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Accounting for labour: The future of pay and work

5th Dec 2018
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The way society values labour is changing. Wage growth has stagnated, union membership is on a long-term decline and precarious work has become commonplace. Are we witnessing a hundred-year shift in the way we work? Chris Goodfellow investigates.

Wage growth has been anaemic for a decade

Wages haven’t grown since the financial crisis. Adjusted for inflation, average wages were £463 per week last year up from £458 from a year earlier but £10 lower than the pre-downturn peak of £473 per week.

The estimates don’t just tell us what employers are paying for certain job roles; they reflect changes in the overall structure of the workforce such as the amount of low-paid jobs and fluctuating hours.

The ten-year trend in wage growth - or lack of - has happened while labour force participation increases. The unemployment rate fell to 4.1% in Q3 2018 despite fear-mongering about Brexit and falling consumer confidence. This is heading towards historic lows last seen in the early 70s.

So why isn’t increased competition for staff raising prices?

The future of collective bargaining

The share of the workforce that are trade union members fell from 28% to 23% between 2007 and 2017. That meant that around six million employees in the UK were trade union members last year, well below the peak of 13 million in 1979 when Margret Thatcher was elected.

Trade union membership stabilised in the mid-2000s but hasn’t kept pace with the increase in employment. Declining union membership levels between 2007 and 2011 and in 2016 exacerbated this trend. Union leaders blame the loss of “good-quality jobs”, cuts to the public sector workforce and the rise of the gig economy.

In the medium term, the UK economy’s shift away from traditionally union-friendly sectors like manufacturing has been combined with anti-union legislation, a rapid increase in temporary staff and the use of zero-hours contracts.

The future for unions isn’t bright either. Union participation tends to be generational and the population of members is ageing. People that joined during the heyday of the labour movement are starting to retire. The generation that’s entered the workforce since the 2008 recession faces less stable employment without the back-up of unionisation.

This has the potential to compound the lack of wage growth, and there is some evidence of a link between falling union membership and pay inequality.

Technology rapidly disrupting the jobs market

Without resorting to scare stories, it’s a fact that robotics and AI are replacing workers. Even within highly-skilled professions like accounting, payroll and bookkeeping tasks are being replaced by easy-to-use cloud products – and those tools are learning.

These trends are manifesting themselves in the way we value businesses. Three of the world’s most valuable public companies are the San Francisco-headquartered Facebook, Alphabet and Apple. Over 2,000 miles away in Detroit the ageing giants of the automotive industry General Motors, Ford, and Chrysler have fallen down the rankings.

The tech labour force is a tiny fraction of the automotive industry, as The Atlantic pointed out. Today, the lesson from the market seems to be that value’s created by technology and is in no way tied to physical assets or job creation.

What does this mean for the future?

Unions – legal ones at least – have existed for around 200 years. Will they last another century? Will the UK’s productivity increase and wage growth return?

The minimum wage has been around since 1909. Both sides of the political spectrum are united in arguing for its increase. Perhaps we’ll see a world with limited union participation and workplace stability, but where employees receive a fair level of pay.

There’s some hope when it comes to collective bargaining too. The very tools that Google created to help the world work collaboratively allowed its own employees to plan a 20,000 person, international walkout in just three days.

In the UK it feels like we’re at a turning point. Public outcry over the treatment of employees and discrimination, and the groundswell of support from young voters for the Labour Party’s employment policies in last year’s election point to the public’s interest in the changes that are happening to the way we work.

What we need is a realistic, long-term policy debate on how low wage growth, automation and falling union participation are going to impact the way we value work. If we continue to undermine its value inequality and economic unrest will follow.

Replies (3)

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By trecar
06th Dec 2018 11:25

I take issue with the final statement. Not with its sentiments but with its tense. I think Brexit and the election of Trump are two signs that it has already arrived. And with its arrival has come an indication that new technologies bring huge dangers of which the latest incursion into the online database of Marriott is just one sign. New skills are needed and training by companies of their staff is abysmally deficient. If they are to survive and prosper, companies need to address that deficiency with an urgency that is sadly lacking at present.

Thanks (1)
Replying to trecar:
paddle steamer
06th Dec 2018 22:11

trecar wrote:

New skills are needed and training by companies of their staff is abysmally deficient. If they are to survive and prosper, companies need to address that deficiency with an urgency that is sadly lacking at present.

I think the issue is that companies will not substantially train staff, where staff are no longer with them for the long haul there is little incentive for them to train then lose elsewhere.

Now if employers were to take a long term career view re their staff fair enough, but I see little sign that they will.

What those in employment possibly need to embrace is they, as individuals, not at their employer's push/behest, need to self learn. If one has a strong initial education post school that habit ought to be instilled and the graduate, say, ought to have the skills to learn by themselves- imho this was what a university education was for, it was never about what you learned re content and was all about the skills to self teach engendered to last you the rest of your life.

Some people, not just graduates, embrace this, but a large number clock off post formal studies and will then find themselves left behind re career progression (possibly in quite a few different careers) as they fail to enhance their own skills- reasoning, persuasive argument in writing, report writing, ability to talk in public, all skills that ought to be enhanced and honed throughout a career.

Education in a formal setting is expensive and not great post school; and there is possibly the root of the UK's issue re its homegrown workforce, easier, non work disruptive, access to well thought out skills training is sadly lacking in the UK.

To bastardise Shakespeare, "The fault, dear Brutus,is not in our" employers , "but in ourselves that we are underlyings."

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Adrian Lawrence
By AdrianLawrence
07th Dec 2018 15:40

"The minimum wage has been around since 1909" It really would be interesting to see the UK if that statement was correct!

I think the gig economy is the natural extension of technology, you now no longer need to work or see work as being limited to a geographic area, think of digital nomads.

In the future I believe an increasing amount of tasks will be done globally based solely on the ability level of the individual. I already outsource coding work to a guy in India and design work to another in Bosnia via two gig platforms.

This will provide a real and mounting challenge to countries with high taxes as it will become easier and easier to allocate work to anywhere globally based on price and quality and tougher to collect taxes if labour is no longer localised.

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