Addressing today's labour market challenges is a huge task, but we need to try, and our work can help

Blog posts

5 Oct 2018

Tony Wilson

Tony Wilson, Institute Director

As the dust settles on the party conferences and we prepare for a long winter that will be dominated by Brexit, it’s worth stepping back and reflecting on the specific challenges facing the UK labour market.

Some markets are still not working in the interests of ordinary people. Employment is up, but too many people haven’t had a decent pay rise. The deficit is down, but achieving that has been painful. And our economy is growing, but some communities have been left behind. This is why some people still feel that our economy isn’t working for them.

These were the words of the Prime Minister this week – although with the psychodrama of Brexit, the 'end of austerity' and the Abba dancing, they were easy to miss. It’s an analysis that’s hard to argue with and, if you squint a bit, a frontbencher from any of the main parties could have said similar during the last five or so years. However, beneath these words, there is a growing consensus around the challenges facing the UK labour market.  I would argue that we have three – around productivity, polarisation and participation.

First, on productivity. As the Prime Minister has said, the recovery in headline employment since 2011 has surpassed all expectations. But, low growth and weak productivity has seen, on some measures, the most prolonged period of pay stagnation since the Napoleonic wars. As a consequence, one in four workers is low paid, and one in four of these has been stuck in low pay for a decade or more. This low pay has contributed to significant impacts on incomes and, in turn, on poverty, exacerbated by unprecedented cuts in welfare benefits (which will get worse as Universal Credit rolls out) and by high inflation. For the first time in generations, most of those now living in poverty are in households where someone works. Raising minimum wages is welcome, but won’t be enough on its own to sustainably improve incomes for the lowest paid.

Second, and linked to this, is polarisation. Again, the drivers for this have been diverse (global trade, technology, workplace relations, the recession) but the consequences are clear – with now nearly four million people in insecure employment and within this 1.4 million people in temporary or part-time jobs who want permanent or full-time work. And looking ahead, while the ‘rise of the robots’ is often overstated, even the most considered estimates suggest that one in ten jobs in the UK is at risk of replacement and one in four workers may see significant change in their role. The same OECD study suggests that impacts will be most keenly felt in lower-skilled work, so increasing the risks of polarisation.

Third, we still face challenges around labour market participation. High employment is not full employment. For example one in five adults is disabled, yet disabled people are twice as likely to be out of work as those without an impairment. On ageing, despite older people now making up one third of the workforce, almost one million people aged over 50 are out of work and want to work. On ethnicity, unemployment is twice as high among black people, Pakistani and Bangladeshi people, and those who identify as mixed as it is for white people. The government has set ambitions in all of these areas, but is less clear on how these will be achieved.

Of course it’s easier to say what’s wrong with things than to work out what to do about it. So, where do we start? This is still my first week as Director at IES, but it’s already clear to me – from the work that we’ve done and the expertise and passion of our staff – that these are areas where we have made a difference and will go further still.

On pay and productivity, we’re currently pulling together evidence and practice from across Europe on employer-based approaches to support pay and progression for disadvantaged groups, funded by the JPMorgan Chase Foundation. We have reviewed, on behalf of the Equality and Human Rights Commission, what works in tackling gender, disability and ethnicity pay gaps; we’ve developed a resource hub on gender pay with case studies, reports and advice; and we’ve worked extensively with individual employers and through our HR Network to advise and support on how pay policy and HR practice can support progression (see, for example, this blog).

On polarisation and job quality, gig economy research – including interviews with 150 gig economy workers – has shone a light on precarious employment, the diversity of the gig economy and directly informed the government’s response to the Taylor Review. Elsewhere, as automation changes how we work, we’ve been supporting individual employers to research, understand and respond. Improving job quality matters for our mental health and wellbeing as well – with a range of research showing how employer practice, line management training and benchmarking can all make a difference (summarised here).

Finally, on participation, we’re helping to research and share what works in increasing employment for disadvantaged groups: for example in work and health, where we’re leading the evaluation of the largest formal trial of ‘Individual Placement and Support’ for the Work and Health Unit (whilst having recently evaluated the Fit for Work Service); on ageing, where our work for the Centre for Ageing Better has shown what older people value about employment; and on supporting those with caring needs, where we’ve researched what works in supporting carers, how parents make employment decisions, and much else.

Addressing these challenges also means focusing on the determinants of good employment. In our work, this has focused in particular on education and skills, where increasingly our work is showing the importance of improving access to high quality education and training at all levels (including technical education, apprenticeships and higher education).

In truth, trying to make progress on all of these areas at once would be a huge task for the strongest and most stable of governments. Doing it now – in such a febrile political, social and economic environment – feels Herculean, but we need to try. That means working with national and local government, and sharing practice within and between employers. Whatever exit deal or otherwise we strike with the EU, Brexit means that addressing these issues will become all the more urgent (as we have explored with CIPD in our guide for employers on workforce planning).

As followers of IES will know, 2018 is the 50th anniversary of our founding. I’m proud to have joined IES and I’m excited about our future. We want to work with you to share what we know, to learn from you and help to meet the challenges that we face – of delivering more and better work, more supportive and productive workplaces, and a more inclusive, and better-off, workforce.


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Any views expressed are those of the author and not necessarily those of the Institute as a whole.