The future of the UK jobs market

The future of the UK jobs market was chaired by Peter Cheese with Michael Davis (UKCES), Norman Pickavance (Head of People and Culture, Grant Thornton), Paul Nowak (TUC). As this was a discussion, I’ve tried to record it more like “minutes” than a blog so you know who said what!

PC opened by describing the “bifurcated labour market” – there are lots of low skill, low pay jobs; a “hollowed out” middle then higher skilled jobs that are increasingly difficult to fill.

Each speaker gave a brief opening statement about their view of the current situation of the UK labour market.

Michael Davis:
We’re facing a productivity paradox – how many people do you have in work and what in sum do they produce. We need to understand why we haven’t seen any growth in this recovery. He said UKCES see three issues:

1. Getting into the labour market is harder than it used to be for young people. The rate of youth to adult employment is four times higher. In Germany for example, they are far closer. Also young people who end up being unemployed for over 12 months find it much harder. It disproportionately impacts on ethnic minoritues and people living in cities
2. Getting on in the labour market. The labour market is currently maybe not as dramatically shaped as an hourglass but more a dumbbell shape. We have a shrinking middle – due to a combination of globalisation and technology.
3. Moving up in the labour market – this is a conundrum: there’s an acute shortage of higher level skills, but there are also people who are under-utilised in their organisations.

Paul Nowak:
Paul made three key points:

1. Pay and the link to living standards – there is an “epidemic” of low pay. In the North West 1 in 4 people earn under the Living Wage. We have become very good at creating a large number of low paid jobs in this country. Also there is a large and growing gap between shop floor wages and the boardroom.
2. The quality of the experience at work – the emergence of short hours working, zero hours, widespread bogus self-employment and agency working. The rise of outsourcing, the increasing fragmentation of the public sector.
3. The short term approach of UK plc – 1 & 2 are symptomatic of this. The UK lags around 20 percentage points behind other economies. This reflects a lack of investment in both staff and management and a lack of industrial strategy.

Norman Pickavance:
Norman said we’ve heard a lot of the background there and asked “Why does the problem exist?” We’ve made conscious decisions over the last 25 years about how we want to run our organisations. These have had unintended consequences,notably:

• productivity is not improving – this is a mystery
• innovation is still below 1970s levels
• there has been a decline in engagement in the workforce
• there is a high level of anxiety in the workforce caused by uncertainty – a stress epidemic. You are 4 times more likely to have a heart attack if you’re in an insecure job
• the Leach report on skills showed the UK is a “third division country”, however CEOs identify talent as a “top three” issue
• only 1 in 5 say they trust what their CEOs say

Against those as KPIs, we haven’t been performing. Why? Again, Norman offered three reasons:

• Mega trends: there is an abundance of labour. Pay is levelling out at the lowest common denominator. Also: technology & demographics.
• HR: we need to examine some of the policies we have been enacting for a long time. HR’s mantra was “they’re not personnel, they’re flexible resources to be managed”. Why innovate when you have a totally flexible resource? We have actively sought to engineer out people. People can’t progress through the organisation because the jobs in the middle have gone.
• Shifting values: leaders have started to make a distinction between people who matter and people who don’t. The former are on your talent review lists. The latter are outsourced, zero hours; we believe it’s OK for them to have a different set of rights and be treated in a different way. People understand this is happening. We talk about a lack of engagement, especially amongst milennials, but why would you commit to this concept if you were a young person?

PC asked the panel to consider what the issues were at both macro and micro levels.

MD:
At the macro level, the Industrial strategy is something the Coalition government got behind in 2012. The TUC has remained firmly behind it, as has the CBI. At the moment, we don’t have a confident sense of which sectors in the economy give us a real source of competitive advantage.

At a micro level, the HR profession must recognise that the workplace is a key arena to deliver social mobility: we have to design jobs that enable progression. Also, apprenticeships are a key lever – but we have a way to go to create meaningful apprenticeships as in other countries. Secondly, we need to see the workplace as a space for innovation on how jobs are designed. We now have what the UKCES are calling a “4G workplace” with four generations working together. We need an HR profession that can use Excel!

He said he had always thought that the two organisational departments that didn’t need to prove their financial value (and in many ways probably couldn’t) were Marketing and HR. Marketing now have Google Analytics – they can point to the value of their activity to their organisation. We need to provide details of the value of people.

PN:
We need to crack the productivity gap and improve the experience of work, drive up living standards. Maybe we should have national KPIs beyond GDP and unemployment. There needs to be brave political leadership, whoever wins the next election.

On pay, at a macro level the government can boost the National Minimum Wage (NMW), actively promote the Living Wage and rethink the approach to public sector pay. Do we need a sectoral NMW? There needs to be active support for unions and collective bargaining (this raised a few smiles in the room!).

Organisations need to take responsibility for supply chain – who are the “people that don’t matter”? How do we drive good behaviour down the supply chain? Workers should be on remuneration committees – engage workers in decisions on top pay. The gap between boardroom pay and shop floor pay drives division, it’s not felt fair in the workplace. A whole generation of young people have had their sights set so low in work that it’s quite depressing.

Paul told the story of how his grandfather came to the UK from Poland after the Second World War and worked alongside English workers at English Electric in Liverpool. He wasn’t paid a “Polish workers rate”  People in this country are not naturally xenophobic but when someone is doing the same job as them for £3 or £4 less, they are naturally suspicious that they will be replaced.

NP:
We’ve somehow come to see business as separate from society. If we don’t see organisations as solving some sort of social problem, they lose their point. We need organisations to redefine their purpose. He said he had wondered where the word company originated from and found it was derived from two Latin words: panis (bread) and com (together). So a company is derived from the notion of coming round a table and breaking bread together. It has the same root as “companion” – people who we travel together. This sense of what the purpose of organisations is is something the HR community can really get to grips with.

At a micro level, we have alternative tools to zero hours contracts that mean we can manage our workforce more appropriately.

PC:
We are the function that design the jobs, recruit the people, worry about skills and engagement – it’s something we can really influence.

For me, this session was the absolute highlight of the conference. Each of the speakers was knowledgeable, succinct yet detailed and thought provoking. The conversation was free-ranging but never irrelevant. The focus was on the UK’s economic situation but as it relates to HR. The situation was painted as “kind of dark” (as one questioner described it) but actually I found it inspirational. We’ve got a job to do, fellow HR people. This isn’t about us worrying about commerciality, a seat at the table, engagement or any of those buzzwords – this is about the impact our organisations have on society itself, and in which we have a critical role.