Eight drivers of change

Eight drivers of change: Role of the state

ROLE OF THE STATE ROLE OF THE STATE

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).

Politics

Realignment of British politics

Realignment of British politics

The governing Conservatives, traditionally a deregulation, low tax party came to power on the back of working class voters for whom rolling back labour laws would be unpopular. As a result, there has been little significant change under the current UK government.

Populism

Populism

Populist/nativist political parties have been a feature of the last decade in several countries but there appears to be limited impact by populist governments on employment law.

Green politics

Green politics

Green parties have risen in popularity in recent years. Green parties around the World tend to have radical employment policies.

Thatcherism

The Thatcher years highlight the impact politics can have on work. Her arrival in 1979 saw marked declines from high levels of employment and peaks in public sector employment and union membership as well as a sharp growth in self-employment.

State intervention

Furloughing

Immediate state intervention at the time of the first lockdown saw, at its peak, nearly one in three UK employees placed on furlough. This decisive action, no doubt, saved many jobs and is likely to change the attitudes of many to government support in the labour market. The scheme ended on 30 September 2021 with around 800,000 still benefiting from the scheme at that date.

Universal basic income

Universal basic income

The concept of a guaranteed income for all, whether working or not, has gathered interest over recent years with many seeing furloughing as a step in this direction. Several countries including Finland and Spain have experimented with it and Wales has plans for a trial.

Attitudes to benefits

There has been a sea change in British public opinion over the last five years with far greater support now to those in receipt of social security benefits. With many more in receipt of state support during the pandemic, it can be expected that this trend will continue. 

Living wage

Over the last two decades, other than in the US - although this is likely to change with the Biden administration -  real (minimum wage levels taking account of cost of living rises) have risen consistently.

Tax

Taxing employment

Taxing employment

Taxing employment (employer’s NICs) is hard to justify in the long-term where employers need to be encouraged to create jobs rather than replace them with technology or move work to other countries. However, employer’s NICs raise around 10% of total UK tax revenues.

Attitudes to tax

Pre-pandemic saw a general increase in support for raising taxes to increase expenditure on health, education and social benefits (at least since the financial crash of 2008). This trend is likely to accelerate in the post-pandemic years to come.

UK revenues

Corporation taxes will rise from 19% to 25% in 2023. Other options for increasing taxes include: higher income tax rates; aligning employee NICs with income tax; aligning taxes on gains and dividends with taxes on income; a wealth tax; and even taxing non-resident UK citizens on their foreign income or overseas gains. 

Tax revenues

Amongst G7 countries, the UK has relatively low tax revenues in comparison with the European G7 nations (though far higher than the US) and ranks 23rd of the 37 OECD nations (UK tax revenues as a proportion of GDP have not changed significantly over the last 20 years). This suggests some possible headroom to increase the overall level of tax in the years ahead.

Worker rights

Strikes

For most of the 20th century workers looked to trade unions for their protection. Trade union membership has declined in the UK since the high point of the late 1970s. With this decline, strikes have gone down from a high point in the 1970s to very low levels today. 

Individual rights

Across the G7 the level of employment protection has changed little over the last 20 years. Introduced from the early 1970s, UK employment rights are less protective than those in Continental European jurisdictions but greater than those in North America.

Human rights

Human rights

Over the last 50 years, there has been a shift from job security to human rights in employment. Anti-discrimination laws gradually extended the range of protected characteristics and rules about working hours, family rights and privacy rights have followed. 

Regulators

Regulators

With enforcement of employment rights through courts and tribunals, arguably, becoming less suited for today’s world, aggrieved employees look more to regulators such as the ICO with data issues and professional bodies such as the FCA or SRA for protection.

ROLE OF THE STATE - INTERCONNECTING DRIVERS

Technology

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Technology

Role of the State

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Role of the State

Sustainability

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Sustainability

Migration

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Migration

Globalisation

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Globalisation

Covid-19

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Covid-19

Demographics

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Demographics

Part 1 

DRIVERS OF CHANGE

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Part 2 

EMERGING THEMES

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Part 3 

PREDICTIONS

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