is difficult to justify a tax relief here. Since attitude surveys show that parents prefer informal childcare (with a member of the family or friend), one way of progressing might be to extend the childcare tax credit to informal carers rather than registered child minders and nurseries. The obvious problem with this is that it raises difficult questions about quality control and abuse of public funds. A rather different approach is to try and adjust work time itself. In this context it is worth exploring whether a tax advantage could be given to companies where flexible working arrangements are both offered and taken up. This would be a rather more focused version of the US Democrat’s "A-Corp" proposal which offered tax relief to companies who fulfilled a range of obligations. Lastly, government should undertake further research which examines the types of support that is required by SMEs if more of them are to adopt family friendly policies. In short, over and above the government’s commitment to improvements in minimum rights there is also a real need to think about how policy tools can help promote best practice in this field.

 

 

ii) enhancing security and mobility

It is not necessary to accept the wilder accounts of pervasive employee insecurity in order to recognise that there are many groups within the labour market who face substantial insecurity over issues such as tenure, pay levels or pension contributions. Fairness at Work proposes some positive measures in this regard including: the shortening of the qualification period for protection against unfair dismissal from two years to one, a right to trade union representation in grievance and disciplinary disputes, the removal of the right of employers to ‘contract around’ unfair dismissal provisions in short-term contracts, and possible restrictions on "zero hours contracts". Other changes which will directly impact on aspects of financial security are the minimum wage and Working Family Tax Credit which will put a floor on pay levels. Together these represent a significant departure, but they clearly do not exhaust the possibilities for further safeguards. An important medium-term objective for enhancing security would be the development of a basic universal framework of rights available to all employees, since the current variegated standards applying to different categories of employees are becoming increasingly anomalous. The EC Directive on part-timers constitutes a step in the right direction as it ends discrimination against this group of workers, but there remains scope for further erosion of these imbalances (Fabian Report, 1996). Another priority should be measures to protect those who move in and out of the labour market and are therefore unable to build up pension or other social insurance entitlements. One proposed solution to the exclusion from contributory benefits which results from this revolving door of unemployment and low pay is to devise a system of publicly funded "social insurance credits" for those who can only make intermittent pension contributions (Huws, 1997).

It is also the case, however, that instruments other than defensive legal protections are vital in generating greater security where it is most needed. For example, the possibility of exiting a poor job enhances security in a meaningful way: thus it is wrong to simply equate security with high levels of employment protection. This distinction underlines the current emphasis on training. It is well established that those on the margins of the labour market are least likely to benefit from the training which fosters greater job mobility (Arulampalam and Booth, 1998). The implication is that if the "full employability" agenda is to deliver tangible benefits where they are most needed, ILAs need to ensure accessible and affordable training opportunities and employees need to have the opportunity to take training leave. Other restrictions on mobility derive from job related benefits. This can be seen most clearly with regard to private occupational pensions - namely defined benefit schemes - which impose penalties on individuals who change employer. Again this runs against the grain of the employability agenda. If the flexible labour market is also to be a fair and efficient one then job-related benefits need to be portable.

 

For those at the sharp end of the labour market access to the key resources on which security rests will not be guaranteed by individual rights and statutory entitlements alone, it will also require some form of collective organisation. As we have noted it is in precisely this segment of the labour market that trade union coverage tends to be thinnest. The existence of this representative gap for those in atypical employment has prompted a number of innovative proposals for organisations which could play this role, whether they be reinvented trade unions, 'workers guilds' or 'employee mutuals', each of which could provide vital resources such as a site of continuity across jobs, access to training opportunities, the kite-marking of key services such as pensions, and membership of employment networks and job-search facilities. While these are unlikely to be public sector agencies, government could clearly have a role here in fostering their development. For instance, their uptake might well be (partially) dependent upon public sector recognition of their status as agencies capable of delivering or organising services such as training. However, making these organisations work for the low paid and insecure workers is a substantial challenge. Working out whether this type of intermediary would be able to deliver tangible benefits to those on the margins of the labour market, and if so, the role of public policy in supporting them, should form part of the employability agenda.

 

 

iii) human capital and the company

Encouraging the development of what the government calls 'modern companies' has become a central component of policy on corporate competitiveness and the enhancement of productivity. According to Fairness at Work a pre-requisite for being 'modern' in this regard is that companies ensure that: employees ‘understand the business so that change is readily accepted’; are encouraged to ‘exercise their initiative and to contribute their ideas to the development of the business’; have the opportunity to develop through training in such a way that lets them ‘respond to and lead change’; and finally, companies themselves must recognise that employees have an interest in their company’s success. One reason for pressing on this theme is the long established gap between managerial rhetoric about the extent to which employees are companies' most valuable asset and the reality of the limited opportunity for meaningful employee involvement within many workplaces, less still participation in decision making.

This lack of imagination with regard to the position of employees was demonstrated in the adversarial tone which characterised much of the debate on corporate stakeholding. On one side, some protagonists seized the corporate reform agenda as nothing more than an opportunity to further the cause of "representation" and to constitutionalise "industrial democracy" within the firm, sentiments which were gleefully seized upon by many critics who clung to the view that any rethinking of corporate objectives and responsibilities would inevitably weaken corporate accountability and undermine wealth creation. In the face of this cross-fire Labour’s response that stakeholding meant exclusively cultural not legal change was politically understandable, if not economically desirable. But from the perspective of mid-1998 (rather than pre-election 1996) it is clear that if development of human-capital is to be one of the organising principles for our thinking on the organisation of work and companies, then there must be a measured debate as to how this can be reflected in the principle and details of corporate law and regulation. This will mean having an open mind on a range of issues, such as the coverage of directors’ fiduciary duties, the treatment of investment in training and skills in accounting procedures and disclosure requirements, and the role of the annual report in communicating information to employees. We should also be willing to examine thorny issues such as board composition - not in order to impose some form of employee representation which is likely to be counter productive, but as a means of improving the quality of non-executive directors. For instance, creating a system where it was the norm for individuals from a variety of backgrounds, including employees, to have access to the training required to work effectively in this role would increase the pool of talent available to companies, help professionalise the post, while also serving to reduce the information gap between the board and ordinary employees. Finally, the debate on developing human capital in companies should also encompass public policy on related issues such as the purpose and structure of employee ownership schemes as well as the measures taken to promote them, for they represent an under-utilised basis for generating and rewarding employee commitment.

 

The need for this re-evaluation is one reason why the DTI’s post-Hampel announcement of a wide-ranging review of company law represents such a positive step. While it may be the case that in isolation each of the above proposals would appear piecemeal, taken together they would help create a framework within which it would be possible for a new model of employee-company relations to emerge. Once again though the limited capacity of changes in the law to effect the necessary change needs to be stressed. The view that changes in company law will in themselves secure more participative and productive companies is as misplaced as the contention that the UK's arcane framework of corporate law is ideally suited to current times. Putting in place a progressive body of company law and regulations is a necessary, but not sufficient, step in increasing the number of ‘modern companies’ that the government has talked of.

 

As the Fairness at Work made clear a more productive approach towards the treatment of employees also requires encouraging partnership within the workplace. The emphasis needs to be on developing a framework which fosters the high-trust high-commitment relations which improve communication flows between management and employees and facilitates the spread of ideas and eases the introduction of new working arrangements or technologies. Using public policy to remedy these deficiencies is, once again, complex. It is self-evidently misguided to propose that governments can somehow force companies to develop high-trust relations with their employees. The aggressive promotion of best-practice through voluntary methods is clearly needed, though care must be taken not to promote a single model of participation which would be inappropriate for some firms. Indeed, given the focus of much of the relevant ‘social partnership’ research on big industrial firms there is a danger of being too large-firm centric and over-formulaic in this regard. Another difficulty concerns finding the appropriate agencies to carry out this advocacy of partnership arrangements, a task made less straightforward by the comparatively underdeveloped status of the UK's business associations. Nonetheless Fairness at Work makes progress in this regard. In addition to pledging public funds to assist the training of managers and employees in developing partnerships, it also proposes an enlarged role for ACAS and Business Links (at a local level) in spreading a co-operative approach to work.

 

The difficulty will be if in the medium term this approach fails to generate the necessary shift in workplace relations. Those who question the efficacy of the voluntary approach have long made the case for the introduction of mandatory representative bodies for employees in all firms (i.e. not just those transnationals covered by the Social Chapter). Indeed the government has already taken a small step in this direction by recognising its commitment under European law to ensure that all companies inform and consult with either trade unions or (in their absence) independent employee representatives on planned redundancies and business transfers. Pointing in the opposite direction however, is it’s opposition to a proposed EC Directive on employee involvement and consultation in national firms (above some minimum size threshold) on the grounds that it breaches the subsidiarity principle, would undermine the diversity of experience within EU countries and could not reflect the requirements of individual companies. Neither of the first two arguments would impede action at the national level should voluntary action not generate greater employee involvement. There is a need therefore to explore whether it is possible to devise an obligation to ‘inform and consult’ which is sufficiently binding so as to force lagging firms to adjust, but sufficiently flexible so as not to impose inappropriate structures on workplaces which have found their own preferred method of engaging with employees.

 

 

Conclusion

 

Much of the agenda that has been the subject of this article is premised on the notion that public policy can enhance the quality of working life without being costly in terms of employment. Overall we are optimistic about the extent to which improved basic standards go hand in hand with better economic performance. The problem is often in identifying the appropriate tools of public policy capable of bringing about the required change. ‘One size fits all’ legislation can be entirely inappropriate, whilst tax incentives are often blunt and costly (if every bright policy idea led to a new tax exemption the tax base would be increasingly narrowed). Similarly there are limits to the extent to which governments can impose additional organisational requirements on companies bidding for public sector tenders. With these potential pitfalls in mind, however, we still think that it is worth considering how these levers can be used to prompt companies to adopt new practices. But we also need to be think seriously about other measures. Using disclosure requirements strategically is, for example, an increasingly important (though still under-utilised) instrument of public policy. Though a simple disclosure requirement may in itself be insufficient, when combined with other measures such as ‘kite marking’ it can create a momentum for ratcheting up standards.

Whatever policy levers are utilised it remains the case that there is an absolute need to do everything possible to implement change sensitively, and where possible, to rely on voluntary action - not least because of the danger of corporate-fatigue in implementing or co-operating with government initiatives. But this does not imply that we need be too defensive in making the economic case for policy measures. ‘What is, is best’ was never a sensible guide to thinking about public policy towards the organisation of work. While it goes without saying that it is necessary to ask why it is that business has not itself already introduced a proposed reform (which is supposed to improve efficiency), we should also not be too surprised if there is a convincing answer to this question. There are strong grounds for maintaining that the invisible hand does not automatically ensure that companies adopt structures that maximise wealth creation. Consequently policy should be sensitive to, but not mesmerised by, the argument that companies will of their own accord adopt efficient practices.

The Labour government is feeling its way towards an agenda which reflects the needs of the contemporary world of work. But there is still a long way to go. If built upon, however, the measures to date could mark the beginning of a progressive settlement which is founded on partnership, enhanced security and mobility in a competitive economy.

 

 

 

 

Gavin Kelly is a Researcher at the Political Economy Research Centre, University of Sheffield and Carey Oppenheim is Senior Research Fellow in Social Policy at the IPPR.. This article will appear in a forthcoming edition of Renewal.

 

 

 

References

 

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