A future that works for working people

In the middle of the longest pay squeeze since Napoleonic times, pay is at the top of workers’ list of concerns about the future of work. When we asked both what workers were most worried about now, and in the next five to ten years, most workers picked the ability of pay to keep up with living costs.

Much of the debate about the future of work has skipped straight past pay, instead focusing on whether there will be any jobs at all in a future where technology has caught up with the ability of humans to perform many tasks. But if technology has the potential to make us richer, the question should be less whether there is enough wealth or work to go around, but how that wealth is distributed. And at present, too many workers are missing out.

We know from our history, and from widespread international research, that the best way to ensure that workers get a fair share of the rewards from technological progress is to enable them to come together and bargain with their employers. So expanding trade union presence and collective bargaining will be vital to ensure a fairer future for work.

But will there be any jobs?

Two rival perspectives often dominate debates on the future of work. On the one hand, the sanguine approach that points to the rapid history of technological change in the past, as well as the UK’s current record of high employment, and suggests that we have little to worry about.

As Bank of England chief economist Andy Haldane put it in a speech to the TUC in 2015,

Debates on the potentially negative impact of technology on jobs - so-called technological unemployment - go back at least to the invention of the wheel … Certainly, the Ancient Civilisations of Greece and Rome wrestled with the problem of how to deal with the consequences of workers displaced by technological advance.14

On the other side of the debate are those who claim that ‘this time it’s different’. This is perhaps best summed up by the much-quoted idea that the factory of the future will have just two employees: a man and a dog. The man will be there to feed the dog, and the dog will be there to stop the man from touching the machinery.

Economists have spent the last few years producing rival predictions on the potential impact of new technology on employment. In March 2018, the Organisation for Economic Cooperation and Development (OECD) estimated that around 14 per cent of jobs in OECD countries were highly automatable, and just over 30 per cent subject to substantial change in how they were carried out.

It argued that those in more routine jobs, young people, and those with lower level educational qualifications were likely to be most at risk.15

Estimates from Deloitte for the UK suggest that the sectors particularly at risk include wholesale and retail, where they estimate around 2.2 million jobs are at high risk of automation; transportation and storage (1.5 million jobs at risk); and human health and social work, with 1.4 million jobs at risk.16

However, the fact that some jobs may be automated does not mean that jobs will disappear. As Jason Furman and Robert Seamans set out in a recent paper17 , there are a number of ways in which new technology could potentially impact the number and nature of jobs. Technology could:

• Displace jobs entirely, leading to a reduction in the amount of overall paid work in the economy
• Lead to a change in the tasks performed by workers, rather than a reduction in the number of jobs.
• Lead to changes in industrial make up; for example, a shift to more service sector industries.

The recent history of industrial change shows evidence of each of these:

•  Over the last 150 years in the UK, increased productivity has led to shorter working hours, but we are currently experiencing the highest employment levels on record.
• Jobs have changed within sectors. The OECD highlights US research on the introduction of automatic telling machines in banks, which performed more routine tasks previously handled by human bank tellers, but freed up their time for more productive tasks, and employment in the sector rose
• There has been a large-scale shift away from manufacturing towards the service sector. As we showed in the last section, there’s been rapid change in the industrial make up of the UK. To take just one example, there are half a million more people working in hospitality than in 1998.

Based on both long-term and recent history, we believe that the introduction of new technology has the potential to deliver good new jobs. The Made Smarter review of industrial digitalisation, for example, estimated that industrial digitalisation could create a net gain of 175,000 jobs over 10 years.18

We need to talk about wages

But while recent history might make us more confident that there will be enough work to go around, it also flags the importance of thinking about how that work is rewarded. The last thirty years of industrial change have seen working people lose out in general, with those working in industries hit by technological change often hit the hardest.

The OECD calculates that labour’s share of income is in decline across the industrial world. Between 1990 and 2009, the labour share fell in 26 of 30 advanced economies19 . In the UK, the biggest fall happened between the early 1960s and the mid-1990s (see chart 4).

Some of this loss was recovered over the next decade and a half, with rising employment rates and positive policy change (including the introduction of the National Minimum Wage). But the proportion of income going to workers in the UK is still 8 percentage points lower than at its peak.

• 14Andy Haldane Speech to the TUC, 12th November 2015 https://www.bankofengland.co.uk/speech/2015/labours-share
• 15 OECD (2018) Putting faces to the jobs at risk of automation http://www.oecd.org/employment/future-of-work/Automation-policy-brief-2…
• 16Deloitte: Automation transforming UK industries (press release on 22 January 2016) available at https://www2.deloitte.com/uk/en/pages/press-releases/articles/automatio…
• 17Jason Furman and Robert Seamans (2018) AI and the economy at https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3186591
• 18https://assets.publishing.service.gov.uk/government/uploads/system/uplo… /20171027_MadeSmarter_FINAL_DIGITAL.pdf
• 19https://www.oecd.org/g20/topics/employment-and-social-policy/The-Labour…- Economies.pdf

Source: AMECO and TUC analysis

The International Monetary Fund (IMF) estimates that half of the decline is the result of new technologies that have made it cheaper to replace workers with machines or computers, particularly for routine tasks. 20 But this ignores the question of why the benefits of these advances in technology have not been shared equally between capital and labour. Research has found that developments over recent decades that tipped the scales against workers are strongly linked to the fall in the labour share. A decline in union density, and particularly in collective bargaining at the sector level, has weakened workers’ bargaining power. Cuts to social spending have reduced their fall-back options.21

Globalisation has also had an impact, as the ability of companies to move jobs between countries has eroded the bargaining power of workers in both high- and low-wage economies.

On the other hand, introducing or increasing minimum wages has been shown to increase the labour share.22
Looking at pay trends within the working population in the UK over the past four decades, wage inequality has increased significantly, and those at the top have been able to capture more of the gains from growth – as shown in the chart below. In the last few years, there have been encouraging gains in the wages of the lowest paid workers following the introduction of the National Living Wage. But pay inequality in the UK remains extremely high. Those living in communities who have seen their industries decline have often been hit the hardest: the Industrial Communities Alliance estimates that male wages in former industrial areas remain 10 per cent below the UK median.23

• 20Mai Chi Dao ; Mitali Das ; Zsoka Koczan ; Weicheng Lian (2017) Why Is Labor Receiving a Smaller Share of Global Income? Theory and Empirical Evidence -IMF Working Paper at https://www.imf.org/en/Publications/WP/Issues/2017/07/24/Why-Is-Labor-R…
• 21Guschanski, Alexander and Onaran, Özlem (2017) The political economy of income distribution: industry level evidence from 14 OECD countries http://gala.gre.ac.uk/17518/
• 22ibid
• 23Industrial Communities Alliance (2017) Low Pay in Older Industrial Areas at http://www.industrialcommunitiesalliance.org/uploads/2/6/2/0/2620193/lo…

Source: ONS/ASHE/NES/TUC analysis

Pay as a priority

In this context, it’s little surprise that when we asked working people about how new technology could make their life better pay topped their list of concerns.
 

• Three quarters (75 per cent) of people said that higher pay was the thing that would most improve their working lives.
• Almost half (46 per cent) of workers said that ‘pay not keeping up with living costs’ was their biggest concern at work now (the most frequent choice).
• When we asked about the challenges of the next five to ten years, again half (48 per cent) picked pay falling behind.
• Workers were worried about job losses as a result of new technology too. Some 18 per cent said new technology replacing workers was one of their biggest three concerns in the next five to ten years. But this came behind pay, stress, and the impact of job losses due to company reorganisation (rather than technology) in the list of their concerns.
• This perhaps reflects the fact that while workers believe that, overall, technological change will lead to job loss (63 per cent agree compared to 26 per cent who disagree), far fewer think that their current job could be done by a robot or computer programme (26 per cent agree compared to 65 per cent who don’t)/

It was also notable that most workers feared that any gains from technology were unlikely to benefit them. Over half (51 per cent) are worried that the benefits of new technology will be hoarded by managers and shareholders.

Trade unions delivering change

Ensuring that workers get their fair share of the rewards of economic growth has always been at the heart of trade unions’ concerns. The TUC has been calling for greater government and business investment in the UK, including in the new technologies that could help deliver growth, in order to boost workers’ pay, alongside an urgent boost to the national minimum wage.

But an increasing body of evidence shows that strong collective bargaining is the best way to both deliver a fair share of growth to workers, and ensure that there’s equality between them. Within the UK, there’s clear evidence that the decline in trade union membership has coincided with a rise in inequality (see chart 7).

And international institutions are increasingly recognising that better trade union representation delivers greater equality across the board. A 2015 research paper for the IMF found that ‘the evidence strongly indicates that de-unionization is associated with rising top earners’ income shares and less redistribution, while eroding minimum wages are related to increases in overall income inequality’.24

• 24Jaurmotte, F. and Osorio, C. (2015) ‘Inequality and Labor Market Institutions’, Staff Discussion Note No. 15/14

Source: TUC analysis of data from the world inequality database, ONS, and BEIS

And the OECD has found that it’s when trade unions are able to co-ordinate their bargaining across sectors that they deliver the best results, finding that ‘co-ordinated systems [of collective bargaining] are shown to be associated with higher employment, lower unemployment, a better integration of vulnerable groups and less wage inequality than fully decentralised systems’.25

Boosting collective bargaining to ensure that workers receive the fair rewards from any newly created wealth is therefore at the top of unions’ agenda in responding to the future of work. We need a revival of collective bargaining in the UK, supported by a policy framework that gives working people more of a say in their workplace, in their sector and at national level.

Trade unions are determined to expand collective bargaining coverage across the public and private sector. This will be critical to delivering a fairer future for work.

• 25OECD (2018a) Employment Outlook 2018, available at: https://www.oecdilibrary.org/employment/oecd-employment-outlook-2018_em…