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Richard Lambert's speech to 2007 Trades Union Congress

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Richard Lambert's speech to 2007 Trades Union Congress

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Good morning.

I'd like to start by thanking you for the opportunity to be here this morning.

This is a good time to be talking, because employers and employees - indeed the whole of our society - are facing the same challenge.

How best to deal with the fundamental changes which are affecting our working lives - and every aspect of the world of work.

Over the past 20 years the global work force has quadrupled in size, as trade barriers have fallen away and countries like China, India and the former Soviet Union have joined the international market.

At the same time, rapid advances in technology have connected this vastly larger labour force together, making it possible to unbundle production processes and transfer work to more efficient or lower cost locations anywhere around the world.

It may not always feel like it, but these changes have brought enormous benefits. They've triggered the fastest and most sustained period of global growth in a generation.

They've helped to lift hundreds of millions of workers out of poverty in the developing world.

In the developed world, the changes have provided access to cheaper imported goods, everything from TVs and computers to trainers. They have boosted productivity and output, and contributed to higher wages and more jobs - over a long period.

Dramatically increased competition among the suppliers of goods and services has brought benefits to consumers everywhere.

But there is another side to the story. The benefits of all this growth have not been evenly distributed.

The overall economic pie has increased in size, and workers have shared in that increase just about everywhere.

But because of the enormous increase in the size of the global labour market, it's not surprising that their share of the pie is rather less than it was in most developed economies.

And this in turn has contributed to a period of rising income inequality.

The point I'd like to emphasise today is that this is a global phenomenon. We're seeing some of it here in the UK, and the TUC, not surprisingly, has expressed strong views on the subject.

But the pattern is also clear in many other advanced economies, particularly the US.

So it's not just a story about what's happening here at home.

The big question is what we should do about it and how policymakers should respond.

There are only two choices.

One is to push back against the forces of globalisation, by being protectionist and restricting cross border flows of goods and services, and by slashing the income of high earners through the tax system.

That would be disastrous and have serious consequences for growth and employment.

It would cut the UK off from the benefits of open markets and free trade, and both capital and talent would drain out of our economy into someone else's.

The other choice would be to look for ways of sustaining a growth economy on the one hand, while underwriting social cohesion on the other.

No one wants to live in a society divided between the extremes of gated communities and the under-privileged and under-employed.

As the former US Treasury Secretary Larry Summers wrote earlier this year, the challenge is to develop "policy approaches that can ensure prosperity is more fully shared without threatening its fundamental basis."

I would suggest that there are three key areas which policy makers should focus on:

One is the labour market.

A major study by the IMF a few months ago concluded that those countries which have put reforms in place to improve labour market flexibility have generally experienced a smaller decline in labour's share of income than those that haven't.

That's because they have found it easier to adapt to changing business conditions, and to shift resources from declining to expanding areas of the economy.

The UK's relatively flexible labour markets are a key source of competitive advantage within the European Union.

They help to explain our consistently high employment rates relative to those of the continent, as well as our attraction to foreign investors - including capital-intensive manufacturing.

That's why, among other things, the CBI strongly supports the opt-out from the Working Time Directive.

And it's why we oppose the Agency Workers' Directive in its present form.

We don't believe it would protect vulnerable workers - in fact we think it could make it harder for some workers with family and other responsibilities to find their way into permanent jobs. Recent CBI research shows that large numbers of agency temp placements would simply disappear.

But of course labour market flexibility does bring with it responsibilities as well as opportunities.

So the second key area for policymakers must be skills, education, and training.

Those of us who support free trade and open markets have an obligation at the same time to address the urgent need to strengthen the UK's pool of skills, so that as many people as possible in our society have the chance to share in the job opportunities that come with pro-growth policies.

That's why the CBI is keenly supporting the Skills Pledge, and is also calling for a greater sense of urgency from the government in addressing the challenges set out last year by Lord Leitch.

We know that government, businesses and individuals need to be investing more - and investing more smartly - to raise our game in what's become a much more intensely competitive global labour market.

The third key piece of policy that has to be got right covers the social policies that are needed to cope with this period of change. That includes providing adequate income support to cushion the process of adjustment.

And it certainly includes providing protection for vulnerable workers.

Here I can do no better than strongly endorse Brendan's comment in this Saturday's Guardian.

I quote: "First, we need to focus far more on enforcement of existing laws, which is weak and piecemeal."

Responsible employers recognise the importance of the national minimum wage, and accept that employment tribunals provide an essential recourse for those denied their basic rights. They acknowledge the many ways in which employment rights have been strengthened over the last ten years.

And they have accepted new rights for employees to request part time or other flexible working patterns, new maternity and paternity rights, and increased holiday entitlements.

Good employers will always want to do all they can to retain and motivate staff.

There should be no hiding place for those who operate outside the law - THEY should get clobbered.

Rigorous enforcement of the existing rules must be the right way forward.

So how does the UK stack up compared with other advanced economies against these three policy benchmarks?

In some important respects, we come out rather well.

We have more flexible labour markets than most of our neighbours in continental Europe. And we have much better social protection than is available in the US.

This, I'm convinced, is one of the main reasons why we in the UK look more favourably on free trade than citizens in other big economies. A poll earlier this year found that the France and US were much more anxious about the possible impact of trade on jobs. The UK came at the opposite end of the scale.

But we still have a lot of work to do, particularly in the area of skills and training - where our record does not compare as well as it needs to with those of our main international competitors.

And here I'd like to pay tribute to those many union-learning reps who do great work up and down the land in helping their colleagues to gain new skills and experiences.

Just last week, I visited FirstGroup, the transport company, and heard how representatives from the Transport and General Workers Union were working with managers to refresh existing skills and bring new ones to the workplace, with tailored courses ranging from computer literacy to conversational Spanish.

The programme, I was told, now has a momentum of its own, and has brought a new sense of partnership to the workplace. Right now, around three-fifths of FirstGroup's 20,000 bus drivers have access to the scheme. Next year, they all will.

It sounds like a model. And the fact is that there are many other good stories like this to be told.

Of course, there are lots of issues on which the CBI and the TUC are unlikely to agree.

About the right balance between the voluntary approach to training, and compulsion.

About the potential role for the private sector in the delivery of public services.

And so on.

But it's important to remember that in big picture terms we do have vital common interests.

About the need for high employment levels, and a skilled workforce. About the importance of creating a fair and competitive society, with opportunities for those who can grasp them and support for those who, for one reason or another, cannot.

And we also have a common interest in fostering an open and constructive discussion about the benefits and costs of globalisation, and the policies that will be necessary to support the one and minimise the other.

And it's with that in mind that I was so pleased to accept your invitation to come down to Brighton this morning.

Thank you again.

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