In an era of political uncertainty, the actions of government will drive change. Take the profound impact of Margaret Thatcher in the 1980s, whose era saw falls from a peak in trade union membership and public-sector employment alongside significant rises in unemployment and self-employment, all stemming from her policies.
More recently, we can see this illustrated by the profound changes in the US under Donald Trump’s presidency and now, in an opposite direction, that of Joe Biden. As Harold Wilson famously said: “A week is a long time in politics”.
The future direction of British politics will influence the world of work in this country, not least in the way work is organised, taxed and regulated. As the traditional left/right divide has broken down, both major UK political parties are divided. The Conservatives are trying to reconcile their traditional support amongst small state, low-tax, libertarians with the “red wall” social conservatives (often working class) on whom they relied to win the last election. Meanwhile, Labour is seeking to reconcile its traditional left-wing supporters with urban, often professional, liberals through its agenda for a new deal for working people.
Populism and green politics are becoming increasingly influential in many countries, including the UK. While there is little correlation between populist governments and employment regulation, the employment agendas advocated by green parties around the world are usually radical. Future political upheavals are impossible to predict, but the results of polling reported by the Institute of Economic Affairs suggest there is good reason to predict a leftward shift in British politics in the years ahead. A return to centre-left politics or increased green party influence, such as appears to be the case in Germany following its September 2021 elections, could see increased regulation including enhanced collective rights, greater individual protection and restrictions over atypical work. In contrast, continued Conservative governments are likely to see deregulation and pro-business employment laws. The higher proportion of green voters among younger generations may well signal a future increase in green party influence, not just in Germany but other countries too (see demographics; social trends).
Attitudes to social security benefits were already softening in the UK before the arrival of Covid-19. Unprecedented levels of state intervention to pay the salaries of employees whose jobs were immediately at risk undoubtedly staved off mass unemployment in many countries. This support, embraced across the political spectrum, may well herald a new-found expectation for government intervention in times of difficulty. It is foreseeable that this intervention, from which so many workers benefited, will further weaken hostility to state support for the unemployed or under-employed. Support for economic austerity was also waning in the years immediately before Covid-19 and seems even less likely in a new era in which expenditure demands will need to be met from many directions. President Biden’s trillion dollar economic stimulus package, coupled with tax rises for the wealthier, is an example of state intervention in response to the pandemic.
If technological advances have the effect of making full employment unrealistic in the long-term, the concept of the state paying everyone a base income (Universal Basic Income) will gain more traction. State intervention is also apparent in government decisions on financial subsidies (or other payments) to support businesses or sectors with growth potential, or adversely impacted by changes. This can have the consequence of creating or preserving jobs, as seen in the UK through government focus and planned investment in high-growth sectors and technologies.
Paying for increased government intervention and support will mean increased taxes, even if this is politically difficult for both leading UK political parties. Debt has climbed dramatically throughout the pandemic and needs to be serviced. Governments needing to balance the books have four options: reduce expenditure; grow the economy to increase tax revenues; raise taxes; or borrow. With pressure to increase expenditure on health, social care and education, a need to invest to combat the climate emergency, limited appetite for another period of austerity, an uncertain economic outlook and limits on borrowing (particularly for day-to day spending), higher taxes seem inevitable.
The questions will be which additional taxes to raise, when to do so and where to find them, none of which are straightforward. As physical retail outlets come under pressure from online retail (“bricks v clicks”), it would seem unsustainable to increase the burden of business rates. Employers wishing to employ workers in the UK face pressure from automated or overseas resourcing alternatives, which means that taxing employment by way of employers’ national insurance contributions (NICs) becomes less justifiable. Nonetheless, the UK government has announced that it will be introducing a new Health and Social Care Levy, payable partly by employers from 2022, to pay for increased expenditure on health and social care.
In the longer term, the combined burden of income tax and NICs needs to be reformed. Currently they can be regressive: the total tax/NIC payments due on an employment cost increases in steps to 66.6% at £112,580, before falling to 49% at £141,189 and then rising again to 53.4% at £169,480. This means the effective rate on the very highly paid is lower than on many earning a lot less. A tax and social security regime that has evolved over the last century needs a comprehensive review, regardless of the political difficulties in raising taxes (see also globalisation – international rules). Options for raising more in tax revenue could include: taxing employment, self-employment, dividends and capital gains at similar levels; introducing some form of wealth tax; and making non-resident UK citizens liable to UK tax (as the US does with its citizens) - possibly at half the rate levied on residents.
Until the 1970s, employees relied on their trade union for support in any workplace dispute. As union powers declined, this was gradually replaced by a raft of individual employment rights regulating the workforce. Many of these employment laws are relatively new but have been readily accepted as uncontroversial, with levels of employment protection having not differed greatly over the last twenty years. Effective enforcement of individual rights through employment tribunals (ETs), originally designed so as not to require lawyers, has become more difficult as the law has evolved and become more complicated. ETs have also become under-resourced, with consequent delays and costs. Nowadays, many employers are more concerned about the reputational impact of treating workers poorly and enforcement by regulatory professional bodies, than fear of compensation awards from individual employment claims. As the workplace changes fundamentally, however, laws and enforcement procedures designed for a different era of work are ripe for review (see emerging themes – regulation and enforcement).
The role of the state will influence the how much, what, where and who of work.