Levelling up at work - fixing work to level up across the UK

“Levelling up” is a worthwhile and justifiably popular aim. Who can disagree with the idea of bringing up poorer communities to the level of wealthier ones? The government has made “levelling up” a central aim - but slogans don’t always translate neatly into policy. We need an open and transparent debate about what levelling up means in practice, how success in levelling up will be measured and how we can make it happen.

This report aims to make a contribution to this debate by focussing on the centrality of work to the levelling up agenda. It argues that poor quality work is a key cause of broader inequality across the country and within all regions and nations, including those seen as the target for levelling up. While other strategies - including infrastructure projects, transport improvements and community wealth-building - have an important role to play, unless we reduce the numbers of people in jobs that are in low-paid, insecure and offer no route to better quality work, little will change in the lived experience of a significant number and proportion of people across every part of the UK. We cannot level up the country without levelling up at work. Ensuring access to decent, secure work for everyone is a key test of the levelling up agenda.

Work has a significant impact on the quality of our lives.

For most of us, work is our main source of income through most of our lives and therefore a key determinant of whether we are comfortably off or struggling to put food on the table. And for too many working people, the link between work, security and opportunity is broken. Over half of those living in poverty are in working households – and this rises to a shocking three quarters of children living in poverty. Too many people find their work is trapping them in poverty, rather than providing a route out. And this is a national, rather than a regional problem, as shown by the table below:

Rates of in-work poverty by region and nation (data is a 3-year average)

IPPR Analysis of DWP (2020a) Households Below Average Income (HBAI) 2017/18 – 2019/20 (data refers to the number of people in working families who are in relative household poverty)

The quality of our work – in particular, the control or lack thereof we have over our working lives – has a major impact on our health. The government is right to highlight tackling postcode disparities in health as an important aim of levelling up, but these in part reflect the stark occupational differences in health outcomes. One in three low-paid workers who left their jobs before state pension age did so because of ill health. By contrast, just one in twenty professionals who left the labour market early did so because of long-term sickness. If we leave millions of people in low-paid insecure work, significant economic and social disparities in health outcomes and life expectancy will remain.

Low-pay and insecurity are not neatly concentrated by geography – rather, they are prevalent across every region and nation. Over one in seven jobs in every region and nation is paid less than the Real Living Wage. In over 62% of constituencies, more than one in five jobs are paid below the Real Living Wage. Across the North East, West Midlands and Wales the share is more than three quarters, in London it is 84% and in Yorkshire and the Humber every constituency has high rates of low pay. The lowest rates of low pay are in the South East and then Scotland, but even here 16 percent and 17 percent respectively of employees are paid less than the Real Living Wage.

This reflects the fact that low paying sectors are large employers across all regions and nations, with retail and social care among the top sectors of employment in every region and nation. Strategies which ignore these sectors cannot deliver levelling up.

Like low pay, insecure work is endemic across every region and nation of the UK. Only Yorkshire and Humber and Scotland have less than one in ten workers in insecure work.

The distribution of insecure work and low pay both reflects and deepens existing inequalities. Black and minority ethnic workers are more likely to be in insecure work than white workers, while women are more likely to be low paid than men. Disabled workers face significant employment and pay gaps compared with non-disabled workers. These differences reflect and but also reinforce discrimination, creating further barriers to change.

We need to address the challenge of poor-quality work head on. Much industrial and regional policy has aimed to redistribute better paid jobs more evenly across the country. Achieving a better distribution of high-skilled, high-paid jobs around the country is an important part of what is needed to level up. However, if it is not linked to strategies to improve the experience and rewards of low-quality work, poverty and insecurity will remain endemic across the country. As well as creating new good quality jobs, we need to level up the jobs that people are already in.

The experience of London shows that the creation and existence of high-paid jobs in an area and does not automatically lead to rising incomes and quality of life for the wider community. Indeed, unless low-pay and poverty are also addressed, there is a danger that the creation of high-paid jobs will lead to deepening inequality, unaffordable housing and being priced out of local amenities for many local people. As the table above showed, London has the highest rate of in-work poverty in the country, with 21.8 per cent of people in poverty in a working household. The creation of good quality, green jobs is desperately needed – but it’s not enough on its own.

If we are to level up the country, we need to level up at work. This report sets out a plan for how to make it happen.

Recommendations

Creating an economy based on decent work

We need to change the way our economy works so that economic growth translates into good quality jobs. This requires an institutional environment that encourages the development of business models based on high-wage, high-skilled and secure jobs, rather than a reliance on low-paid and insecure work. Without reforms that hard wire decent work into business models, strategies to boost research and development, or to attract new investment, while welcome, will not deliver the good jobs people need.

To change the economic incentives that shape our economy, we need a new skills strategy, reform of corporate governance and industrial policies, and new measures to strengthen workforce voice and collective bargaining to give working people more power in the workplace.

A new lifelong learning and skills strategy for all workers

The TUC is calling for a new national lifelong learning and skills strategy based on a vision of a high-skill economy, where workers can quickly gain both transferable and specialist skills to build their job prospects. Delivering this would require:

A significant boost to investment in learning and skills by both the state and employers. People should have access to fully-funded learning and skills entitlements and new workplace training rights throughout their lives, expanding opportunities for upskilling and retraining.
These entitlements should be incorporated into lifelong learning accounts and accompanied by new workplace rights, including a new right to paid time off for learning and training for all workers.

Corporate governance reform to promote long-term, sustainable growth

Shareholder primacy in corporate governance encourages directors to prioritise shareholder returns over wages and long-term investment, fuelling short-termism and poor employment practices. We need to address shareholder primacy through reform of directors’ duties and promoting workforce voice in corporate governance.

The inclusion of worker directors on company boards would bring people with a very different range of experiences into the boardroom, which would help to challenge ‘groupthink’ and change the culture and priorities of the boardroom, improving the quality of board decision-making.

Directors’ duties should be reformed so that directors are required to promote the long-term success of the company as their primary aim, taking account of the interests of stakeholders including the workforce, shareholders, local communities and suppliers and the impact of the company’s operations on human rights and on the environment.
Company law should require that elected worker directors comprise one third of the board at all companies with 250 or more staff.

Strengthening workforce voice and collective bargaining

Giving workers stronger rights to organise collectively in unions is key both to raising pay and working conditions and giving workers more say over their working lives. Collective bargaining promotes higher pay, better training, safer and more flexible workplaces and greater equality. The absence of a collective approach to driving up employment standards has led to the poor pay and conditions that are now resulting in labour shortages across the country.

We need to give workers stronger rights to speak with one voice and bargain with their employer and give unions access to workplaces to tell workers about the benefits of union membership, following the New Zealand model.
And starting in sectors that are characterised by low pay and poor conditions, we need to create new bodies for workers and employers to come together to set minimum standards and Fair Pay Agreements across the sector, starting with social care.

Industrial and trade policies to promote good jobs

To boost domestic manufacturing, services and technology development, and reap the full benefit of developments in infrastructure and renewable energy, the government should adopt strong trade and procurement policies to strengthen local supply chains and raise employment standards.

The UK government should use local content requirements where they are legal and needed.
Trade deals and WTO rules should be used as a lever to lock in the highest standards by enforcing respect for International Labour Organisation (ILO) standards. Too often, rights have been defined disparagingly in trade deals as ‘non-tariff barriers’ that should be removed.

Government leading by example – public services, job creation and procurement

The government should lead by example by showcasing good quality employment practices as an employer and making decent jobs a requirement of all government spending so that the power of government spending is used to drive up employment standards.

Strong and resilient public services are vital for levelling up

The experience of the pandemic has shown us how much we rely on and value public services and the public servants who deliver them. Strong public services are a vital part of any effort to end inequality, a source of good quality employment and key to building resilient communities able to grow and thrive.

To truly level up, the government must undo the damage inflicted by cuts on public services over the last decade. Public sector workers are one in seven employees in every region in the UK, and in the North East, Wales, Scotland and Northern Ireland they are over one in five. We need a long-term plan backed up by sustainable and substantial investment, and delivered by workers who are properly rewarded and employed directly by the public sector.

Government must end the cuts to public services and invest to reverse them, bringing investment back to the levels we need to maintain quality and meet demand.
We cannot level up while holding down public sector pay. The public sector pay freeze should be ended and workers paid at least the real living wage. Pay rises must keep pace with the increased cost of living, while making up for lost earnings over the last decade.
Public ownership and in-house provision must be the default for setting public services, unless there a strong public interest case for putting services out to tender.

Procurement and investment standards to support decent work

Decisions on infrastructure spending, including through the National Infrastructure Strategy, should be subject to a job creation and quality test that evaluates both the quantity of jobs created by a proposed development and their quality, according to an agreed set of measures.

The government should:

Build job creation and job quality tests into public investment decision-making and procurement standards

Strengthening the floor of employment protection for all workers

We need to reform the way the economy works so that economic growth translates into decent work that will level up people’s lives and the communities where they live. But tackling low pay and insecurity also requires strengthening the floor of employment protection for all workers to make the worst forms of exploitation illegal, raise the wages of the lowest paid and tackle structural discrimination at work.

We need to ban zero hours contracts by giving workers the right to a contract that reflects their normal hours of work, coupled with robust rules on notice of shifts and compensation for cancelled shifts.

The minimum wage should be raised to at least £10 an hour immediately to put more money into workers’ pockets and address in-work poverty.
The government should strengthen the gender pay gap reporting requirements, and introduce ethnic and disability pay gap reporting, requiring employers to publish actions plans on what they are doing to close the pay gaps they have reported.
The government must comply with its existing public sector equality duty and proactively consider equality impacts at each stage of any policy-making process, with a view to promoting equality and eliminating discrimination.

Beyond the workplace – strengthening our safety net

For most people, work is their main source of income throughout their lives. But for all of us, there will be times that we are unable to work. These include periods of old age, ill-health or when we are unable to find suitable work. And, of course, it includes time spent on the all-important role of bringing up the next generation, who need and deserve the very best start in life their families can give them.

People need economic security throughout every part of their lives. That’s why levelling up requires a strong safety net that supports people when they need it. We need a decent pension system, sick pay for all and a social security system that enables people to live in dignity.

Because of the stark occupational differences in life expectancy, an ever-increasing state pension age will mean that people in poorer areas and in manual and low paid jobs are increasingly unlikely to be able to stay in work until they can start drawing their state pension. The government should shelve scheduled increases to the state pension age and maintain the pensions triple lock.
The cut in Universal Credit must be reversed, and Universal Credit should be increased to at least 80 per cent of the level of the living wage, around £260 a week.

Introduction

“Levelling up” is a worthwhile and justifiably popular aim. Who can disagree with the idea of bringing up poorer communities to the level of wealthier ones? The government has made “levelling up” a central aim – but while the term is easy to understand, it in itself implies nothing about how it will be achieved. This underlines the importance of an open and transparent discussion about what levelling up means in practice, how success in levelling up will be measured and how it can most effectively be brought about.

The levelling up agenda has been framed by the government as being primarily about addressing regional or geographical inequality. The 2019 Conservative Manifesto[1] talked about “levelling up all parts of the United Kingdom”, linking this to investments in infrastructure, a new deal for towns, transport, skills, supporting rural and coastal communities and freeports. With the exception of skills policy, this linked levelling up to regional or place-based initiatives.

Boris Johnson’s July speech[2] on levelling up again framed the problem in terms of geographical imbalances – decrying differences between different areas in life expectancy and healthy life expectancy, children on free school meals who go on to attend university and income per head. However, in discussing how these inequalities should be tackled, the speech pointed to national strategies, as well as regional or place-based one. Alongside improving transport and infrastructure and boosting local decision-making across counties and cities, the speech rightly cited the need for improved public services, boosting skills and training and “help[ing people] into good jobs on decent pay” as being part of what is needed to level up.