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The Future of Work

Issue date

Looking Ahead - the Next Ten Years

Higher skill white-collar jobs

Section one

1.1 Introduction

1.1 It is a widely held view that the structure of the UK labor market has changed radically over the past 20 years with the growth of "flexible" forms of employment and the end of job stability. Tomorrow's labour market, it is said, will be dominated by flexible employment in an IT "knowledge driven economy". Many of these ideas are influenced by the US experience of high tech related growth in areas such as Silicon Valley.

1.2 But how much hard evidence is there to support such assertions? Are there clues in the way employment and the world of work are changing across the industrialised world that might shed some light on where we are going in the future? This report looks at what has happened and what might happen to the labour market over the next ten years.

1.3 We cannot predict the future. Things happen which few could have foreseen, such as the explosive growth of the Internet and more recently e-commerce. These changes will impact on the world of work in many diverse and unexpected ways. But equally if something hasn't happened over the past twenty years, either in the UK or in Europe or in the US, we need to ask why it should happen over the next twenty years.

1.4 Governments and institutions still matter in helping shape change in the labour market. The past Government's policies of deregulation, promotion of hire and fire, and abandonment of a fairer distribution of incomes all had a profound impact on where we start from today. The present Government's policies can also shape the labour market that trade unions and employers have to work within over the next decade.

1.5 Of course, there are limits to what governments can do, for good or ill. It would be a costly and ultimately futile battle to reverse trends deeply entrenched in the economy and which are clearly part of wider changes across industrialized economies. The end of the 1970s did mark a structural shift away from very large manufacturing plants. It would be very difficult if not impossible to return to the labour market structures of thirty years ago.

1.6 But it would also be equally wasteful and frustrating to prepare for changes never likely to happen because of an exaggerated or mistaken view of what is actually going on the labour market today. It is vitally important that we recognize and distinguish between the changes likely to stick and become widespread and those that are likely to be transitory or affect only a small, if vocal, part of the labour market. It is also misguided to construct a mythical past Golden Age in which, for example, everyone had a job for life.

1.7 Many of the processes driving change in today's labour market - such as new technology and globalisation - have been around for a long time. Often, it has been changes in the way governments and institutions respond to these challenges that have been important rather than in the nature of the challenge itself. The key is to develop policies that manage necessary change in ways that maximise the benefits and minimise the costs, and as far as possible ensure that both are widely and fairly shared across society.

1.8 The basic picture presented in this report is that while labour markets have a lot of short-term turnover, below the surface activity there is also a lot of underlying stability. Changes in the underlying structure of employment therefore tend to be persistent and steady, operating over decades - most of the changes likely to persist today had their origins in the 1970s or even earlier. Those seeking significant breaks with the past in the wider labour market may be looking in the wrong place. At least as significant - perhaps even more so - have been change inside the workplace, of collective organization and changes in work organization and practice.

Section Two

2.1 Labour Market Change

2.1 This section looks at changes in the labour market from the mid 1980s to the present day. This period was chosen because from 1984 onwards we have a consistent set of official labour market statistics drawn from one official source, the household Labour Force Survey (LFS), so we can be reasonably certain we are comparing like with like.

2.2 The LFS is based on international standardised definitions of employment and unemployment set down by the International Labour Organisation (ILO). Comparable surveys are held in all EU member States to form the annual European Labour Force Survey. This report also draws on statistics and estimates produced by the OECD, the EU Commission and the US Bureau of Labor Statistics. Unless otherwise stated, the figures are all UK seasonally unadjusted, and refer to the Spring of each year. The employed workforce includes employees, the self-employed and government trainees, but for this report excludes unpaid family workers (the latter were only included in official definitions of the employed workforce from 1992 onwards).

2.3 The fifteen years 1984 to 1999 on which this report is based was a period of employment expansion, with a net rise of well over 3 million in the number of people in work. It has included a boom, a bust, and a long recovery. It was also a period when the regulations and institutions said to hinder change were either removed or severely weakened. It is hard to imagine a period more favourable to radical changes in labour market structures.

The end of the permanent job?

2.4 If there is one persistent view it is that the UK developed a more flexible labour market over the past twenty years - one in which "regular" permanent job-for-life employment was on the way out. What official statistics show is that the permanent employee remains the bedrock of the UK labour market.

2.5 In 1999 permanent employee jobs accounted for over 80 per cent of total employment, very similar to the share in 1984. Between 1984 and 1999 about 70 per cent of the net increase in employment was in permanent employee jobs. There has been a slight rise in temporary and self-employment as a share of total employment, and a fall in the share of people on government training schemes. Many commentators refer to part time jobs as part of the "flexible" workforce, but nearly 90 per cent of part time jobs are permanent.

PERMANENT EMPLOYEE JOBS DOMINATE THE LABOUR MARKET

Share of all in work*

1984

1999

Permanent employees

82.8%

81.7%

Temporary employees

4.6%

6.0%

Self employment

11.2%

11.7%

* includes government trainees but excludes unpaid family workers: all figures UK seasonally unadjusted, Spring.

Labour Force Survey

The Jobs For Life Myth

2.6 As well as the "death" of permanent employment, much has been made of the end of the job for life. It is said that people will move more frequently, perhaps changing careers two or three times. There are certainly examples of the highly mobile, well-educated, IT literate professional who fits the bill exactly.

2.7 How long people appear to stay in jobs is affected by the economic cycle. When the labour market is creating lots of new jobs, as the labour market has over the past few years, the average tenure may fall a little - because by definition new jobs have not existed for as long as old jobs and partly because people tend to move around more. But taking all this into account the hard evidence shows that on average, people stay in jobs almost as long as they did fifteen years ago. The share of long tenure jobs in the economy appears to have changed remarkably little.

2.8 The Employment Policy Institute has estimated job tenures on a comparable basis from 1975onwards. This shows that tenures fell in the 1980s recession with the loss of many long-term jobs for male manual workers. But there has been much more stability since 1985. Latest figures suggest the share of people who have been in the same job for less than two years has increased from 29 per cent to 33 per cent, while the share that have been in their current jobs for more than 10 years remained much the same at around 30 per cent.

EMPLOYMENT STABILITY IN THE UK 1985 TO 1999

Length of time with current employer

1985

1999

Less than 2 years

29%

33%

2 but less than 5 years

20%

20%

5 but less than 10 years

21%

15%

10 but less than 20 years

20%

20%

20 or more years

10%

11%

Source: Employment Audit, Spring 1998, Employment Policy Institute; Labour Force Survey, Spring 1999.

2.9 The myth of the end of the jobs for life is partly based on the creation of a mythical Golden Age of life-long employment for everyone. This is simply wrong - for many manual workers and most women jobs for life were never on offer even in the 1970s. In 1975, for example, only 6 per cent of women had been in their current job for 20 years or more.

Stability Is Not the Same As Security

2.10 These trends have been seen by some as evidence that job insecurity is also a myth, perpetuated by the chattering classes in London. But this confuses stability with security. Those who have been a job for many years can feel just as insecure as a new recruit, because although they may be less likely to lose a job they have more at stake in terms of job status and pension rights. Older workers in particular may struggle to regain the salary and conditions they had had in a previous job.

2.11 There is compelling evidence that the traditional insecurity experienced by many manual workers has spread into non-manual jobs. The combined impact of increased job insecurity and work intensification is clearly set out in the most recent comprehensive study, funded by the Rowntree Foundation (Job Insecurity and Work Intensification, Burchell et al, 1999). It is the breakdown of the workplace social contract between job security and worker commitment and the increased costs to the individual of job loss that has pushed job insecurity up the agenda over the past twenty years. The 1998 WERS found that in all workplaces with 25 employees or more only 14 per cent operated any form of job security agreement, such as a commitment not to use compulsory redundancy.

Flexible Alternatives

2.12 Various alternatives to the permanent employee job have come in and out of fashion over the past twenty years, notably self-employment in the 1980s and temporary employment in the 1990s. More recently portfolio and teleworking have had their advocates. Unfortunately, what has actually happened in the labour market over the past fifteen years is not supportive of the view that permanent employee jobs are on their way out.

Self-employment has been seen as the way forward, and it did grow significantly in the 1980s. But ever since it has been in retreat, so that in 1999 the share of employment - just under 12 per cent - is much the same as in 1984. By 1999 there were 400,000 fewer people in self-employment than at the peak year of 1990. There is little sign that the decline in self-employment is halting.

  • Temporary employment as defined by the LFS includes those on fixed term contracts, agency workers, casual and seasonal work, and other forms of non-permanent contract. The percentage growth in all sorts of temporary employees between 1992 and 1997 was impressive but from a small base. Temporary work accounted for just under 5 per cent of employment in 1984 and today accounts for about 6 per cent. The growth has not been sustained and since 1997 the numbers in temporary work have fallen.

Temporary and Self-Employment in Europe and the US

2.13 There has been no growth in the share of self-employment in Europe or the US over the past twenty years. The share of temporary work has increased in Europe, largely driven by policy interventions in France and Spain. Non-permanent employment is today much more common in the rest of Europe than in the UK or the US labour markets. By US national definitions, temporary or "contingent" work is rare and shows no sign of growth. In 1999 the US Labor Department estimated "contingent work" accounted for between 2 and 5 per cent of US employment (the higher estimate includes some self-employed).

TEMPORARY AND SELF-EMPLOYMENT COMPARED

Temporary

Self-employment

Total

EU15 (1998)

13%

15%

28%

UK (1999)

6%

12%

18%

US (1999)

2%

7%

9%

Note: UK and US are 1999, national sources: EU is 1998 for self-employment and temporary work.

Sources: UK Labour Force Survey; EU Commission and 1997 EU Labour Force Survey; US Labor Bureau of Statistics.

2.14 Despite the clear-cut picture shown above there is a persistent perception that the regular permanent job is going to decline in the future. This perception may be based on confusion between the changing nature of non-permanent employment and the undoubted increase in particular occupations and industries and its overall importance in the labour market. In the mid 1980s self-employment was dominated by traditional jobs in industries such as construction and distribution, but increasingly self-employment has been shifting towards managerial and professional workers in areas such as business services, education and health and the media. In 1984 only 16 per cent of the self-employed worked in business, education or health services, but by 1999 the share had nearly doubled to 29 per cent. Nearly half of all self-employed people today are managerial, professional, or associated professional.

2.15 Similarly, within the temporary labour market there has been rapid growth in the number of people working for agencies compared with other forms of temporary work. More temporary workers are professionals in specialist areas. Many more academics are on fixed term contracts, but as a result of public policy rather than global economic forces. There has also been a clear trend to casual, temporary, and freelance contracts in the broadcast media. However, it is also important to remember that despite these shifts, many self-employed and temporary workers are in "traditional" manual and non-manual jobs. In many cases lack of job security is compounded by low pay, poor conditions and little chance of acquiring new skills.

Portfolio and Teleworking

2.16 Fashionable interest has been in the promotion of new forms of home working,particularly teleworking - the idea that more and more people will work from home using new technologies. Closely linked is the notion that regular permanent employment will increasingly give way to "portfolio" workers (one person holding down more than one job) as the new alternative to permanent regular employment. However, the statistical evidence is that these forms of employment account for a small share of employment and there is little evidence of significant growth over the past fifteen years.

"Portfolio workers": the number of people who hold more than one job today is roughly 5 per cent of the workforce. Portfolio workers are often portrayed as creative IT literate professionals, but the reality is usually more prosaic. Second jobs are much more likely to be in areas such as catering or cleaning and are often taken to supplement low earnings in a main job. Portfolio working has risen, but from a small base - in 1984 about 3 per cent of the workforce held a second job.

Homeworkers include some of the greatest extremes in the labour market -at one end "traditional" homeworkers are one of the most exploited groups of workers in Britain; at the other, teleworking managerial and professional workers are often seen as the "new" homeworkers of the future. Those who work mainly from home -whether paid or unpaid - are still comparatively rare - about 2 per cent of the labour force.

Teleworking: a history of ambitious job growth forecasts never matching reality appears set to continue. The Labour Force Survey of telework is some paid or unpaid work at home requiring the use of computer or telephone, but even on this definition only 5 per cent of the workforce had ever "teleworked" in 1999. Those who "teleworked" as their main job accounted for about 1 per cent of employment.

HOMEWORKING AND "TELEWORKING" IN BRITAIN IN 1999

"Homeworkers" as % of all in work

"Teleworkers" as % of all in work

Mainly work at home

2.3%

Telework in main job

1.1%

Some work in week of survey

4.0%

Telework with home as base

2.9%

Ever do some work at home

18.9%

Some telework in survey week

1.6%

Note: all figures include self-employment and both paid and unpaid work. "Home based" teleworkers work somewhere else but operate from home.

Source: Labour Force Survey

Small Firms

2.17 Small firms are often said to have played a major part in job generation in modern economies. It is commonly asserted they will have an even more important role in the future. Not only has the small firm sector been singled out for special attention by successive UK governments, but also promotion of entrepreneurial activity has become one of the central pillars of the European Employment Action Plan. Yet despite all the attention, there is remarkably little hard evidence on their actual contribution to employment growth.

2.18 One of the key distinctions often over-looked is between small workplaces and small enterprises (firms). Many people in small workplaces on the high street are part of a big company chain or corporate holding. Another key distinction is between the normal processes of industrial regeneration we would expect to see in any economy, whereby existing firms grow, die and are replaced by newer enterprises and a more fundamental structural shift with more jobs moving permanently into the small firm sector.

2.19 There are many official statistics by size of workplace, and it is clear that over the past twenty years there has been a shift as large scale manufacturing plants disappeared and smaller service sector workplaces expanded. In contrast there are hardly any official statistics by size of enterprise. Until very recently there was no agreed definition on how big a small or medium sized enterprise (SME) was. The current standard EU definition is that firms with less than 50 employees are "small"; firms with between 50 and 249 are "medium"; and firms with 250 employees or more are "large". The US uses a higher cut-off, defining firms with less than 500 employees as SMEs and firms with 500 or more as large.

2.20 We have no real idea whether there has been a significant long-term shift towards smaller enterprises over the past twenty years or how big it has been. The most widely quoted estimates of new job generation in small firms are based on extrapolations from one-off surveys. However, from the limited official data available it seems clear that (a) the rise in the number of "enterprises" in the 1980s is almost entirely attributable to the growth of individual self-employment (one man bands who employ no-one else) (b) there was no growth in the number of enterprises in the 1990s and (c) since the mid 1990s the employment share of SMEs who employed someone has changed little. In contrast, the employment share among large firms has clearly grown.

EMPLOYMENT SHARES BY FIRM SIZE 1994-1998

Number of employees

Start 1994

Start 1998

Change

(percentage points)

None

14.6%

12.7%

- 1.9

SMEs with employees (1 to 249)

43.4%

43.6%

+ 0.2

Large (250+)

42.0%

43.7%

+ 1.7

Source: SME Statistics Unit, Department of Trade and Industry, August 1999.

Entrepreneurial and Flexible Employment Compared

2.21 One view is that even if we can not see a significant shift in employment patterns in the UK, the shift to more entrepreneurial and flexible employment forms is well underway in the US - and where the US is today, Britain will be tomorrow, and the rest of Europe the day after that. Unfortunately, the statistical evidence finds such employment forms no more or less common in the US than in most of Europe and there is little sign of significant growth up to now.

2.22 The latest fad has been to describe the US labour market as more "entrepreneurial" based on private sector analyses of start up rates and surveys on what people think about starting a business. Much could be written (and has) on the allegedly more entrepreneurial attitudes of US society and culture. However, it might therefore be reasonable to conclude that if the US has a much higher start up rate and easier barriers to entry than either the UK or the EU, it would have more people in self-employment or employed in Small and Medium Enterprises (SMEs). This is not so.

2.23 As shown above, the US has a low share of self-employment compared with most other industrialised economies, and that low share has not increased over the past twenty years or so. The US official statistics define firms who employ less than 500 as SMEs, much higher than the European definition. Even so the share of employment in small and medium enterprises in the US was also lower than in the UK or the EU. Nor is there any sign that the below average share of employment in SMEs has risen in the US since the mid 1980s.

2.24 Other forms of flexible employment appear equally uncommon in both the US, the UK and the EU. As also shown above, the US labour market supports far fewer temporary jobs as a share of total employment. There is a slightly higher incidence of homeworking in the main job, and slightly more teleworking than in the UK - but the shares are still very small. In 1997 only about 3 per cent of US employees did some paid telework at home.

2.25 Why it should be persistently believed in the face of such weak statistical evidence that these sorts of jobs are making rapid in-roads into more conventional employment forms may be optimism triumphing over experience. The explosive growth of Microsoft and a handful of other very fast growing high-tech companies attract the headlines, but these are rarities rather than the norm. The underlying trend for the small firm sector in most modern economies is for a great deal of entry and exit, with only a very small minority of surviving small enterprises producing new jobs on a significant scale.

2.26 There may also have been some confusion between the well-established UK (and US) tradition of white-collar workers taking work home with a fundamental change in the way people work. The vast majority are managers or professionals (including many teachers) taking occasional work home or sales-people and the self-employed who use their home as a base. There is nothing very new in this as a work practice, even if today the PC and telephone play a bigger role than in the past.

FLEXIBLE AND ENTRPRENEURIAL EMPLOYMENT COMPARED

Share of employment

EU15

UK

US

Employment in SMEs

66%

59%

52%

Self-employment

15%

12%

7%

Temporary

12%

7%

4%

"Portfolio" (all second job holders)

3%

5%

6%

Teleworking (main job at home)

na

1%

3%

Note: all figures 1998 or 1999, except SMEs for the UK and EU that are 1996. EU and UK SMES are defined as less than 250 employees; US SMEs are defined as less than 500 employees. Sources: EU Commission 1998; EU Employment Observatory; US Bureau of Labor Statistics; UK Labour Force Survey.

Part Time Work

2.27 Among the more persistent and durable changes in employment in the UK labour market has been the move to part time employment. However, it is important not to exaggerate the pace of change. Growth in the share of part time work has been steady rather than spectacular. Moreover, part time work grew faster in the 1970s than in the 1980s or the 1990s.

2.28 The Labour Force Survey measure, based on respondent's own assessment, shows part time work (including the self-employed) grew from 21 per cent to 25 per cent of total employment between 1984 and 1999. However, employment is still overwhelmingly full time. Moreover, expanding labour markets are still quite capable of generating large numbers of full time jobs. For example, between 1984 and 1999 the number of full time employee jobs increased by nearly 1.3 million compared with a rise of 1.5 million in part time employee jobs.

2.29 There is a powerful gender dimension to the increase in part time work since the mid 1980s - but not in the way often perceived. For women there was no overall shift towards part time employment. The shift towards part time work since 1984 is accounted by changes in male working patterns. However, over 90 per cent of men still work full time as employees or as self-employed. The rise in male part time employee employment appears to have more to do with male students entering the part time workforce than a more fundamental break-down in traditional gender based demarcation lines in the labour market.

RISE IN SHARE OF PART TIME WORK 1984-1999

Share of total employment in part time work

1984

1999

Share of men working part time

4%

9%

Share of women working part time

44%

45%

Share of all employees/self-employed

21%

25%

Note: employees and self-employed only. Source: Labour Force Survey, UK, Spring, seasonally unadjusted

2.30 The rise in part time jobs has been heavily concentrated in the expanding private service industries such as distribution and hotels and parts of the public sector where part time employment was already strongly established. In addition, part time work has become more important in some industries, such as hotels and catering. However, the shift to part time work is not universal - the already small share of part time jobs in manufacturing and construction has fallen even further.

2.31 The UK labour market already has one of the highest shares of part time employee employment in Europe - or indeed, the industrialised world. The UK share is also much higher than in the US where 14 per cent work part time by the standard OECD definition of part time work of less than 30 hours a week (the US national definition of 35 hours or less gives a US figure of 17 per cent).

2.32 A safe bet would be conclude that the next ten to fifteen years will see a further modest rise in the share of part time employment of 2 to 3 percentage points. But it is equally plausible to argue that, while part time work will continue to grow in absolute numbers, we may have already reached a post-war peak for the employment share. The share has stabilised over the past five years, and international comparisons suggest there is nothing inevitable about a consistently rising share of part time work.

2.33 If the share of part time work rises, one factor could be the re-integration of lone parents into the labour market through part time jobs. The UK has one of the lowest employment rates for lone parents in Europe. Another factor could be a further shift in male employment towards part time jobs, perhaps driven by a rise in student participation in the labour market and among men close to or at normal retirement age, and by necessity in areas of high unemployment where full time work is scarce. The share of men working part time is higher in Australia, Canada, Denmark, and the Netherlands.

Higher Skill White-Collar Jobs

2.34 In many ways the bigger story of employment change over the past twenty years has been the shift from manual to non-manual work, especially for employees and among men. The most obvious reason has been the loss of jobs in sectors such as manufacturing and mining in the 1980s and early 1990s. But in addition the balance of employment has changed radically within some industries. For example, within engineering skilled craft workers comfortably outnumbered higher skill white collar workers (managers, professionals, and technical staff) at the start of the 1980s, but today engineering employs significantly more higher skill white collar workers than manual craft workers.

2.35 The other side of the story has been the growth in the share of higher skill white collar jobs - managers, professionals and associate professionals - across the economy. The Labour Force Survey only provides fully consistent figures for occupation from Spring 1991 onwards, but these show that the share of managerial, professional and associated jobs increased from 32 per cent to 37 per cent.

2.36 Yet it is easy to overstate the shift in employment towards higher skill jobs as part of a "new IT knowledge economy." Even if the three occupational groups of managers, professional workers and associated workers are combined, they account for less than 40 per cent of total employment. This group includes groups such as teachers and nurses, which are certainly knowledge-based jobs making increasing use of new technologies, but are hardly new occupations. Nor are all the workers in this category very well paid. They will include significant numbers of badly paid managers of bars and pubs and smaller restaurants and hotels. Moreover, the UK has far more managers as a share of employment than any other major European economy or indeed the US, and it is possible that in Britain more people describe themselves as managers than is traditional in other countries. If the UK figure were taken at face value, it would of course be unjustified to make any link between an apparent excess of managers and low workplace productivity or market driven reforms in the public sector.

2.37 Even today, nearly two thirds of today's workforce - over 17 million people - remain within more "traditional" employment groups - clerical and secretarial workers, security guards, waiting and hotel staff, care workers, hairdressers, sales assistants and till operators, craft and semi-skilled manual workers, porters, cleaners, and labourers. The share of more traditional service based jobs has not changed since 1991 and still accounts for more than 40 per cent of all jobs in the economy. As well as job growth at the top end of the labour market, the number of less well-paid jobs has also grown in areas such as catering and care services and in sales. Many are part time and held by women.

2.38 However, despite relative decline it is important not to write manual jobs off as part of "yesterday's economy," particularly in a period of relative economic stability. Between the end of the early 1990s recession and the start of the manufacturing recession of 1999 manual employment across the economy increased by nearly half a million. Even with job losses in manufacturing, energy and water manual work today still provides employment to well over 10 million people.

MOST PEOPLE STILL WORK IN "OLD ECONOMY" JOBS IN 1999

Share of total employment (inc self-employed)

1991

1999

Managers & administrators (inc proprietors)

14%

16%

Professionals (teachers, doctors, lawyers, engineers, scientists)

9%

11%

Associated professional (nurses, computer analysts, technicians)

9%

10%

All of above - higher skill white collar

32%

37%

Clerical and secretarial

16%

15%

Personal & protective (police, fire, security guards, cooks, waiting and bar staff, care workers, hairdressers)

9%

11%

Sales and related

8%

8%

Other jobs (labourers, porters, shelf-fillers, cleaners, domestics)

9%

8%

All of above - "traditional" service jobs

42%

42%

Craft and related trades

15%

12%

Plant and machine operatives, inc drivers, assemblers

10%

9%

All of above - craft and operatives

25%

21%

Source: Labour Force Survey, UK, spring, seasonally adjusted

The Shift To the Service Based Economy

2.39 The decline in manual jobs is linked to the decline in manufacturing and the rising share of employment in the service sector. In 1984 the Labour Force Survey estimates show that 63 per cent of people worked in the service sector but by 1999 the shares were 72 per cent in services. Employment also fell in some other non-service industries such as energy and water and agriculture. Overall, between 1984 and 1999 employment expanded by about 4.5 million in services and fell by about 1 million in the rest of the economy.

2.40 The rising share in services is not new or confined to the UK. The economy has been shifting towards more services for most of the post war period, and this is true across the industrialised world. In 1997 the UK's share of employee employment in services was higher than in Germany and Italy, countries that retain a relatively large manufacturing base, but broadly in line with countries such as France, Sweden and the Netherlands. The US share is however even higher - in 1998 about 82 per cent of US non-farm wage and salary workers were employed in services.

2.41 However, these figures may mislead about the real contribution of manufacturing to the employment base. Many functions and services previously appearing as part of the manufacturing sector now appear as part of the business service sector. The figures for manufacturing only cover direct employment within the sector. There are also significant differences between the employment levels based on surveys by employers and the employment levels based on surveys of individuals. Latest figures from the LFS show 4.9 million people said they worked in manufacturing, while the employer survey figure shows only 4.3 million.

SHIFT TO THE SERVICE BASED ECONOMY CONTINUES

Share of total employment

1984

1999

Manufacturing

23%

18%

Other non-service

14%

10%

Services

63%

72%

Note: "other" includes agriculture, energy & water, construction

Source: Labour Force Survey

2.42 Within services the big net job creators over the past twenty years have been distribution, business services, and health and education. This trend seems set to continue. The growth in health and education employment is mainly private sector based, supported by public subsidy and shifts in the public sector workforce (eg more social welfare workers, fewer construction workers).

2.43 The balance between private and public sector employment has clearly shifted, mainly through the sell-off and run-down of employment in the public industries and public service manual employment. Changes in definition of what counts as part of the public sector in the national accounts make it impossible to be precise about exactly how big the underlying change has been. Labour Force Survey definitions show that the share of employment in the public sector has begun to stabilise and today accounts for about 23 per cent of all those in work or roughly 6.2 million people.

Skills, Training and Knowledge Based Employment

2.44 There is no official definition of "knowledge based" employment, and in reality all industries are to a greater or lesser extent knowledge based. The OECD has suggested that those industries that are most highly dependent on a knowledge base include "high and medium tech manufacturing industry", communications; finance and business services; and community, personal and social services.

2.45 However, as the OECD admit (OECD STI Indicators, 1999) these broad industry definitions include activities that could not be regarded as knowledge intensive. For example, although community, personal and social services include health and education, which the OECD says is knowledge intensive, the sector also includes personal services, which includes cleaning and hairdressing. Moreover, according to the OECD some countries only report market based services while others include non-market services - so in some cases health and education services provided by the public sector may not be included, while similar services provided by the private sector are.

2.46 The OECD classification, using the measure "shares of value added in the business sector" shows Germany has the most highly developed "knowledge based" economy, followed by the United States. The UK, France, Netherlands and Sweden have roughly similar shares at around 50 per cent of business value added.

2.47 However, an OECD estimate of the share of employment classified as high and low skill shows that by European standards, the US has a bias towards low skill employment despite being an apparent world-leader ( just behind Germany) in knowledge based industry. The OECD estimates showed that only 37 per cent of jobs in the US were classified as high skill, compared with nearly 60 per cent in Germany and the Netherlands, 55 per cent in France, and 52 per cent in the UK. The balance between high skill blue-collar employment (where the UK has relatively few jobs) and high skill white-collar employment (where the UK does better) reflects in part differences in industrial structure, but also historical weaknesses in training structures.

HIGH SKILL EMPLOYMENT ECONOMIES

High skill white collar

High skill blue collar

All high skill

Germany

37%

21%

58%

Netherlands

45%

13%

58%

France

35%

19%

55%

UK

38%

14%

52%

Japan

23%

26%

49%

US

26%

11%

37%

1995 or latest year.

OECD Scoreboard of Indicators, Ministerial Industry Committee, 1998.

2.48 It is clear that if we are to have a meaningful estimate of the employment and skills implications of developing a knowledge based economy we need a better definition of what might be reasonably classed as a knowledge based sector or worker. Moreover, as the TUC report Britain's Skills Gap shows, addressing structural weaknesses in skills and education is essential if the UK is to develop a high skill-high productivity economy with a rising share of knowledge based employment.

Women in the workforce

2.49 The UK labour market has historically had high rates of female participation and most of the historical rise in the size of the workforce has been through women entering the labour market. This steady expansion has continued throughout the 1980s and 1990s. Women's employment has been concentrated in occupations and industries that have experienced long term growth. In declining sectors, such as manufacturing, women's employment has fallen even faster than for men.

2.50 The share of women in the workforce has grown from 41 per cent in 1984 to 45 per cent in 1999. Virtually all the increase in female participation has come from women of working age with younger dependent children. As shown above, what has not changed is the share of women working full time - in both 1984 and 1999 about 56 per cent of women were in full time jobs.

2.51 Women's employment has changed most at the top end of the labour market, with advances in the share of women in managerial and professional jobs. But elsewhere the traditional barriers remain largely intact, notwithstanding more males working part time and more females becoming self-employed. The female share of employment in jobs traditionally regarded as female - clerical and secretarial, sales, personal services - has hardly changed. Self-employment remains predominantly male, while manufacturing and is even more male dominated than in the past.

MORE WOMEN ENTER THE LABOUR MARKET 1984-1999

Women as a share of total employment

1984

1999

Employees

44%

47%

Self-employed

24%

26%

All in work (inc trainees)

41%

45%

Source: Labour Force Survey

Black People in the Workforce

2.52 Many of these changes have been mirrored in the black workforce, which accounts for about 5 per cent of all those in work. The proportion is much higher in major cities such as London and in the West Midlands. In the 1990s there has been little sign of an overall improvement in the relative labour market position of black workers as a whole, but there are sharp differences between ethnic groups classified within the Labour Force Survey. For people of Indian origin indicators such as unemployment rates are now much closer to that of the white population.

Working Hours

2.53 Over the past 15 years almost all the growth in employment has been in either long hour jobs or shorter hour jobs, with a declining share of jobs offering hours of work around the "standard" working week. The standard ONS public presentation of the working hours statistics allows comparisons to be made for changes in the number of jobs with more than 45 hours a week, jobs with 30 or less hours a week, and jobs with between 31 and 45 hours a week. These are based on individual assessments of usual working hours, and include unpaid overtime, and are shown below. By 1999 roughly 25 per cent of people in employment (including self-employment) said they usually worked at least 46 hours a week, another 25 per cent said they usually worked 30 hours or less, and the remaining 50 per cent worked between 31 and 45 hours a week.

2.54 The trend towards the polarization of employment between long hour and shorter hour work is clearest for male employees. The share of male employees working usual hours of between 31 and 45 hours a week fell from 66 per cent in 1984 to 57 per cent in 1999. For women, the trend was much less clear-cut. There was a shift towards more long hour jobs, and the number of women working long hours shows a dramatic percentage increase. But working more than 45 hours is still comparatively rare for women employees - in 1999 only 10 per cent of female employees said they did so. The figures in the table below show usual hour worked by men and women as employees, including unpaid as well as paid hours.

USUAL HOURS WORKED BY EMPLOYEES IN BRITAIN IN 1999

Usual hours (inc unpaid)

Males

Females

All employees

30 hours or less

9%

43%

23%

31-45 hours

57%

47%

53%

46 hours or more

34%

10%

24%

Source: Labour Force Survey

2.55 Although the "average" working week is similar in the UK and the rest of Europe, this is mainly because of higher levels of part time working in Britain. Among those describing themselves as full time workers, the UK has much higher levels of long hour jobs. The 1997 European Labour Force Survey shows that 32 per cent of UK full time employees worked more than 46 hours a week compared with a EU average of 12 per cent. The gap was even wider for men, with 40 per cent of UK men working full time having usual hours of more than 46, against a EU average of 15 per cent.

2.56 The long hour culture is nothing new - many manual workers have and continue to work paid overtime on a systematic basis either to boost total earnings or to offset very low basic hourly rates. But there also has been an increase in often unpaid overtime working by white-collar managerial and professional workers. However, the most recent Bank of England Inflation Report (February 2000) suggests that the Working Time Directive may be starting to check the expansion in long hour jobs. It is still early days, but it is possible that we may see the share of long hour jobs start to fall and the share of jobs below 48 hours a week (the Directive cut-off) start to grow.

Unsocial hours - the "24 hour society"

2.57 The pattern of employment is also said to be changing with the advent of the seven day, twenty four hour society - with shops and on-line services now available at any time, including the weekends, evenings and nights. Charting trends is difficult because the survey questions keep changing. An analysis by the Employment Department found there was no change in the incidence of Sunday working between 1985 and 1991. The questions changed in 1992, but independent analysis of the Labour Force Survey by Susan Harkness of Sussex University shows that between 1992 and 1998 there was very little change in usual working patterns for evening or night work (Employment Policy Institute Employment Audit, Summer 1999). There was another question change in 1999, and the new question gives a much higher number saying "usually" work unsocial hours than the old question. The answers to the new question are shown below and, taken at face value, indicate a high level of unsocial hour working in evenings and at night and working at weekends is common in the UK labour market.

UNSOCIAL HOURS WORKING IN THE UK IN 1999

% total employment (inc self-employed)

Usually work

Ever work

Never work

Evening

33%

22%

45%

Nights

13%

10%

77%

Saturdays

33%

30%

38%

Sundays

20%

24%

56%

Note: categories overlap; figures may not sum due to round. Source: Office for National Statistics, Labour Market Trends, January 2000.

2.58 Not all forms of employment are equally "unsocial" - there is a big difference between under-20s still at school doing a Saturday morning on the tills in the local supermarket, and adults with family responsibilities having to routinely work weekends or nights. However, our best guess is that unsocial hour working has been a long-standing feature of the UK labour market rather than a recent or new development. For a significant share of the working population the 24-hour society or working unsocial hours is nothing new. Many workers in agriculture, mining, manufacturing, the travel, hospitality and cultural industries and in the emergency services and health care have always had to work nights, evenings, weekends and other "unsocial" periods outside the standard working day.

2.59 The extent of evening and weekend work today is a reflection of the UK's traditional reliance on high levels of overtime working for manual workers; widespread unpaid overtime among managerial and professional workers; and over 1 million students combining part time jobs with full time study. Staying late at the office or coming in on a Saturday morning, or taking work home just to get the job done, or professionals such as teachers running activities outside normal work hours will continue to have an important influence on work patterns.

Flexible Working

2.60 In the 1990s other forms of flexible employment contract have been seen as the future. The Labour Force Survey provides figures on the numbers working on flexitime, term time working, annualised hours, and job sharing. The most striking thing is how few people, relatively speaking, actually work flexibly in a formal sense. In 1999 over 80 per cent of employees had none of these flexible work arrangements, including over 70 per cent of women with dependent children. Flexible working hours and term time working are the most common, but other forms such as job sharing were rare and, fortunately, zero hours contracts even rarer.

FLEXIBLE WORK ARRANGEMENTS IN 1999

Type of flexible work arrangement

All employees

Women with dependent children

Flexible working hours

9.5%

11.4%

Term time working

4.4%

11.5%

Annualised hours

2.8%

3.2%

Four and a half day week

1.8%

0.8%

Job sharing

0.9%

2.9%

Zero hours contract

0.5%

0.5%

Nine day fortnight

0.3%

-

All with flexible work arrangement

19.4%

28.6%

Alll without flexible work arrangements

80.6%

71.4%

Note: respondents can cite more than one type of flexible arrangement.

Source: Labour Force Survey, in Labour Market Trends, October 1999

2.61 These figures need care in interpretation. They may be a better indicator of who works flexibly at any one time than who has access to flexible work arrangements or who might be required to work flexibly by an employer in the future. The 1998 Workplace Employment Relations Survey shows that in workplaces with over 25 employees many more people say they have access to flexible arrangements such as flexitime if they wanted them, especially in the public sector and in larger workplaces. In many workplaces other forms of flexibility exist not listed in the LFS, for example, the ability to take time off for childcare or family reasons. However, according to WERS, overall less than 30 per cent of employees in workplaces with more than 25 employees said they had access to parental leave arrangements, and only 4 per cent had direct help with workplace nurseries or childcare subsidies. These figures exclude smaller workplaces were such arrangements may be far less common. There is clearly much ground to make up before UK workplaces can be described as family friendly.

2.62 The 1998 WERS also looked at the incidence of industrial "team working" pioneered in Scandinavia and Japan and sometimes held up as evidence of new forms of work organisation that are set to re-model the 21st century workplace. The evidence suggests that while most workplace managers reported some form of team working for some employees, the "pure" teamwork model that fits the management guru vision is a rare beast indeed, reported by only 3 per cent of workplaces.

Wage Inequality

2.63 A persistent feature of the UK labour market has been the growth of wage inequality. In 1979 the wages of the top10 per cent of full time male employees were about 2.4 times greater than the wages of full time male employees in the bottom 10 per cent. Women at the top of the earnings distribution had average weekly earnings about 2.1 times of women at the bottom. By 1999 the gap between the top and bottom had increased to 3.4 times for men, and 3.1 times for women. Much of the increase in the ratio between the top and the bottom took place in the 1980s. The gap has started to stabilize in recent years, but as yet has not reversed - at least for full time workers. The future role of the National Minimum Wage is clearly going to be of great importance, especially for part time and women workers.

RISE IN WAGE INEQUALITY 1979-1999

ratio of weekly earnings of top 10 per cent to the bottom 10 per cent

Full time average weekly earnings

1979

1999

Men

2.4

3.4

Women

2.1

3.1

All employees

-

3.4

Source: New Earnings Survey

2.64 There are many factors that could explain the increase in wage inequality - global economic forces, technological changes, the decline of collective bargaining coverage and the weakening and abolition of wage floors. However, two facts stand out. Firstly, the extent of the rise in inequality seen in the UK was unique in Europe. Secondly, the rise in wage inequality seems to have been even greater in the US, where the wage gains have been heavily concentrated at the top end of the labour market. In recent years the upgrading of the US national minimum wage and the return of full employment has started to reverse the trend to greater inequality.

Pay Flexibility

2.65 It has been suggested that the pay packet nowadays includes far more variable pay such a profit related or performance related bonuses, commissions, and other incentive pay. Variable pay is not new - many manual workers have always depended on overtime, shift-work and piece work for a significant share of their earnings. Moreover, although for those workers who receive such payments they can form an important part of their earnings, their impact on the national wage bill is limited and their coverage has changed little over the past twenty years. Paid overtime remains far more important for most workers than new forms of payment, such as profit related pay.

2.66 It is particularly easy to inflate the actual importance of new forms of pay, such as profit related pay. The 1998 WERS shows that nearly half of all workplaces employing more than 25 had a scheme, and over 20 per cent of full time employees are covered by schemes registered with the Inland Revenue. The New Earnings Survey shows that in 1999 only 8 per cent of full time employees actually received profit related pay.

NON-STANDARD PAY IN 1999

Full time adult employees

% of earnings

% of employees

Paid overtime

5%

27%

Payment by result (inc bonuses & piecework)

3%

14%

Shift premia

1%

11%

Profit related pay

1%

8%

Note: earnings are gross average weekly for full time employees

Source: New Earnings Survey, April 1999.

Who Sets Pay

2.67 If there has been little change the importance of non-standard pay, there has been certainly been a change in the way pay is set. As the latest Workplace Employment Relations Survey (WERS) shows, there has been a decline in collective bargaining coverage over the past twenty years, especially in the private sector. Today, in a majority of UK workplaces pay is set, without negotiation, by managers. The 1998 WERS survey found that while in nearly half of all workplaces employing more than 25 people pay for non-managerial workers was determined by collective bargaining, the proportion in the private sector was just under 30 per cent. This understates the influence of collective bargaining, as some managers will use the bargained "going rate" in similar jobs or industries as a guide to setting pay for non-unionised workers. However, there is no sign of individual empowerment for workers as an alternative to having a collective voice. Only 2 per cent of workplaces set pay through individual negotiations.

Section Three

3.1 Conclusions

The future of work

3.1 Past predictions based on radical change in the future structure of employment - including those that said work had no future - have been proved wrong. Speculations based on radical change in the next decade are also likely to be wrong. It is impossible to be precise about how employment will change over the next ten years, but there will be a strong sense of continuity with the labour market changes of the past fifteen years.

3.2 The labour market of the next ten years will still be dominated by the permanent employee jobs with people staying in jobs about as long as they have in the past. There is no evidence, either here or in the US that flexible employment forms such as self-employment or temporary work will grow. New forms of "flexibility" in portfolio work or home-based teleworking will remain on the margins of the labour market. Nor is their compelling evidence that the future belongs to SMEs.

3.3 Self-employment and temporary work will nonetheless change. Self-employment is polarizing between part time often very low-income forms of self-employment, often done by women, and white-collar professional self-employment. Temporary work is also changing, with the rise of employment agencies and the decline in more traditional casual and seasonal work.

3.4 The steady rise in part time employment as a share of employment may continue, with another 2-3 percentage point rise over the next decade. But it is quite possible that we have reached a peak. The majority of jobs will remain full time, overwhelmingly so for male workers. The shift towards higher skill jobs and the decline of mainly skilled manual jobs will continue as the economy continues to shift towards service based employment. However, manual jobs should not be written off and in a period of economic stability there could well be some recovery in absolute numbers. Moreover, more people will also be at work in "traditional" non-manual jobs - clerical and care workers, catering, sales, security, hairdressing, porters, and cleaners. There may also be a continued steady rise in the share of female employment, but except at the top end of the labour market many of the traditional gender based demarcations look set to remain largely intact.

3.5 Long hours for some full time workers have been a well-established feature of the UK labour market, even if unpaid overtime among white-collar workers has been more of a driving force in recent years than traditional overtime working among low paid manual workers. The Working Time Directive may start to reduce the share of long hour jobs in the economy and increase the share of "middle hour" jobs. For all the talk of a new 24-hour society, unsocial hour working is not new. With no convincing evidence it has grown much as a share of employment over the past fifteen years, our working assumption is no significant growth in unsocial hour working is likely over the next decade.

3.6 The way hours are arranged at work may change, as may access to more flexible working arrangements. But in practice the vast majority of people work within standard employment arrangements. The share of people in job sharing, annualised hours, or similar employment forms is very small. So too, thankfully, are the more exploitative forms of flexibility such as zero hours contracts. However, the family friendly workplace is still some way off, although new rights to parental leave would encourage a faster pace of change over the next decade. Direct employer support for childcare may remain a rarity.

3.7 An equally rare beast is the new organisational model based on the team-working concept seen by some as the next big change for workplace organisation in the next decade. Most mangers today say their workplaces have team-working but hardly any practice the model as pioneered in Scandinavia and Japan and taken up by a handful of progressive UK employers. Without a radical shake-up in managerial attitudes it is very unlikely that the teamwork ideal will ever become widespread.

3.8 The UK's unusual experience of sharply rising wage inequality has stabilised. Recent US experience suggests a regularly uprated minimum wage and low unemployment may start to reverse the trends of the past twenty years. The revival of collective bargaining coverage, the strengthening of individual employment rights across the workforce, and the widening of access to better education and training will all help. There is little indication that the importance of non-standard pay has increased over the past twenty years. What has undoubtedly changed is the way pay is set, especially in the private sector where in a majority of workplaces people have their pay set unilaterally by management. The decline of collective bargaining has seen no offsetting increase in empowerment for the individual - only a tiny minority of workplaces negotiate pay individually. The revival of an effective voice at work - both on pay and non-pay issues -could be one of the most far reaching changes within the workplace and the wider labour market over the coming decade.

3.9 Yet the macro-economic environment could produce some of the biggest changes of all. Labour markets of the past twenty years have seen average unemployment rates of 8-9 per cent. It is possible that UK unemployment by international definitions could average 4 to 5 per cent over the next ten years. Already unemployment is down to below these levels in much of Southern England. If low unemployment is here to stay then the hire and fire labour market becomes more costly for employers to operate. The relative bargaining power of employees will increase. Full employment may change the rules of the game at least as much as Government legislation or global economic forces.

Congress House

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contact:

Ian Brinkley

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ibrinkley@tuc.org.uk