IT was 1921 when Seebohm Rowntree wrote in his book The Human Factor in Business: “It is one of the first responsibilities of employers towards the workers to raise the standard of efficiency within the factory; for substantially higher wages can only be paid in proportion as they are earned. To earn them involves the united effort of the employer and the workers.”
Almost 100 years on, one of the founders of the organisation I lead today could have been accurately describing the challenge facing the modern UK economy and employers. Of course, living standards have drastically improved since those days. But the quandary of how to ensure workers shared in on the prosperity generated by private business, while protecting the company’s productivity and profit, is one we still grapple with today.
The Government has on the whole a compelling story to tell on the economy: record employment, rising wages and Britain standing tall as the fifth-largest economy in the world. But we know major challenges lie underneath. Our productivity lags behind our global competitors and we have many millions of people working but struggling to make ends meet.
Over two million workers in the retail and hospitality sectors earn less than the Living Wage. At the same time, business warns of threats to its viability: the British Retail Consortium predicts almost a million jobs lost in the sector as a result of paying higher wages, the apprenticeship levy and technological change.
The jobs that do remain will pay better and be more productive, their analysis suggests. We know that work is the most reliable route of out poverty, but also that progression in work is essential to fully escape hardship. While some work is better than none at all, Britain’s low-paid workers more often than not face being trapped – only one-fifth have left low-paid work completely 10 years later.
And we know from experience closer to home that prosperity is not always spread into all pockets and all places. Recent research for Joseph Rowntree Foundation showed how 10 of the 12 most struggling cities were in the “Northern Powerhouse” – Hull and Bradford featured in the index. While they are growing, they are not participating in the burgeoning prosperity enjoyed by their neighbours. So what to do?
It is heartening that all the people who can make a difference recognise the size of the challenge at stake. In Leeds today, major national firms such as EE, PwC and IKEA will sit down with Yorkshire’s local elected leaders and economic bodies and national government officials to see what steps we can take towards a virtuous circle of higher skills, jobs progression and – ultimately – improved business performance.
Let’s take each in turn. First, the Budget next week is a strong place to start. The Government can build on its strong employment record, so rather than just helping people into work, we can help people get on so they can earn more. The best thing to do is to create more incentives for town halls to tackle poverty and ensure everyone has the chance to find work – such as a welfare earn-back scheme – and by devolving more powers over skills and employment support so once they get into jobs, they can move upwards to better pay and higher-skilled work.
Second, our combined authorities and metro mayors can play a leading role. The devolution process can allow our civic leaders to develop a business support system that enables workers to progress and gain the skills that meet both the needs of employers and local residents. Providing careers advice and guidance and enhancing the opportunities for part-time employees to progress can make a big difference.
We should also look to our local figureheads to play a convening role, bringing colleges, private training providers, universities, employer groups and trade unions on board so everyone plays in their part in helping workers and employers thrive.
Third, business themselves. Detailed surveying by JRF of low-paid workers found 70 per cent would value more work-related training from their employer to help them progress and improve their working lives. Nearly 45 per cent of those polled said there were no promotions available with their current employer. We know in-work training rates were decimated during the recession – now it’s time to reverse that trend and ensure the barriers to workforce development are brought down.
In today’s challenging climate for businesses, those that will thrive are those that make the most of their employees’ skills and help them progress in work to create a more productive workforce.
There is a prize at stake. Were we to raise productivity levels in low-wage sectors to levels seen elsewhere, the UK could close a third of the productivity gap with leading Western European economies. But to get there our government, local leaders and businesses must all do the heavy lifting to rebalance the economy and ensure more people benefit from economic growth.
Seebohm Rowntree urged us to do the same the best part of a century ago. Let’s not wait another 100 years before we see progress.
Julia Unwin is chief executive of the York-based Joseph Rowntree Foundation. Its Better jobs, better business conference takes place in Leeds today. Follow
#betterjobs for more.