Summary

Fairness and work

The social contract – the link between working hard and enjoying a decent quality of life – needs to be reinstated.

We have not yet achieved fairness in the workplace. For example:

• Low wages (combined with the increasing cost of living and inadequate benefits, as well as precarious jobs) are contributing to an increasing problem of in-work poverty in the UK. The link between hard work and a good quality of life (the social contract) has broken down.
• The COVID pandemic has both highlighted and exacerbated issues of poverty pay and unemployment. COVID-related job losses have had a disproportionate impact on ethnic minorities. COVID has also shown us how much we rely on the labour of those at the bottom of the income ladder.
• Increasing numbers of people are on insecure contracts, including zero-hours contracts, bogus self-employment and the gig economy.
• Equal pay for equal work is a long way from being realised, whether for women, ethnic minorities or disabled people (and with particularly large disparities for people in more than one of those groups). Meanwhile, levels of executive pay remain unreasonably high.
• Working conditions and allowances remain inadequate, with policy failures including an ineffective shared parental leave policy and inadequate sick pay provision.
• Equal opportunities for jobs and promotions are a distant prospect, whether on the basis of class and income, or race, or gender, or disability.
• Trade union membership in Britain has more than halved since 1979.

A covid chasm has opened up between low paid and average paid workers and the better off. It feels like that divide is really sharp. Politicians need to start addressing how to close that chasm. That’s important not just for working families but for the economy. We hear a lot about levelling up, but if it is not about workers’ rights, their bargaining power and their pay, then what is it about?

Frances O'Grady, Trades Union Congress, September 2021

What needs to change

A fair society is only possible if working conditions and equality of opportunity in the workplace are improved, so that everyone has equal chances to make the most of their talents and everyone is able to live a life of dignity and control. Improving working lives benefits everyone in society; for example, there is a proven link between better job security and increased economic productivity. Businesses cannot succeed if the underlying social infrastructure – schools, healthcare, security, housing, and so on – is not meeting the needs of its workers and of the wider population. Employers benefit from investing in better wages and contractual and working conditions for all workers. Everyone in society benefits if key workers, such as nurses and carers, drivers and supermarket workers, enjoy better terms and conditions. Executive pay should be linked to success in achieving long-term targets.

The government should tackle low wages that are leading to increasing levels of in-work poverty, for example by:

• Official government adoption of the Minimum Income Standard, which calculates what level of income is necessary to afford the goods and services that cover essential material needs and give people the opportunities and choices required to participate in society
• Raising the national living wage to the level of the ‘real living wage’ based on the cost of living
• Applying a 20% higher minimum wage to zero hours contracts and other uncontracted hours
• Abandoning the idea that minimum wage increases allow large cuts in tax credit and universal credit top-ups to low-income working families (which can often dwarf the income gains)
• Rebuilding and strengthening collective bargaining (introducing sectoral collective bargaining, especially in low-paid sectors like social care and retail, as well as more firm-level bargaining) and other institutions like wage councils

The government should deal with the unequal impacts of unemployment on particular groups, and take steps to prevent large-scale unemployment in the future, for example by:

• Targeting full employment in the post-pandemic economy (meaning that we achieve low levels of underemployment as well as unemployment)
• Introducing and funding a ‘right to retrain’ scheme for workers at risk of losing their job, for example due to the pandemic, automation or decarbonisation, as well as investing public funds to create high quality new jobs in the green economy and in sectors like social care

The government should improve job security for the increasing numbers of people on insecure contracts, for example by:

• Introducing a ban on ‘fire and rehire’ practices
• Cracking down on companies that use bogus self-employment arrangements to deny their workers sick pay, annual leave and other basic protections
• Banning zero hours contracts (unless entered into freely by the worker), and in the short-term, persuading companies to implement them more fairly (by scheduling shifts with at least two weeks’ notice and paying shifts cancelled within that period, by allowing employees to request contracts with more fixed hours at any time without consequences, and by reviewing actual hours worked annually with a view to providing a contract close to those hours)

The government should do more to ensure that the legal requirement for equal pay for equal work is observed, for example by:

• Requiring all large organisations (more than 250 employees) to monitor and report on gender, ethnic and disability pay gaps, and publishing action plans with regular progress updates
• Requiring all large organisations to publish their pay scales and reforming corporate governance requirements around executive pay (for example, the IPPR has proposed that a third of the membership of remuneration committees should be made up of elected worker representatives, that their remit should be widened to include the pay, incentives and conditions of all company staff, and that executive pay packages should be simplified and linked to drivers of long-term value such as innovation and productivity, not just share prices)

The government should improve working conditions and allowances, for example by:

• Reforming shared parental leave by giving fathers an additional ‘use it or lose it’ allowance to encourage men to take a greater role in care responsibilities
• Extending statutory sick pay to all employees, not just those who earn over £120 per week, and increasing the amounts paid out under it
• Requiring all jobs to be available and advertised on a flexible and potential job-share basis, except with good reason (the government is currently consulting on plans to introduce the right for all employees to request flexible working from day one)
• Legislating to improve working conditions by targeting some of the abusive practices that have been used by certain employers in recent years

The government should take steps to ensure genuinely equal opportunities for jobs and promotions for everyone in society, for example by:

• Backing schemes to encourage employers to act more ambitiously on equal opportunities, such as the Social Mobility Pledge (while recognising that they by themselves are not enough)
• Considering how best to tackle ongoing structural discrimination in labour markets, such as racial disparities in employment rates and hiring practices outlined by the Runnymede Trust and gender inequalities in terms of applications and promotions (as well as pay and working conditions and allowances, both covered above)
• Making the case for why employers benefit from hiring more people from diverse backgrounds (including but not only those from working class backgrounds)
• Tailoring the apprenticeship levy more effectively for disadvantaged trainees (recommended by the Social Mobility Commission)
• Holding apprenticeship providers to account for improving participation rates (recommended by the Equality and Human Rights Commission)
• Acting on its commitment to supporting one million more disabled people into work over the next 10 years (recommended by the Equality and Human Rights Commission)
• Encouraging and incentivising employers to create or adapt jobs that are suitable for lone parents, carers and people with mental and physical health problems (recommended by the Marmot Review)

On the right to unionisation, IPPR has proposed a series of reforms:

• Doubling collective bargaining coverage to 50 per cent of workers by 2030, with a focus on the lowest paid sectors
• Giving unions stronger rights of physical access to workplaces, combined with a ‘digital right of access’ to reach remote workers and a new ‘right to join’ for workers
• A trial of auto-enrolment into trade unions within the ‘gig’ economy, on the model of auto-enrolment into workplace pensions
• A WorkerTech Innovation Fund to support unions to innovate and use digital technology to recruit and organise

A wide range of proposals have been made for how best to level the playing field for small businesses. Many of these require action by government, such as reducing opportunities for tax avoidance by large multinational companies (with a particular but not sole focus on some sectors, e.g. big tech), or legislating or enforcing legislation on issues such as supplier payments, bank lending or competition, or providing more support and advice to small businesses, or ensuring that small businesses are properly considered and fairly treated in the design and implementation of major policies related to long-term changes, such as the decarbonisation of the economy.

Some of the changes outlined above can also be achieved, in whole or in part, by responsible business practices, such as paying fair tax and paying suppliers promptly (to benefit small businesses), or paying the real living wage, introducing fairer hours and contracts, encouraging employee representation and ensuring employee wellbeing (to benefit workers). These and other responsible business practices are included in the Good Business Charter.

IPPR make a broader point about changing the power dynamics in the labour market, arguing that “power needs to be shifted to employees and workers, from employers and shareholders, and to companies that work in the interest of society from those that extract from society”.

There is also a longer term question about the future of work in a world of increasing automation and artificial intelligence, where both have developed to the extent that a very large number of jobs are no longer performed by humans, and there needs to be a separation of work from income. This gives rise to a number of fundamental questions around fairness, such as whether and how to introduce a universal basic income, what would be the fairest way to distribute the wealth that is created by machines, how best to redesign education and whether the state should focus on providing ‘socially useful’ learning while people should be required to invest their own money in training that provides them with skills that will enable them to work, and so on.

A fair economy is a strong economy. It used to be thought that prosperity and economic justice were in conflict; we had to choose one or other but could not have both. The international evidence now points in precisely the opposite direction. A more equal economy generates stronger and more stable growth, lower social costs and greater wellbeing. Both economics and morality argue for an economy which achieves prosperity and justice together.

IPPR Commission for Economic Justice, September 2018