Blow the whistle on control freak management and enjoy the World Cup

There are so many ‘occasions’ nowadays I find it increasingly difficult to get excited by the prospect of any particular event. But the boy in me still thinks of the World Cup as something special. 1966 was the first tournament I can properly remember, my nine year old self never doubting an England victory, though 1970 and the brilliance of the Pele generation of Brazilians remains my internal default setting for what the World Cup is, or at least should be, all about. Personally speaking, the adrenaline level has dropped in recent years simply because globalised televised sport means we regularly see all the top players, eliminating the surprise factor that competitive international matches once brought. Nonetheless, I anticipate a month of late nights and bleary eyed mornings as events in Brazil unfold.

Judging from the usual welter of ‘how to manage staff through the World Cup’ reports in recent weeks, British bosses expect many of their employees will be similarly footie focused between now and July 13^th. The general tenor of this stuff is apocalyptic: without effective management, absence rates will soar while lateness, hangovers and time spent at work checking out news on the latest England injury scare will hit productivity. But is this really likely, or leastways is it really worth worrying about? I doubt it.

For one thing, people nowadays are used to combining work with increasingly active social lives which are jam packed with the enjoyment of entertainment of various kinds. Most behave sensibly, which is why employers don’t have to develop policies to manage staff through the Glyndebourne season or Glastonbury week. But more importantly, indulgence in a bit of collective interest not directly focused on the daily grind may well make staff more, not less, engaged and productive in their jobs.

Casual empiricism has always suggested that sporting achievement or excitement lifts the mood in both the nation and the workplace. Evidence for this in the form of an economic dividend is less apparent (for example, whatever the legacy of the 2012 London Olympics it clearly didn’t do anything to boost the UK’s dire labour productivity performance). However, the good workplace is not measured by short-term financial indicators alone but also by the immediate and long-term wellbeing of the workforce.  Far sighted employers will recognise this and offer a bit of slack to staff to live a little and enjoy the World Cup with family, friends and work colleagues. The short-sighted will instead issue memos on proper behaviour and conduct of the type that have turned so many UK workplaces into rules driven target obsessed fiefdoms that inspire control freak managers but turn staff into disengaged stress victims.  Society should blow the whistle on this type of management and kick-off toward a new way of working for the UK.  

Talent ain't what it used to be

I don’t routinely watch ITV’s Britain’s Got Talent but caught the end of this year’s Final on Saturday having switched on ahead of England’s World Cup warm up match with Honduras. As it turned out, the Simon Cowell franchise show was more entertaining than the weather interrupted goalless draw in Miami, though what struck me most was just how old fashioned the basic format was. To all intents and purposes BGT is Opportunity Knocks with chirpy Geordie duo Ant and Dec instead of Hughie Green, plus Botox, a bit more cleavage and audience telephone voting rather than the once famed ‘clapometer’.  Also interesting was the underlying assumption of the show  that ‘talent’ is a plentiful resource that exists throughout the land and simply waiting to be tapped. This notion of a ‘talent pool’ is nowadays widespread throughout society, shared by politicians and business people as well as those in entertainment and sport, yet it differs from how we thought about talent in the past and raises some intriguing issues.

Traditionally, talent referred to a person’s innate ability at performing a given task or tasks.  A talent might be used for personal profit or the common good but – as, for example, espoused in the New Testament ‘parable of the talents’ - there was a clear moral imperative to use it wisely. Every person was deemed to have some talent or other. Some talents were fairly widely spread throughout the populous, others relatively rare. Exceptional talent might bring fame and fortune though it was not necessarily marketable (we’ve all heard of Pavarotti, the planet’s greatest yodeller is less well known). However, it was generally accepted that while a talent could be honed it could not be acquired. Each individual had a well of aptitude from which to draw. All the individual could do was identify their particular talents, develop them and make the most of them – ideally with a helping hand from parents, teachers, and employers. But attempts to conjure up silk purses from sows’ ears were generally seen as futile.

However, this traditional concept has gradually been diluted by a growing tendency to confuse the availability of talent with the supply of acquired skills. When government ministers and business leaders talk of ‘unlocking talent’ they more often than not mean providing people with education and training that offers a qualification as a route to a job or better pay. In some cases this can indeed help develop and validate people’s innate aptitudes. There is undoubtedly a waste of potential in our society, especially amongst the most disadvantaged young people who deserve greater opportunity to show what they’re capable of. But increasing skill acquisition is not the same as giving vent to genuine talent. Public policy and business practice can raise the supply of useable skills and, if effective, add to the flow of observable talent into the market – it can’t easily, if at all, boost the underlying reservoir of talent. 

Ironically, the more we try to unlock talent in this rather crude way the harder it becomes to identify and properly manage talent.  As more people acquire academic or vocational qualifications the proportion whose acquired skill fits a genuine natural aptitude tends to fall. One can detect this from the observation that the pay gap between higher and lower earners is getting wider within skilled occupations as well as between occupations. This might to some extent be explained by the superior soft skill (itself usually a personality trait) some people display in their jobs but it also suggests that people whose acquired skills are most attuned to their aptitude enjoy a wage premium (particularly in economies such as the UK and the United States where pay rates are more likely to be matched to individual performance). But in a labour market awash with qualifications the genuinely talented are becoming harder to pinpoint by means of a simple scan of those with a given formal skill set – which is why recruiters and managers are eager to develop more acutely attuned talent spotting antennae.  

Organisations must take care, however, that in the rush to share in the understandable vogue for talent acquisition and talent management they don’t fall into a related trap. A common error is to simply attach the talent label to existing recruitment and development practice. At best this treats talent as if synonymous with skill and at worst merely uses talent management as a sexier alternative to people management. This may be good for book sales – count the number of bog standard HR publications in the past decade with talent in the title to add a bit a gloss – but ultimately causes confusion. The successful organisation, by contrast, will be that which knows what genuine talent is and what it isn’t and is able to identify pearls of talent within the increasing mediocrity of formal skill.

Sense of perspective needed on trend toward working from home

The Office for National Statistics this morning published its latest analysis of the incidence of people working at home, which shows a substantial rise since the late 1990s. In my experience, the tendency of many commentators will be to leap on these figures as evidence of a revolution in the British way of work. However, while there is certainly a clear trend toward homeworking, the phenomenon needs to be viewed with a sense of perspective.   

Although home working in the UK has risen to a record high of 4.2 million (up from 2.9 million in 1998) the share of home working in total employment (13.9%, up from 11.1% in 1998) has yet to grow by as much as ‘future of work’ gurus have commonly predicted, with many suggesting that the home working rate might one day exceed 50%.

The key factors behind the increase are digital technologies which allow people to work at home or to use home as a base while regularly on the move between various work locations (the latter group of nomadic home based workers accounting for two-thirds of all home workers), the rise of self-employment with people establishing offices at home, and an ageing population with more older people seeking to avoid the daily commute and the stresses of office life (the home working rate for the over 65s, 38.3%, is almost three times higher than the overall rate). All these factors are likely to further increase home working in the coming decades but one should be wary of forecasts suggesting that the vast majority of people will in the future be mainly working at home.  While home working is set to be a far more common feature of the UK’s flexible employment landscape, work in the office, at the factory or on the service front line will remain the norm for the vast majority of people.

Job growth fuelled by continued surge in self-employed takes the steam out of pay growth for UK employees

The Office for National Statistics (ONS) has released the latest set of UK labour market data, mostly covering the three months January to March 2014.

The number of people in work in the UK continues to rise at a remarkable rate (up 283000 or 0.9%, to 30.43 million, in the first quarter of the year). This has helped to cut total unemployment by 133,000 to 2.21 million (6.8%) against a backdrop of rising economic activity (the number of economically inactive people of working age falling by a further 85,000 to 8.84million).

All the available wider quarterly headline employment, unemployment and underemployment figures show signs of improvement. Full-time employment accounts for more than 60% of the total rise in employment, while the number of part-timers who want a full time job, while still very high at 1.42 million, has fallen slightly by 7,000. Long-term unemployment has fallen by 33,000 (to 813,000), youth unemployment has fallen by 48,000 (to 868,000) and the JSA claimant count has fallen by 25,100 (in April 2014, to 1.16 million). Employment in the first quarter increased in every nation and region of the UK except Wales (where the number in work dropped by 18,000) and unemployment fell in every nation and region except the North East (where the number unemployed and looking for work increased by 5,000).

Once again, however, the self-employed account for the vast majority (183,000, almost exactly two-thirds) of total employment growth in the first quarter of this year and 52% of the 722,000 increase in the year to the first quarter. The precise reasons for this continuing surge in self-employment at the present time remain a subject of debate. But either way a jobs boom driven by the fast swelling ranks of the self-employed is not being matched by a corresponding boost to employee pay, the recent improvement in which appears for the time being to have run out of steam.  

While the latest Average Weekly Earnings figures show the rate of growth of total pay unchanged at 1.7% - a whisker above the CPI inflation rate of 1.6% - growth in regular pay (excluding bonuses) has dropped from 1.4% to 1.3%, with the easing of regular pay growth more marked in the private sector.

The good news from the latest jobs and pay figures is that they suggest UK unemployment can probably fall much further and much faster without triggering wage inflation. No wonder then that the Governor of the Bank of England, Mark Carney, noted this morning in his opening remarks to the Bank’s quarterly Inflation Report press conference that “significant slack remains in the labour market” and that the “unemployment rate of 6.8% remains significantly above our (the Bank’s) estimate of its current equilibrium.” Consequently, Mr Carney stated, the Bank reckons that the labour market currently accounts for the bulk of slack in the UK economy as a whole at present (estimated at 1-1.5% of GDP). Although, as Mr Carney also notes, there is considerable uncertainty around this estimate of slack, the Bank’s current estimate does not therefore suggest a near term interest rate rise. The bad news is that ‘significant labour market slack’ also means there is probably a very long way to go before workers notice any significant improvement in their real standard of living.   

Adult care on the cheap is real slap in the face for Britain’s elderly

Last night’s BBC Panorama programme is the latest to expose abuse in some of Britain’s residential care homes for the elderly.  Sadly, despite acknowledgement of the need for ever tougher regulation and inspection, it’s unlikely to be the last such horror story from a sector where the availability of low-skilled workers and public sector financial constraints combine to create an incentive for providers not to improve employee pay, conditions, working practices and care quality.

I draw this pessimistic conclusion from a study of Britain’s low wage economy, including a focus on the adult care sector, which I recently undertook for the Joseph Rowntree Foundation (JRF). A report based on the study was published yesterday.

As the JRF report finds, adult care (which employs approaching 2 million people to serve our ageing population) is by no means the lowest paying sector in the UK but offers a particularly arduous combination of low pay, demanding work, often anti-social hours, and uncertain contractual arrangements (the use of zero-hours contracts is endemic). This in part reflects the fact that although care work requires a considerable amount of ‘soft’ personal skill the workforce lacks the kind of ‘hard’ formal skill that offers a decent return in the labour market.

Care staff need the technical ability to assist those they serve properly and safely (sometimes including an element of medical care) plus basic admin skills but for employees in direct caring roles soft skill is generally more prevalent than formal qualifications. Despite some improvement in attainment over the past decade almost 40% of direct carers have no qualifications whatsoever, the remainder split roughly equally between employees with NVQ level 2 qualifications (equivalent to five or more GCSEs at A-C grade) and qualifications at level 3 (equivalent to 2 or more A levels) or above. This outcome is not as worrying as it might at first appear given that the personal ability of employees to treat customers with sensitivity, due respect and to display a marked degree of empathy are likely to be at least as important as formal skills in the care sector. Yet what’s also clear is that far too many cash strapped employers in the sector have become reliant on poorly trained staff that can be hired on the cheap, which at best has proved detrimental to the general standard of care quality and at worst  resulted in the serious abuse scandals.  

The labour market dimension of the poor care quality story emerges because care work provides opportunities for individuals who have strong personal skills but sometimes lack even basic literacy and numeracy skills. The difficulty workers with few qualifications or hard skills face in gaining entry to higher paid employment sectors means that those with soft skills crowd into service sectors where this kind of skill is particularly important. But this ‘crowding’ effect creates a buyers’ market for people with solely or mainly soft skills, allowing employers to recruit them on very low rates of pay.  Where, as in the care sector, these recruits are predominantly women looking for part-time work or flexible shifts close to their own homes - which further limits the number of alternative jobs effectively open to them - the impact of labour crowding on pay can be marked.

However, while almost everybody is aware of the potentially adverse consequences on care quality of maintaining a predominantly low paid, poorly qualified and low status workforce, even the best of employers struggle to respond to calls to improve pay, staff training and other workplace practices because of the severe funding constraints they face. In comparison with the NHS, and regardless of hand wringing over cases of abuse, adult social care remains a Cinderella service in terms both of status and government spending. Cost cutting has been the principal rationale for the UK’s shift to a commissioning and contracting out model of adult care provision in the past two decades, with the underlying funding situation exacerbated by a 20% real terms reduction in overall local authority adult care budgets since 2010 .

The juxtaposition of the current contracting out model with a deregulated labour market and plentiful supplies of low skilled/low wage labour makes the maintenance of low-cost business models in Britain’s care sector almost inevitable. This is in marked contrast with the situation in Scandinavian countries, notably Sweden, where subcontracting of care services to non-state providers is more limited and the government actively requires good minimum standards of entry level qualifications to the sector. Compared to other countries Sweden requires the highest levels of education among caregivers and pays the highest wages. The objective of care policy is to improve employment and working conditions in order to recruit and retain a stable care workforce and enhance the status of care work. Moreover, countries such as Sweden which impose higher training standards on care workers also operate sector-wide pay regulations, often based on collective bargaining. This is clearly a very different institutional context, both in terms of funding of care and labour market regulation, from that which currently prevails in the UK. 

 

Ultimately, therefore, any serious drive to improve pay, working conditions and service quality in the adult care sector may require acceptance at the very least of a higher level of funding for the sector, probably a reassessment of the current contracting systems, and a new way of thinking about the downsides of the UK’s ultra-flexible labour market model.   

All eyes on the UK pay figures but it’s the jobs figures that are truly remarkable

The Office for National Statistics (ONS) has released the latest set of UK labour market data, mostly covering the three months December 2013 to February 2014.

All eyes today are on the latest average weekly earnings figures which show that the UK’s prolonged real pay squeeze is over, with average total nominal pay growth of 1.7% in February 2014 matching that month’s CPI inflation rate. Bonus pay accounts for the end of the squeeze – regular pay rises are still running at a sub-inflation rate of 1.4% – although workers in the private sector on average enjoyed a small real wage increase in February whether one looks at nominal growth in pay including bonus payments (which increased by 2%) or excluding bonus payments (which increased by 1.8%). Either way, with pay set to keep rising against a backdrop of modest price inflation, which the ONS told us yesterday fell to 1.6% on the CPI measure in March,  average real weekly earnings are now on the up again for the first time since 2010 even though still well below the pre-recession level.

However, while the pay figures grab our attention one should not overlook how truly remarkable the latest jobs figures are. Not only is employment up by 239,000 in the latest quarter on the Labour Force Survey (LFS) measure, helping to cut the unemployment rate to 6.9% (2.24 million), but the ONS’s quarterly Workforce Jobs (WJ) survey data show that the UK economy added almost a million (993,000) net new jobs in 2013 as a whole, almost half a million in the final quarter alone.

Note that the LFS is a household survey, which provides us with an estimate of the number of people in employment, while the WJ is mainly a survey of employers asking them how many jobs they provide. The LFS estimates that there are 30.3 million people in employment, the WJ that there are 32.7 million jobs (the estimates differ primarily because of differences in coverage and methodology but in part also because some people in employment do more than one job). Both measures tend to move in line over time, although they sometimes suggest different rates of employment growth. The ONS prefers to use the LFS to provide its headline employment measure – the LFS providing more timely estimates and forming part of an overall framework of labour market statistics which also provides estimates of unemployment and economic inactivity – but prefers the WJ to estimate the distribution of jobs across industrial sectors because respondents to the LFS might not always be fully aware of which sector they work in.   

Either way the latest WJ figures indicate annual UK job growth of 3.1% in the year to the final quarter of 2013, making the latter one of the best years for UK jobs in decades, the kind of performance one might expect during an economic boom rather than a gradual economic recovery. While it’s clear that many of these net new jobs are linked to the recovery in the housing market – construction added 92,000 jobs in 2013 (an increase of 4.5%), real estate activity 83,000 (an increase of 16.3%) – jobs are being added across the economy, including in manufacturing which added 45,000 jobs (an increase on 1.8%). Moreover, according to the WJ well over two-thirds (707,000) of these net new jobs are for employees, so the ‘jobs boom’ can’t be explained solely by the big surge in self-employment recorded by the LFS in recent years.

Given all this, along with good news of rising job vacancies (up by more than 100,000 in the year to the first quarter of 2014), falling youth unemployment (down 38,000 in the latest quarter), fewer people claiming Jobseeker’s Allowance (down 30,400 in March) and fewer part-timers unable to find a full-time job (still high at 1.42 million but down 17,000 in the latest quarter), it’s clear that the UK labour market is now in a far healthier state than 12 months ago. What remains to be seen now is what happens to this remarkably strong jobs growth as real pay growth increases and employers set their sights on increasing productivity to counter rising labour costs. Watch this space.

A full employment target is no longer enough

The political economy of full employment has been my principal professional interest – some might say obsession – for the past 30 years. For much of that time the concept has remained dormant, having been placed in deep freeze in the late 1970s. But every now and then a politician decides to revive the idea, suitably reframed for a new audience, as the UK Chancellor of the Exchequer, George Osborne, did earlier today.  

Even though politicians on the left long ago abandoned the Keynesian-style policy mechanisms associated with full employment in its post war heyday, they have generally been more comfortable about promoting it as an objective. Conservatives, by contrast, have to skirt round the unhelpful fact that Mrs Thatcher disliked the idea (the former prime minister claimed to always carry a copy of the 1944 employment policy white paper in her handbag, but presumably only as a reminder never to back-slide on her neo-liberal principles). Tory Chancellors, such as Ken Clark in 1994 and now George Osborne, instead evoke Churchill as an advocate of full-employment, while at the same time applying the concept to an entirely different frame of economic reference.

Mr Osborne’s task is to suggest that his current, and presumably future, agenda of tax cuts and welfare reforms is needed to propel the UK to top spot in the G7 when it comes to the employment rate (i.e. the proportion of the population in work). To Mr Osborne’s credit this is a specific full employment target – most of his predecessors have aimed more loosely at ‘a high and stable’ level of employment. However, although this is a moving target – since employment rates in other G7 countries will be changing too - it isn’t particularly stretching, and on current Office for Budget Responsibility projections will probably be met within five years without any changes to policy.

And here’s the rub. A generation ago full-employment was hard to achieve in the UK because an inflexible labour market meant wage inflation proved to be a serious problem even when the unemployment rate was close to 10%. But after 30 years of supply side reform, Mr Osborne has the good fortune to have inherited an economy with a labour market so flexible it can churn out jobs without triggering inflation until unemployment is close to, or perhaps even below, 5%. In other words, the Chancellor knows that in looking forward to full employment he is on to a winner. All he need do is sit back and wait for the economic recovery to create jobs, raise the employment rate to 75% and cut unemployment from around 2.3 million to around 1.5 million.

In aiming for full employment as he defines it, Mr Osborne has therefore chosen too easy a target. Although cyclical unemployment remains far too high, the UK’s key policy challenge today is not how to increase the number or proportion of people in jobs but rather how to increase productivity in the jobs we are creating, and hence the living standards of those doing them. So while I remain a firm advocate of jobs for all, I am increasingly of the view that full employment is no longer enough. Our stretching target must now be ‘full employment plus’.