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A new direction for a more inclusive economy

LightbulbsBy Sir Charlie Mayfield

Technological change is transforming the workplace, driving higher productivity but risking greater polarisation. Building an economy that offers a future for all requires a different approach to business conduct and education, and more plural ownership structures

Over the past year, it has become clear the UK economy has transitioned from recession to growth. The positive statistics mean real progress in life for all those finding jobs or winning new orders for their business. But we know that while our labour market has done well at getting and keeping people in work, it has its share of complex, thorny problems.

The setbacks in productivity the UK has suffered over the years since recession have left a large gap in the productivity of British workplaces compared to those of leading advanced economies. On average, an employed person will spend more of their waking hours at work than in any other activity. The workplace is therefore a crucial arena for social mobility. However, there is strong evidence that in the UK and other developed economies that the workplace is not fulfilling this purpose as well as it could. Data from the OECD suggests that the level of income inequality in the UK is high and growing.

These problems are not new and are independent of the economic cycle. They are about the way we develop and deploy the talents of people, so that they can make the greatest possible contribution to our economic performance. With rapid technological change, there is an opportunity to close the productivity gap and in so doing, create the best possible platform for expanding opportunity, increasing equality and inclusiveness, and raising living standards. But this cannot be taken for granted. It will depend on the choices we make about how to prepare people for the world ahead through education, and on how businesses are owned and run.

Technological change is good for productivity, but is resulting in a more polarised labour market  

Across history, technology has transformed productivity in industry after industry, from agriculture to transportation, manufacturing, communications and healthcare. The progress of the past gives grounds for optimism about the future. However there are signs that technology might be weakening the effectiveness of work as a driver of social mobility.

The experience of the Sky News reporter I spoke with recently brings this point to life.  A decade ago, he would have needed a sound engineer and a cameraman travelling with him to every corner of the world. Now he needs only an enhanced iPhone and a broadband connection to file his reports. But the one thing he can’t do without is a driver.

For some people, technology is an enhancement to their work. For others, it is replacing their once-valued professions. Indeed, demand for higher-skilled, technology-enabled roles has grown significantly in recent years. In the last two decades, the number of high skilled jobs in UK has risen by 2.3 million, and in some occupations like design, engineering and architecture, employers are struggling to fill positions. Demand for low-skill roles has also grown, with 1.8 million more jobs in areas such as care, administration, machine operatives and leisure. Yet over the same 20 year period, we have seen a significant decrease in demand for middle-skilled workers, with 1.2 million fewer jobs available for these largely ‘routine’-based roles.

The trend towards an ‘hour-glass’ shaped labour market is expected to continue, as the routine nature of many mid-skilled occupations makes them especially vulnerable to automation. The predictions are for faster growth of higher- and lower-skilled jobs compared with mid-skilled jobs in the UK into the next decade. This, of course, is not uniquely a UK phenomenon – this ‘hollowing out’ of the workforce can be seen in many other developed economies. In the US, for example, the share of mid-skill roles fell by 14 percentage points – from 59 to 45 per cent – between 1983 to 2012, while the share of low-skilled and high-skilled occupations both rose.

It is hard to predict exactly which of many rapidly advancing technologies in the fields of robotics and artificial intelligence will have the greatest impact on the workplace, but we can be sure that the impact will be profound. A recent study at Oxford University found that nearly half of US jobs could be susceptible to computerisation over the next two decades, including higher-skilled, white collar occupations. Such predictions about the future are far from certain to occur, but it is wise to consider, at least, a world in which technology could lead to an intensification of inequality and the hourglass would become more exaggerated still.

Job polarisation matters for all range of reasons, most crucially for the limitations it may place on social mobility. If the trend continues, fewer middle-skilled occupations would mean less opportunity for low-skilled workers to progress, removing the next ‘rung’ in the ladder of aspiration. A central social purpose of the workplace – to help people get on in life – may become harder to achieve.

Time for a new direction 

How can we address this risk of polarisation, and avoid the economic as well as social consequences that would result? There is no single, simple solution. But I believe we can take the first steps towards a more inclusive and equal economy by focusing on three areas. First, in rethinking the way businesses conduct themselves and the choices they make in the use of technology. Second, in the role of education in supporting this. And third, by encouraging greater plurality in the ownership structures of businesses. These are practical steps that will, over time, make a real difference.

Conduct

Let’s take the first of these measures, conduct. An inclusive, sustainable economy relies on the conduct of its businesses, especially with respect to technology. Businesses can make choices about how they incorporate new technologies into their workplace. They can employ technology in ways that diminish – or even replace – the skills of the workforce.  Alternatively, they can deploy technologies to complement and enhance the contribution of their employees. Not only is this more sustainable, it is also more inclusive. While two companies may be selling the same product, the way the businesses deploy technology and the skills-mix they nurture as a result, may be very different.

Let me give an example. In John Lewis we have one of the largest in-house delivery teams in the country. With a massive increase in demand for delivery we have deployed technology to increase efficiency, such as deliveries per hour. But alongside that we have trained and equipped our delivery drives so they are becoming audio and TV technicians and appliance installers. Combinations of job design, technology and skills development can drive customer satisfaction, efficiency and pay.

Education 

Conduct goes hand-in-hand with the second measure – education. Companies frequently complain about the shortage of skilled workers. But all too often, the burden is placed solely on schools and universities to fill this gap. We’ve got to look at how all parts of the system can pull in the same direction, and how employers can play their full part.

With over 40% of young people now going to university, it should be a major concern that many university degrees are not aligned to employers’ needs. To fix it, we need much greater collaboration between our schools, universities, businesses and government – working together to prepare people for the roles employers need.

Working lifetimes have increased in length by a fifth, creating the possibility for four generations of people to work side-by-side. For many, career progression used to be based on getting better at doing the same thing. As people work longer, and technology cycles turn faster, it is crucial that workers, and workplaces, become more agile.

That requires linking-up work and education more effectively over the course of a working lifetime, so that it is unimaginable to find one without the other. We must rid our economy of the myth that education stops at the age of 21. After all, over 80 per cent of those who will make up the workforce in a decade’s time are already in employment.

Ownership 

The final piece to the puzzle is ownership. While the plc remains the ‘norm’ in both the British and international markets, employee-owned businesses represent a compelling alternative. When Spedan Lewis founded the John Lewis Partnership as an employee-owned business, he introduced a structure where ‘labour employs capital’ – a radical inversion of the prevailing norm. A greater plurarity of ownership would promote social mobility within a more inclusive style of capitalism.

Employee ownership is of course not a panacea, and it is not suitable for every business, but it has key strengths, which are demonstrated in outperformance against other models of ownership. This is particularly true of knowledge-intensive businesses, where the majority of new jobs are expected to be created over the next ten years.

Evidence shows that other alternative forms of ownership also have striking results. Research by Boston Consulting Group and published in Harvard Business Review in 2012, showed that family owned businesses outperform their ‘conventionally’ owned counterparts over the business cycle. In fact, over 30% of all firms generating more than $1bn revenues are in some form of family ownership.

Alternative forms of business ownership are gaining strength across the UK. Increased support to raise awareness, simplify legal models and to introduce new tax reliefs has already created momentum towards real change in the number of collaborative and employee owned businesses.

Business and inclusive prosperity

This is a critical moment for business leaders, and for champions of a more balanced and plural economy to step up and support the movement for change. Over the longer term, technological change offers an opportunity for the UK economy to close the productivity gap, and to make the workplace once again a route to social mobility. But this is far from inevitable. Indeed, if current trends continue, technological change will exacerbate the problems of a polarised labour market.

To counter these trends, we must take a different approach. With deliberate action – in the conduct of businesses, in our approach to education, and in the ownership structures we encourage and support – we can build an economy that is more productive and more inclusive.

Sir Charlie Mayfield is the chairman of John Lewis Partnership and the UK Commission for Employment and Skills

This is a contribution to Owning the Future: How Britain can Make it in a Fast-Changing World, edited by UK Shadow Business Secretary Chuka Umunna and published by Rowman and Littlefield International.

Source: http://policy-network.net/pno_detail.aspx?ID=4731&title=A-new-direction-for-a-more-inclusive-economy

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