Following a run of controversies regarding the treatment of workers under new economic models of employment, the UK government commissioned a report into employment conditions. This week, the initial findings of the Taylor review were released, recommending some tentative solutions to the problems of precarious employment.
The UK labour market, outwardly successful and buoyant, masks some significant structural challenges. Enjoying effective ‘full employment’, with unemployment at a historic 42 year low, the UK’s resilient employment rate now stands at an impressive 74.6 per cent.
However, the types of job created have been most markedly in the low-pay service sector, with the result that real wages in the economy are expected to be no higher in 2022 than they were before the financial crisis in 2008.
Fifteen per cent of the UK labour market is now defined as ‘self-employed’ especially in the area of short-term, insecure, casual ‘gigs’, ‘contracted’ via the ‘app economy’. Typically, and most visibly, these include driving, delivering and DIY tasks. The exponential growth in disruptive labour has left legislation and regulation struggling to keep up with many unable to make a living in a spiral of low-wages and few structured benefits and securities.
The problem of precarious employment
Whilst these new models of working – increased flexibility, for instance for students and those juggling personal commitments – work for some, for others there is the real risk of ‘dependency’, inflexibility and control.
The developed world appears to be at something of a crossroads as far as work is concerned. Competition and technology are combining potentially to marginalise significant numbers of workers in a low-pay, poor conditions spiral to the bottom; at worst, zero hours insecurity can be seen as a mirror of 19th century sweatshop practices – flexibility and low cost for employers – insecurity and in-work poverty for workers. The TUC estimates as many as 10 per cent of workers face this predicament.
The rate of ‘self-employment’ in the UK is two and a half times greater for the lowest paid compared to the wealthiest; these are not entrepreneurs and start-ups, but the ‘just getting by’. In work poverty, supported by tax credits, is the new norm for the lowest paid. Whilst the National Living Wage gives some cushioning, especially as it heads towards 60% of median earnings, it may nevertheless drive more young people into the gig economy and into permanent low pay employment.
The low-cost ‘gig economy’ enabled by technology is a potential harbinger for very poor working conditions – 31 per cent have said they are ‘just managing’ and 19 per cent were finding it ‘quite or very difficult’; a significant majority attested they would find paying an unexpected bill of £500 ‘difficult’.
Investing in the new world of work
Businesses and individuals face significant structural pressures from the rise of low-wage employment and precarious work. This may, ultimately be an unstoppable force, but the manner in which it is achieved – preparing people for alternative routes to employment, or leaving millions behind in rootless poverty, will say much about the kind of society and economy we aspire to be.
Investors may have only a limited role to play, however we will view positively those companies placing a strong focus on supporting employees via skills and training, and in delivering automation, where unavoidable, with empathy and care.
Companies with business models that deliberately exploit individuals in terms of agency ‘gigs or zero hours contracts, may not be suitable for inclusion in the EdenTree range of Amity ethically screened Funds. As responsible investors we will seek to engage with business on responsible employment practices especially as companies seek to reduce costs either through automation or moving to ‘dependent contractor’ models of employment.
Neville White is EdenTree’s head of SRI policy and research