Putting good work on the table
The UK needs stronger labour market institutions
Decent work is a pre-requisite for delivering shared prosperity and improving the lives of the country’s 34-million-strong workforce. In this context, the UK labour market has a number of strengths – from high employment to a national minimum wage that is now among the highest in the world. But there are also deep problems in some areas of the labour market – from stagnant real wages (which have only just returned to their 2008 peak), to extensive insecure work (zero-hours contracts reached a new record at the end of 2022) – that have persisted over time and are unlikely to go away on their own.
In other work, we have described how the national framework of employment regulation and enforcement needs to be strengthened to better protect workers. This is necessary but not sufficient to deliver high-quality jobs: some of the challenges we face are specific to particular areas of the labour market and so are less amenable to one-size-fits-all employment regulations acting in isolation. In this briefing note, part of the Economy 2030 Inquiry, we turn to the role of labour market institutions in resolving these remaining problems – examining existing institutions and considering the case for experimenting with new ones.
Trade unions remain important but need strengthening
Trade unions remain an important form of labour market institution – still representing over 6 million workers, shaping workplace practice and participating in national organisations that shape our workplaces. But over the past four decades, union membership has fallen dramatically to less than half its peak in the early 1980s (from 52 per cent in 1980 to 22 per cent in 2022). Alongside long-term structural changes (such as the changing industrial make-up of Britain’s economy and the rise in self-employment), policy changes from the 1980s onwards, including direct legislation, reinforced union decline by placing restrictions on their activity. The professed goal of these policy changes was to level the playing field between firms and unions and modernise the industrial-relations framework. But that is not where we have ended up today.
So we recommend making three policy changes that would build on the existing industrial-relations settlement while restoring a level playing field and updating some of our outdated processes. First, to ensure that workers fully understand their options, unions should have a right to enter workplaces to raise awareness among employees. Second, we should adjust union-recognition requirements to bring them more into line with other aspects of democratic life: instead of the current requirement that 40 per cent of the entire bargaining unit must vote in favour of union recognition we recommend a simple turnout threshold (also of 40 per cent). And third, we should make voting processes more inclusive by introducing an online option for union recognition ballots: requiring postal-only ballots is an antiquated approach unfit for the 21st century.
As well as a stronger national framework for industrial relations and employment regulation, the UK needs to experiment with new tools. Some of the most pressing labour market challenges in the UK today are specifically sectoral in nature. For example, domiciliary care workers often don’t get paid for the time they spend travelling between clients. Meanwhile hospitality workers highlight issues such as extremely long shifts and harassment from customers. Such examples suggests a tailored sectoral approach may be needed to buttress national rules.
The UK is not alone in thinking about how targeted labour market institutions can help improve the quality of work: other liberal-market economies have either long had sectoral bodies (e.g. Ireland and Australia) or have more recently been developing them (e.g. New Zealand) offering the potential for learning. But we must recognise that institution building is difficult in practice and that our precise labour market problems are, in many cases, particular to us – so any new institutions need to be rooted in the UK’s own contemporary challenges and regulatory approach, rather than imported wholesale from abroad or excavated from the past.
We therefore propose what we call ‘Good Work Agreements’ (GWAs) in problem sectors: a framework to bring together workers and employers to collaboratively solve problems and address poor-quality work in specific pockets of the economy, complementing existing national regulation and industrial relations. Worker or employer representatives could apply for the Government to set up a GWA in sectors with material (and specific) problems with labour standards. Broadly speaking, we propose four key areas to be the potential focus for GWAs: training and progression, sector-specific health and safety issues, pay (in cases where there is a clear need for a pay floor above the National Living Wage), and wider terms and conditions (including contractual non-pay aspects of work, like irregular shift patterns and provision of basic materials).
The Government should immediately set up a trailblazer GWA agreement to enhance protections for the 1.7 million workers in the social care sector. This could address urgent issues such as poor pay – likely unlawfully so for domiciliary care workers, once travel time is factored in – inadequate training and unsafe working conditions that are contributing to an acute shortage of workers and poor standards for service users.
GWAs in the warehousing and cleaning sectors should come next, delivering higher standards for 200,000 and 500,000 workers respectively. In addition to high shares of employees on insecure contracts or with volatile hours (28 per cent and 17 per cent respectively), the expansion of the warehousing sector has been accompanied by extensive use of agency workers alongside intense workloads, while there is also evidence of cleaners facing pressure to complete jobs in unreasonably short timeframes (and not being paid for the overtime).
Once the need for a GWA has been accepted and the partners enter the negotiation phase, the leadership should come from the sector themselves (worker and employer representatives). GWAs will also require a mechanism to resolve disagreements between firm and worker representatives; this should take the form of an independent representative to chair the negotiations. Although the negotiations would be sector-led, we also propose that the Government should sign off on the agreement at the end of the bargaining process to ensure the agreement had resolved the problems it set out to address, and because there may be wider public-interest and public-spending considerations.
Once implemented, GWAs should be enforced in the same way as other labour market rights. (Bolstering the labour market enforcement system will become even more vital if it is to oversee GWAs as well.) Finally, GWAs should be regularly assessed and an evidence base should be developed that feeds into the design and negotiating process (for example, with a role for the Low Pay Commission). There should also be a wholesale assessment and renewal of GWAs every three-to-five years to keep them relevant, ensure standards are maintained and to take account of inevitable trade-offs.
The changes we have outlined are not necessarily straightforward to implement: improvements in the framework for union recognition will take time before they feed through into workplace change, and crafting new labour market institutions is always challenging. But the case for pursuing this agenda is strong. Implementing these proposals would help make a reality of regular calls from different political parties for placing ‘good work’ at the heart of our economy. GWAs could agree on pay rises and greater security for 1.7 million social care workers, for example, that would improve conditions for existing workers and make the sector more attractive for prospective staff. Tackling some of our entrenched labour market challenges, while preserving the strengths of the UK model, requires the UK to embark on a period of measured institutional innovation.
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