The Future of the Labour Market
Amber Rudd talks about the future of the Labour Market at the Recruitment and Employment Confederation
It’s a huge pleasure to be here at the Recruitment and Employment Confederation.
At first glance the world of work resembles the last century, superficially. Offices, shops and warehouses. Teachers and taxi drivers.
But as soon as you scratch the surface, as soon as you stop to think, you realise what we have today is nothing like the labour market I entered in the 1980s.
I remember when my trading team acquired a single, comically large mobile phone, which one of us took home each night in order to contact Japanese markets at 2am.
Now, thanks to globalisation, digital technology, automation and connectivity, the world is being transformed.
And there are huge opportunities for all of us: new and flexible ways of working, better services, and more inclusivity.
Today I want to celebrate the successes of our labour market, but I also want to talk about what else we can do to improve it.
This is a period of significant change.
And government cannot predict with certainty what will happen next, I don’t think anyone can. But we can prepare.
Where we’re at
Fortunately we start from the enviable position of having a buoyant jobs market, and not just for former Chancellors.
Participation in the labour market is at record levels, with over 32 million people in work and the employment rate as high as it has ever been.
We have the most diverse workforce ever, with more women, disabled people and those from ethnic minority backgrounds in work, bringing financial independence, purpose and confidence to millions of people who were previously sidelined.
And since this government has been in office, over 3.6 million more people have entered work, on average over 1,000 people a day. Our unemployment rate is now less than half the Euro area average.
Thanks to the good work of the Chancellor and former Chancellor, we not only weathered the storm, we got the deficit under control, kept taxes as low as possible, invested in national infrastructure and supported entrepreneurs. All of which provided the bedrock for our jobs success.
That success is also a testament to the collective intelligence of the millions of people, who work every day to improve their lives, their communities, and their businesses.
Because the State is not there to direct, corral or force economic activity.
It cannot compel businesses to create a specific number of jobs, in areas or industries determined by a central command unit.
That approach failed in the 20th century and is, frankly, totally implausible in the 21st century.
Indeed, the government’s role is to create conditions for people and businesses to succeed, and crucially, to create a social security system that will support them if they fall.
What we face now
That is the only way to embrace both the opportunities and the challenges of the modern labour market.
The pace of change in the world around us will only increase. The digital revolution and a world of 24/7 connectivity and consumption continue to tear at the 9 to 5 rule book.
Globalisation is expanding the supply of labour, while automation and artificial intelligence simultaneously disrupt the demand for it.
Overall I am enormously optimistic about the opportunities on offer, but nobody can ignore the challenges that do, and will exist.
Every day we see new reports in the paper that 10, 20 or 30% of people may lose their jobs to robots – yes, even MPs!
Hard working men and women can return home on a Friday, not knowing what shifts they’re working the following week, let alone the following month.
Or still find it difficult to make ends meet when their hard earned pay cheque comes in.
And too many people still face barriers to work, due to age, sex, race or disability.
I understand that the certainty of the old industries, of guaranteed jobs for life, offer an attractive nostalgia. But harking back to the dark satanic mills of the past is not the solution.
We can’t stop the clock, even if we wanted to.
And history shows that we can be positive.
This is not the first Industrial Revolution; all the evidence from the past is that automation and technology can be hugely disruptive, but the role of labour evolves, it is not obliterated.
In the Nineteenth Century, blacksmiths were replaced by railwaymen. It was not an easy transition, but ultimately the productive value of labour increased, and an explosion of commerce and communication followed.
No one looks back now and thinks: I wish the Luddites had won.
And we can already see the same opportunities in the Fourth Industrial Revolution.
Automation is driving the decline of banal and repetitive tasks. So the jobs of the future are increasingly likely to be those that need human sensibilities, with personal relationships, qualitative judgement and creativity coming to the fore.
And there is a great, clear role for government to help people take advantages of these changes, and to help businesses create high quality jobs.
So today I want to focus on three key principles at the heart of our labour market strategy for the 21st century, access, opportunity and protection.
First, better access – so everyone who can work is able to get that vital first job, wherever they live and whatever their background.
Second, better opportunities to succeed and progress in work – we don’t just want people to get a job, we want them to get a good job, with opportunities to progress.
Third, better protections for those who will struggle to manage these changes. We need a safety net and a springboard to support people as they navigate the changing labour market.
The first plank of our strategy is building a society where everyone who can work has access to a job.
First and foremost this requires a strong economy, because jobs are created when businesses succeed. Under this government, over a million businesses have been created since 2010.
But obviously it is not enough just to manage the economy we have. We must also prepare for the changes that it will face.
The government’s Industrial Strategy sets out an ambitious, long term vision to make us the world’s most innovative economy – future-proofing our jobs market so we can be at the forefront of emerging industries.
Second, we need to make sure that people can access jobs wherever they live.
Underpinning this is infrastructure: enabling workers to reach new job opportunities.
This is at the heart of government’s £2.5 billion Transforming Cities Fund, opening up labour markets through improved transport connections in some of England’s largest city regions.
Additionally, our £1.6 billion Stronger Towns Fund will help spread opportunity and growth to places that have felt left behind.
And third, we need to make sure that nobody is locked out of any job because of their age, ethnicity, disability or sex.
That is why I have also consistently championed initiatives, in my department and beyond, to improve labour market access for these groups.
And we are making good progress.
Employment rates for women, and for ethnic minorities overall, have never been higher.
Employment of people aged 50 and over is up 1.9 million since 2010. And the number of disabled people in work has increased by over 900,000 in the last 5 years.
But we know these groups still face disproportionate barriers to work, ranging from practical issues like childcare or accessibility, to straightforward discrimination.
So for the next stage of labour market growth, my department is focusing on how to drive up participation for these under represented groups.
We are providing tailored services for ethnic minority jobseekers: for example, rolling out mentoring circles with national employers, which offer specialised support to build confidence and raise aspirations. Thanks to the work of my colleague, the Minister for Employment, these services have been a success locally and are now being expanded to all young claimants, irrespective of their background, across the country.
At the end of 2018 we celebrated 10,000 employers signing-up to our Disability Confident scheme, in order to empower their recruitment, retention and development of disabled employees. This is a great start, but we want to double Disability Confident membership to 20,000 over the next year. As our stakeholders tell me, this country has some way to go to develop a genuinely ‘disability confident’ labour market, economy and society. Our long standing partnership with the Recruitment and Employment Confederation has resulted in some excellent work to challenge businesses to reform their recruitment.
We will shortly consult on reforming Statutory Sick Pay, in order to better support employers to retain staff who experience health problems.
The current system is failing to support those who fall ill in work, one of several factors causing older people to choose retirement when they still have a huge amount to offer. One in 4 men, and 1 in 3 women, have not worked for at least 5 years before they reach State Pension age.
This is a lose–lose situation; employers lose the skills and experience of those workers, and employees miss those vital extra years of earning and saving which could boost the quality of their retirement.
With forward thinking in mind, in February we launched our mid life MOT campaign. We want to encourage people to take stock of their situation in middle age, and consider their skills, finances and health to make realistic decisions for later working life.
We have already removed the Default Retirement Age to open up fuller working lives, and extended the right to request flexible working, which is of particular importance to anyone, of any age, with caring responsibilities.
For many women, we know that caring responsibilities can be a huge barrier to work.
Over the last few months, we have been trialling more flexibility for parents submitting their UC childcare claims. Following a successful pilot, we are now updating our guidance, so Work Coaches can use more discretion to support parents’ claims for this essential service.
Jobcentres can also use their Flexible Support Fund to pay the up front childcare costs of those moving into work, bridging the gap to a parent’s first pay cheque.
Of course we need to do more, and my department will continue to trial new approaches, looking for innovative ways to support people to enter the labour market.
But it isn’t enough to just have any job, we want people to have good jobs.
And there are concerns that the new ways of working and new technology could, for some, lead to worse jobs.
As consumers, we all know the instant benefits that app services can deliver to our lives.
Young people, who would never use taxis, don’t think twice about ordering an Uber, I know, I am a parent to 2 good examples.
However, there are fears that for employees, the gig economy could objectify labour to a point where their working lives are subordinate to an unthinking algorithm.
That is why the Prime Minister commissioned Matthew Taylor to complete an independent review of modern working practices. And the Secretary of State for Business was right to accept the vast majority of his recommendations in the government’s Good Work Plan.
These are now being put into practice, and we are also taking additional steps, such as from this month, zero hours contract workers are now entitled to payslips by law.
The government’s approach will always be to maximise the benefits of this type of work, whilst protecting those who could be vulnerable to abuse in the real time, demand led model.
Of course, working practices aren’t the only issue. Pay also matters.
We know that of those workers low paid in 2006, just one in 6 had escaped that earnings bracket a decade later.
Women, in particular, often move into part–time work to accommodate family responsibilities; they can get stuck in low paid positions, with limited chance of progression.
So the government has already introduced the National Living Wage, now £8.21, which provided the biggest pay rise for low paid workers in over 20 years.
And we want to go further. The Chancellor has already announced our aspiration to end low pay, and there is also more we can do in DWP.
When the move to Universal Credit is complete, around half of claimants will be in work.
More people than ever before will be engaging with my department, and we have a huge opportunity to leverage the skills of our Work Coaches to build relationships and find innovative ways to support progression.
We have already completed a large scale trial, looking at whether Work Coaches could help in work claimants to get a pay rise. We gathered a huge amount of data, but we need even more evidence to understand what really works.
So today I can announce two further projects.
First, building our ability to help claimants make good decisions about job switching.
We know that changing jobs is often the best way to open up new opportunities and take-on more responsibility, but it can come with risks. This project will help us understand how we can assist workers to make informed decisions about new opportunities.
Second, boosting the capability of our employer-facing staff to have effective conversations with local employers about progression and good quality flexible working.
Because this isn’t a problem that any department, or indeed government, can tackle alone.
Progression relies on employers creating higher value jobs. So I want to listen to businesses’ views, because you are the experts in how your employees can be supported to achieve their potential.
There are some great examples of this happening already. Organisations like Timewise, who work with small, medium and FTSE 250 companies, to create not just jobs, but career paths for those who require flexible working.
And this approach is starting to become more mainstream, with employers like Lloyds Banking Group and Ernst & Young wholeheartedly embracing flexible working practices, and the positive and productive culture that accompanies them.
So my department will shortly be approaching academics, researchers, employers and others, to work with us to gather evidence and generate ideas for a fresh approach.
I have already begun discussions with the Trades Union Congress and the Confederation of British Industry on how we can take this work forward.
I want to build a clearer picture of how and why people progress in work, and what we, the government, can do to support them as they do that.
Because in this era of change it is our responsibility to protect people, by helping them manage the transitions they face as work evolves, and working lives expand.
Through Automatic Enrolment we have transformed pension provision, bringing more than 10 million workers into workplace pension saving since 2012.
But we also need to build a safety net that supports people effectively during their working lives, one that can particularly help those who find themselves temporarily displaced.
Universal Credit is a modern, 21st Century welfare system, using responsive technology to measure a claimant’s income in real time, to automatically calculate and award them their benefits.
It has a massive role to play by providing better security and incentives for people trying to get jobs and build careers.
Under the old system, coming off welfare into an entry level low paid job often led to a net loss for claimants. UC is based on the principle that work will always pay more than being on benefits.
And Universal Credit offers a new level of personalised support. Claimants have access to a dedicated Work Coach who builds an understanding of their needs and strengths, to offer them the best possible advice and opportunities. Claimants also have more options to interact with the jobcentre, online, by phone or in person.
And at the heart of this support is an agreement that the claimant commit to certain activities to improve or maintain their employment prospects, such as looking for work or doing work experience.
However, I want to ensure that the penalties for not meeting these conditions are proportionate, particularly for the most vulnerable.
So I am announcing today that I will end financial sanctions for welfare claimants that last for 3 years.
Such sanctions were rarely used, but I believe they were counter productive and ultimately undermine our goal of supporting people into work.
In the future, the longest length of a sanction will be 6 months.
And I am undertaking an evaluation of the effectiveness of Universal Credit sanctions, to consider whether other improvements can be made.
Of course, this time of change demands other measures that complement a reformed welfare safety net.
We will need to help people find new roles and build new careers, providing a springboard to help them harness their talents and adapt to the changing market. And we cannot expect the school system to pick up the slack, two thirds of 2030’s expected workforce has already left secondary education.
So learning has to be a lifelong endeavour. This government is creating new Institutes of Technology, rolling-out T–levels in 2020, and will soon publish the Augar Report on the best ways to support Further and Higher education.
The National Retraining Scheme is at the heart of this work. Developed by the Department for Education with other stakeholders, this service will help workers prepare for technological change and automation, by learning new skills to find better work.
This is a complex brief, but I know that colleagues across government, in partnership with the TUC and CBI, are working to ensure we build a service that meets the needs of workers and businesses.
I don’t underestimate the challenges ahead. Jobs are being made, remade and reshaped every day, as we find new ways to be useful to one another.
But I remain incredibly optimistic about what we can achieve.
Seemingly every month now, we celebrate a new employment record.
Commentators rightly talk about it being the great success story of this government.
Indeed it is.
But sometimes we lose sight of why these figures are so important.
They are important because being in a job gives a person dignity, the opportunity to dream big, to earn their own money, pay their own way, determine their own future and set a positive example to their family.
And for many people a job is even more than these things, it is a calling in life.
But I know too, for many, that a job doesn’t always meet every hope and dream. And just because the world of work is changing, does not mean standards and fulfilment should.
Some people do not progress in the way they’d like, their wages don’t rise as fast as they’d wish or they see opportunities slip away by not having the skills or confidence to reach for those goals.
As we progress towards the 100 year life, as the economy transforms around us, we know that multiple career changes are likely to become the norm.
Changing career, perhaps several times, in the midst of working life can be daunting - particularly if you have a family to look after. I know – that’s the path that I took.
The work we are doing across government, and particularly in my department, is designed to support people through this. Because while I know that being in a job is so much better for you, I also know that getting into work should be the beginning of your journey and not the end of it.
From Universal Credit, to Mid Life MOTs and the National Retraining Scheme, we are building a modern system of social and career support, one that is designed for the 21st century labour market, with every single worker in mind.