29 July 2021

Labour’s jobs plans offers little but red tape and reheated Corbynism

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It’s extraordinary, after nearly a year and a half when thousands of businesses have been forced to close and many more subject to expensive restrictions, that the UK labour market has remained as strong as it has. Unemployment remains low, and while many have left the workforce or are still on furlough, total employment is not far off its pre-Covid level. Wages are bouncing back, and the number of job vacancies is higher than at any time in the last 15 years.

Some of this buoyancy is the result of government policy which – albeit at huge cost – has sustained many businesses and their employees. But a lot is down to the inherent resilience of the UK’s flexible labour market, which has performed far better in the pandemic than many expected. Hundreds of thousands of new jobs have been generated in logistics, IT, warehousing, deliveries, home improvement and so on. Workers have taken on new tasks, have learnt to work reasonably effectively from home, or have retrained under difficult circumstances.

However the Labour Party is not dwelling on these positives, but instead is arguing that the inevitable insecurity in this rapidly changing environment means that, in Shadow Employment Secretary Andy McDonald’s words, “we need a new deal for working people”. This week we are seeing the outline of a radical package of labour market reform which goes beyond anything offered in the last 30 years.

Attention has focused on the call for a default right to flexible working, something for which the TUC has been pushing, together with a French-style ‘right to disconnect’ – so that employers cannot contact you about work matters outside strictly regulated hours. Labour also wants a new worker status which would bring a bunch of new rights for gig economy workers, plus a ban on ‘fire and rehire’ (the practice of dismissing people and rehiring them on inferior contracts, often the only recourse when a business is in danger of collapse). All employment rights which currently require a qualifying period – such as statutory maternity pay – should be available from day one of employment.

There is also plenty of reheated Corbynism from the 2019 manifesto, including a ‘real living wage’ of at least £10 an hour for all workers, irrespective of age, an end to so-called zero-hours contracts and the repeal of unspecified ‘anti-trade union’ laws. Add to this a ‘guarantee’ of work or training for young people – involving the creation of ‘tens of thousands of apprenticeships’ and you’ve got a pretty comprehensive package of changes to the way people work in this country.

Labour is in difficulty at the moment, failing to break through with the electorate despite the Government’s own (often self-inflicted) problems. The opposition hopes on the one hand to rally activists who despise capitalist employers and all their ways and on the other to show former Red Wall voters that it is still the party for the  traditional working class rather than, as it often appears, simply a grievance shop for metropolitan Wokeists.

Will it succeed in these terms? I don’t know. But I do know that sensible voters will need to know a lot more about the detail.

Take, for instance, the plan to create a new definition of ‘worker’ to get rid of the ambiguity of the existing distinctions between employees, ‘limb(b)’ workers and the self-employed. The idea is that everybody should be entitled to, for example, sick pay – which is currently only available to employees. In press releases the suggestion is that 6.1 million more workers would now have a right to this benefit.

It may well be that there is a case for saying that some gig workers are ‘really’ employed by firms to which they are informally contracted. However the 6.1 million quoted includes the entire self-employed population of 4.2 million, the vast majority of whom are people with many clients or customers and no ‘employer’ of any kind. So either the proposed right to SSP for these people is bogus, or else it must be paid entirely by the state. This would necessarily require a big hike in National Insurance Contributions for the self-employed.

How does Labour think it can create tens of thousands of apprenticeships? No government has managed to do this without debasing the concept of apprenticeships to cover low-skill qualifications awarded by sometimes dodgy training companies. The much-touted Apprenticeship Levy has actually reduced the number of apprenticeships being taken up. How does Labour propose to do better?

A new Living Wage of over £10 an hour extended to all ages would involve more than doubling the pay of 16-17 year-olds. Has there been serious modelling of the likely effects of this on the employment of young people?

Angela Rayner, who as Deputy Leader is the heavy-hitter behind this package, wants workers to be able to work at home wherever possible, to be able to work compressed weeks, to be given hours which allow children to be taken to and picked up from school. But she understates the extent to which we already have a labour market which offers a range of different working hours. Some 70% of all requests for flexible working are already agreed, and there is no evidence presented that those requests which are turned down are refused unreasonably. Ms Rayner, who has no experience in the private sector, does not understand the difficulties which small businesses face in accommodating demands for flexibility which often impact on other workers.

Of course, these proposals will appeal to some voters. But there’s no real attempt to show how these changes would help us maintain the recovery which a flexible labour market has made possible. Instead they could well make it less attractive for businesses to take workers on, could lead to increased union militancy, and would certainly increase bureaucracy and public spending. If Labour wants to retrieve its dismal electoral position, it should take policy-making seriously rather than drawing up uncosted wish-lists.

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Professor Len Shackleton is an Editorial and Research Fellow at the Institute of Economic Affairs.

Columns are the author's own opinion and do not necessarily reflect the views of CapX.