Britain learns how not to think about work

By John Foley

LONDON (Reuters Breakingviews) — What makes for a healthy job market? Low unemployment and generous, rising wages are a good start.

There’s more to it, though. A government-backed study on Britain’s working practices published on Tuesday begins to ask the right questions about what the labour market should do – and how not to think about work.

Britain’s workforce should be the envy of the modern world. Unemployment of 4.5 per cent is about as low as it can possibly get in a rich country, and participation in the labour market is at a record high of almost 75 per cent of the population.

Wages in real terms are below where they were in 2008, but real disposable income has grown in all but three of the past 35 years. And the market is flexible: more than France and Germany, but less than the free-wheeling United States, where employees can be hired and fired at will.

What raw statistics miss, though, is that not all jobs are the same. Wage data and employment numbers don’t say much about gruelling hours, intellectual pressure, lengthy travelling times or lack of status.

RSA Chief Executive Matthew Taylor’s attempt to size up the state of British employment begins to address that, focusing on non-financial issues like security. While his review stops short of calling for a ban on “zero hours” contracts that guarantee no fixed amount of work, it does argue that sick pay and paternal leave should be offered to those who are effectively, if not technically, employees.

Wages are just one of the six components of “good work” it identifies.

That framework could go further. The truth is that some kinds of paid work come with conditions that make them little better than not having a job at all, while others appeal much more than pay levels would suggest. Developing countries have known this for decades: think of the challenge of rooting out sweatshops. Emerging markets also offer examples of the other extreme. In China last year, 1.5 million people sat the country’s civil service examination, competing for just 27,000 jobs. These roles are neither challenging nor lucrative, but they bring status, stability and mobility: a state job in Beijing gives an outsider coveted permission to live in the Chinese capital.

If some jobs are as bad as none, aggregate data on how many people are in work becomes less useful. Again, China’s planners would say this is hardly news. Official unemployment in the People’s Republic has not risen above 4.3 per cent in more than a decade. Yet the authorities worry constantly about disgruntled workers, and with good reason. India is in a similar situation. So, after the Brexit vote of last year, is Britain.

The idea that governments should keep their hands off if wages and aggregate employment are rising is falling out of fashion. That’s because it is now clear that workers don’t always negotiate the best deal. In theory, a driver for car-hailing app Uber would calculate the minimum value of their time, add on a charge for the potential costs and risks they will incur, and refuse to work for less.

If employers do not provide basic benefits, employees ought to demand more. That clearly doesn’t happen. Individuals tend to lack sufficient information to price risks properly, and would probably misjudge them even if they had better information.

Any review of modern work needs to answer two questions: how to create more good jobs and how to measure them. This might need a nudge.

Though Britain had its share of sweatshops and child labour, it also has a tradition of employers being surprisingly virtuous. The paternalistic capitalists of the Victorian era built towns and schools for their workers. More recently, Virgin founder Richard Branson said he would no longer keep track of how much time employees spent on holiday. Disruptive technology firms, and hard-edged American working cultures of the kind that saw maverick Uber chief Travis Kalanick fall on his sword, may require more coercion to do more than the legal minimum.

Measuring whether new types of work are up to scratch poses an even bigger challenge for governments and economists. That calls for some new tools, such as better canvassing of workers’ feelings about what they do, or new definitions of pay that factor in a value for non-financial measures like holiday benefits or job security.

The current practice of just counting employed people and what’s happening to their wages is no longer good enough.