Tuesday, 12 February 2013

Bifurcation in the labour market

Recent reports on the UK jobs market have once again been surprisingly upbeat. The FT, reporting on the North of England and the Midlands, noted that jobs were being created at quite a rate (paywall). The ONS confirmed this in its Regional Labour market statistics for 23rd January. Employment is rising, particularly in the West Midlands and the Yorkshire and Humber region, and unemployment is falling, especially in the North East. Things are definitely looking good. Though there is still that productivity puzzle....

There's another puzzle, too. BDO produced a distinctly pessimistic report suggesting that business confidence was at an all-time low and we shouldn't expect recovery any time soon. But the Guardian reports that ICEAW & Grant  Thornton have produced a similar report saying that business confidence is at a two-year high. I wonder how two accountancy bodies managed to achieve such different results, and what this inconsistency tells us about the real state of the UK economy.

The prevalence of temporary and part-time job creation, coupled with lack of capital investment, suggests businesses are uncertain about the future - which rather supports BDO's argument that business confidence is low. If that is the case, then maybe it is reasonable to assume that at some time in the future businesses will convert these into full-time permanent jobs. It would be nice to think so. But I'm not convinced.

Businesses like to have very flexible workforces. Just-in-time staffing - bringing in temporary or agency workers to meet staffing needs on a day-to-day basis - enables efficient use of financial, physical and human resources. And some workers are happy to meet this need. But not all are. The question is therefore how many of the people currently forced into temporary or contract working really want to work like that, and for those who don't, how we move the economy towards generating the full-time permanent jobs that they really want. This is a social engineering problem which would be anathema to free-market fanatics. And it may prove intractable anyway. I think there is another, much more fundamental problem here.

It seems to me that we have a labour market that is bifurcating - splitting in two.  It's like a city in a developing country: there is a "core" of highly-skilled, highly paid and largely protected people for whom businesses compete internationally, surrounded by a growing "shanty town" of low-skilled, poorly paid and increasingly insecure workers. This applies in both the private and the public sector, by the way - in fact I think the trend has been evident in the public sector for longer. What seems to be disappearing is the middle - the routine, well-defined and fairly skilled jobs that are the bread-and-butter of the middle classes. Why is this happening?

AGCAS and the Work Foundation produced a fascinating report in 2011 called "The Hourglass and the Escalator". In this they postulate that increasing automation is eliminating routine semi-skilled jobs and forcing people into lower-skill, lower-paid jobs. This is contrary to the way we normally think about automation. It is usually assumed that automation first eliminates the low-skill jobs. But that doesn't seem to be the case. Low-skill jobs are being created in ever-greater numbers. It's the medium-skill ones that are vanishing.

Most of the temporary and part-time jobs currently being created are low skill, very low waged and extremely insecure. The Financial Times recently discussed (paywall) Amazon's warehouse operation in Rugeley. Amazon, it seems, is employing mainly temporary workers who can be dismissed without notice and offering the "carrot" of a permanent job if they are really, really good - which few are. Obviously this is only one large employer, but it seems likely that others are doing similarly. The interesting thing is that Amazon is using people to do a warehousing job that would seem an obvious candidate for automation. And Amazon is definitely not short of money. So why is it using low-wage, low-skill temporary workers instead of investing in cutting-edge automation?

Amazon says it is because people actually do the job better than robots. With the state of automation at present, this may well be true. In fact most of the low-skill, low wage jobs currently being created don't lend themselves particularly well to automation at the moment. A high proportion of them are service jobs, ranging from childcare to waitressing to supermarket checkout operators. And the fact is that people prefer to be served by people. They don't like dealing with machines. So the smiling barista who serves you coffee in Costa is an essential part of the business. But baristas, checkout operators, cleaners are substitutable. Lose one, you can just buy in another. They don't have unusual skills that are difficult to replace, and although getting on with customers is important, it is not a unique ability. I suppose these jobs too in due course will be automated - but we aren't there yet.

But this isn't the whole story. Your average barista is not paid a great deal and may be on a temporary contract. If he is, then he can lose his job tomorrow. And if he is actually self-employed - and the trend is towards self-employment for low-skill jobs - then there are no employment overheads either. He costs little to employ, you pay him only his wages and when you don't need him you get rid of him. You can't do that with a robot. Robots, like other plant, require up-front capital investment. Automating Amazon's entire warehousing operation would be extremely expensive. Why would they do that when they can use temporary workers on a just-in-time basis at much lower cost? To my mind it is no accident that they chose to site their warehouse in a depressed area with high unemployment due to collapse of the mining industry. They wanted a large pool of desperate people with obsolete skills.

So part-time and temporary jobs, and growing self-employment, may not be a transitional stage on the road to economic recovery. They may instead indicate a fundamental change in the labour market. Perhaps insecure working is the shape of things to come for the majority of people. If so, it raises fundamental questions about the way in which society operates. How do you plan for the future if your job can disappear at any time without notice? How do you get finance for a house, or a car, if you have no reasonable certainty of future income? In fact, if you don't know if you will have a job tomorrow, you aren't going to spend money unless you absolutely have to, are you? So I would expect the rise in temporary work and self-employment, particularly, NOT to be accompanied by a rise in GDP. People stuck in insecure work with frequent spells of "resting" don't spend money. They save it. Ask any actor.

But job insecurity and robots are only half the problem. The other half is skills. Businesses are constantly moaning that they can't get the skills they need, and blaming the education system for failing to provide workers with the right skills. Actually they have been doing this for as long as I can remember, so it is clearly an intractable problem. Now if there really was a skills shortage in the economy, shouldn't there be high vacancy levels? But vacancies have fallen considerably since 2007. So what are businesses really complaining about?

HR magazine notes that businesses expect to recruit in 2013. It is evident from the report that they mean  highly skilled professional jobs. And businesses clearly worry about the availability of these skills. The HR article implies that businesses are competing with each other for "high performers", and increasingly the competition is international. But the definition of "high skill" is changing. We know that many graduates now are taking low-skill jobs because they are unable to find jobs that use their skill set. And professional recruitment sites for executive jobs show how high the bar has been set - no wonder most graduates don't measure up to it. Masters degrees, PhDs, professional qualifications, languages and years of experience - and contacts. You have to have contacts. Actually that's mainly why you need the qualifications and experience. Only by spending time at a top university and in the right businesses can you build up the network of key contacts that you must bring with you to a top job. Even today it is not what you can do that is really important - it is who you know

What businesses are really complaining about is the inability of the Government to provide them with a competitive edge. It is rent-seeking, pure and simple. They don't have the time to grow their own top talent, because jobs are no longer for life and top talent knows perfectly well that the way to build a career is to change jobs. So they are looking to the education system to do it for them. Next time you hear a business leader moaning about the broken education system and the lack of skills in the workforce, try to hear the fear underneath the rhetoric. "If I can't find and retain the best performers, I'm dead"......

Is it reasonable of business to expect the education system to provide it with specific job-related skills? I don't think so. Education is about developing the individual, not meeting business needs. And if business can't recruit the skills it needs at the price it wants to pay, what chance does education have of recruiting good teachers of those skills? Anyway, talented people do wonderful work in business whatever their academic background. I know very few people who still work in the field in which they did their first degree (I am currently an exception). It is the personal skills - critical thinking, time management, independence and so on - that develop in the course of advanced education that are of most importance to business. Focusing on job-specific skills misses the point and runs the risk that market changes will render these skills obsolete. We have far too many people already with obsolete skills.....

In fact obsolete skills are a large part of the problem. The world of work is changing very fast - faster than at any time since the Industrial Revolution. And just as in the Industrial Revolution those who couldn't change their ways suffered, so those who can't adapt to the information revolution and globalisation are suffering. The middle-class jobs of the past are not coming back. The question is, what will replace them? I don't think we can see clearly yet where the new jobs will come from, or in what ways work will change in the future.

What is clear to me already though, is that the boundary between education and work is blurring. Learning is becoming a life-long process: with the advent of the internet, it has never been so easy to research and study anything that takes your fancy, and use it not only to inform your mind but to improve your work performance and develop new lines of business. Business should be a partner in the development of lifelong learning strategies. At present it seems willing to provide learning opportunities for the core, but not for the increasing number of people in the "shanty town". That is why business is struggling to find the skills it wants - it has disengaged from the process of creating them.

Business re-engagement with the growing "shanty town" of low-skilled, poorly paid and insecure workers is essential for economic recovery. And it seems to me that fostering this re-engagement is the role of government. It seems a pity that at the moment government is only too happy to encourage business in its preference for insecure, low paid, short-term working for the majority coupled with excessive remuneration for a protected and increasingly international elite. There can be no recovery while government and business preside over the progressive impoverishment of large numbers of people. After all, business only prospers if the economy does, and the economy only prospers if people do.

Related links:

The Hourglass and the Escalator - AGCAS
Private sector helps spur UK jobs growth - Financial Times (paywall)
Amazon unpacked - Financial Times (paywall)
Regional labour market statistics 23rd January - ONS
Labour market statistics, January 2013 - ONS
Perverse incentives and productivity - Coppola Comment
Business confidence "hits new low", says survey - BBC
Britain "should avoid triple-dip recession" - Guardian
UK directors predict job creation and slowdown in redundancies - HR magazine
Thousands of graduates forced to take menial jobs - Daily Mail
Unemployment and the labour market, 1870-1939 - Timothy Hatton

29 comments:

  1. Very interesting and you are certainly right that the labour market is becoming increasingly bifurcated.

    My quibble (as we discussed on twitter) is your view that "business" blames the "education system" for its failure in providing sufficient "job specific skills."

    For one, it isn't just "business" blaming the system. Today's news brings a complaint from the National Audit Office that the UK lacks sufficient IT professionals to deal with cyber crime.

    http://www.bbc.co.uk/news/uk-politics-21414831

    I don't read these complaints from business about lack of skills as being lack of job specific skills, but the lack of numeracy, literacy, and general science/maths/computer expertise that should be the province of the school/univ system.

    After all law firms pay for staff to go to law school, accountants train grads inhouse, banks send grads off to do professional banking exams/MBAs, and thge likes of Shell, Vodafone, Unilever etc all have inhouse training schemes. And Starbucks even has a barista course (!).

    I think the issue is essentially twofold:

    1) UK plc would like more grads coming through the system who studied maths, engineering, and sciences rather than the arts. And the comparison between degree subjects at UK universities compared to our European peers let alone Chinese, Japanese or S Korean universities is stark.

    As a history grad myself I an well aware of the skills that this imparts but the fact that I stopped maths at 16 (as is common in the UK) makes doing many technical maths-based jobs pretty much out of the question.

    2) UK plc would like more school leavers who enter the workforce to have a better grasp of writing and maths skills that many took for granted in school leavers 30 years ago.

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    1. There is clearly a sizeable mismatch between the expectations of business and what the education system actually delivers. I think the main culprits are not the big employers, who as you say do provide training. It's the smaller companies who don't want (can't afford?) to train, are used to buying in whatever they need and have forgotten what "apprenticeship" means.

      I don't agree that businesses took writing and maths skills for granted 30 years ago. They were moaning about school leaver illiteracy then, too. Business complaining about educational standards goes back a very, very long time.

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    2. I'm sure you're right that it is the smaller companies where this is more of an issue. I expect in places like Germany local businesses have far stronger links with local schools and thus there is a greater mutual awareness of what schools think they should teach and what business would like to be taught.

      I really don't know why more of this doesn't happen in the UK. Though I'm sure Rolls Royce has decent links with schools in Derby and I recall that Norwich Union used to employ something like 30% of all school leavers in Norwich.

      Anecdotally most of my friends who run SMEs (mostly London based retail, restaurant, media) end up employing very able foreign grads for jobs that really don't require a degree level person. As most of the non-grad locals who are considered fail at the first hurdle of a "job specific skill" namely that of turning up everyday on time.

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  2. Perhaps this raises a question about whether countries now and in the future will be ableto find work for all the people.

    If not and if the unemployment is rising, then it is time to review and understand what the future should be like.

    Perhaps all people should get a living wage from the state since there wont be many jobs available.

    We cant expect people to find work when there is none and the same time they should not be punished for not being able to find work.


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    1. It's interesting that plenty of economists 80 years ago were forecasting that as we as a nation got richer then we would have more leisure time. Greater productivity should lead to a shorter working week.

      Instead the opposite has happened. In Frances' bifurcated world the highly skilled may be earning lots of money but are working 12 hour days, plus working from home/on the train and on call at weekends. And at the unskilled end people are having to work two minimum wage jobs to feed and look after a family.



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    2. Perhaps this is a transition stage.

      The more that people like Frances push this point forward, then the more that we will move towards a society that not everybody will be employed but they will supported through a living allowance.

      Perhaps the goverment should step in and reward voluntary/charity work?

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  3. I agree with a lot of what you are saying Frances and this is a particularly interesting point:

    Low-skill jobs are being created in ever-greater numbers. It's the medium-skill ones that are vanishing.

    A good example of the latter, and one that I've seen first hand, is credit underwriting; the vanilla stuff has little if any human intervention as this is all performed by computer and so the underwriters who previously considered applications are now surplus to requirements. No doubt advances in computing technology have had similar impact in other roles.

    Back to the low-skill jobs and specifically the Amazon warehouse example, these will only be sustainable whilst labour is cheap. I fear that the drive towards a living wage, while well intentioned, will simply accelerate the move to automation and with it, the loss of jobs.

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  4. here is just one example of a graduate job that really should not be degree level:

    We are looking for an enthusiastic and hard working design graduate to join our team.
    This role offers the opportunity to gain vital experience and knowledge of the industry and is a first step on the ladder for a graduate aspiring to a career in motion graphics.
    You will work with our design team and production department helping to facilitate the running of business. The job offers the opportunity to learn every aspect of the motion graphics industry.
    The post is based at Old Street, London, EC2 but you may be required to work on occasions
    from other locations.
    Typical work activities include:
    Making and handing out tea, coffee and lunches
    Photocopying and undertaking general administrative work
    Answering the telephone
    Keeping the office clean and tidy
    Looking after clients
    Handing and sorting post.
    Organising couriers
    Taking care of petty cash
    Undertaking basic internet research
    Hiring props
    Helping set up a location for a shoot
    Ordering stock
    Archiving/Unarchiving design projects
    Undertaking basic internet research
    FCP Editing
    Research
    Skills and qualifications:
    A recognised qualification in Moving Image or Design at degree level.

    This is the kind of job that should be going to an apprentice or school-leaver, not a graduate.

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  5. My career used to be in IT (currently between jobs and thinking of changing career). I have dealt with plenty of companies moaning that they have trouble getting people with the right skillset. Their problem is that they don't want to train people because they are afraid that once trained, they will go to work to another company. They just hope they can headhunt employees of another company. They are suffering the consequences of their past disloyalty to employees: employees have figured out they have no reason to be loyal because it won't be rewarded, so overall they are quite happy to leave whenever it suits them.

    You might reasonably ask why people currently out of a job don't train for whatever is the most wanted skillset. The answer is that some people do, but you have to calculate this: training costs time and money, and by the time you've done it, are you still sure this particular skillset will still be wanted, not to be abandoned for the next shiny thing? For the most basic IT skillsets, it probably pays. For anything more sophisticated, you are taking a chance. So many people sit tight and hope for something they can bluff their way into, and acquire skills on the job.

    I finally got sick and tired with this game, which is why I'm considering a career change. But I wonder in how many fields the game is at least similar.

    I suppose this is a problem that economists, when they thought about the job market, didn't factor in: the most super-flexible workforce isn't the ideal, since when jobs are so flexibly gained and lost, there are no real incentives to learn and specialise in anything for employees, and no real incentives to provide training for employers. It isn't as if people are born with a particular skillset that can never change, or a skillset that can change at the drop of a hat. In the real world where skillsets take time and money to acquire, a bit of loyalty between companies and employees would be rather useful and economically advantageous for everyone. Unfortunately economists haven't included it into their models, and keep promoting policies than destroy labour ties as easily as possible.

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  6. Should employers, who pay minimum wage and avoid corporate taxes because they can, be given an ASBO? http://www.gmb.org.uk/newsroom/latest_news/gmb_asbo_for_amazon.aspx#

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  7. There's a train of thought that goes: if you give greater spending power to people at the lower and very low income end of the scale, they tend to spend it on the necessities of life which are generally imported. That makes your trade deficit worse.

    Those at the very high end of the scale would probably salt the money away and cause less of a deficit problem.

    I can't say if this theory has any validity or not, however, if it does hold true, then the falling production from the North Sea (around 7% pa) would explain the reluctance of the Government to improve the lot of the poor.

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  8. I think all of this is driven by a WA Lewis dual sector economy model at the level of the global economy. It's transitional. With global urbanisation now passing the 50% point, marginal growth in labour demand will start to outstrip the marginal supply of migrant workers, and the terms of trade for labour globally will start to shift back towards workers and away from capital. Wages will be bid up. That will incentivise companies to invest in increasing mechanisation over the coming decade. Work hours will shorten, as employees choose to consume more leisure. However, the bifurcation may persist due to policy failure - the ease of high skill migration, the ease of tax avoidance, etc.

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  9. Possibly one aspect of the reduction in training is that years ago the company would acquire comparatively cheap labour from the trainee.So for a few years the trainee would do routine and time consuming tasks progressing to the more skilled work. Now most of those fairly routine tasks are computerised or mechanised.

    I suppose this is part of the hollowing out. Companies want to employ business ready high skills or else low skills. They've nothing to occupy a trainee until they are actually fully trained so training is seen as much more costly.

    Migrant labour might also have an influence. For example the various skilled building workers coming from Eastern Europe meant that companies could recruit the skills without incurring with the cost of training.

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  10. Some interesting points you raise. However, I think it unlikely that many of the workers at Amazon in Rugeley are miners with obsolete skills. Most of them were probably still at school when mining ceased.

    Although recently there has been an acceleration of casualisation and temporary working in the economy. Lower job security and casualisation has been ongoing for some time. If we assume and we probably should, that flexible labour markets help business to be more efficient then those type of labour markets would raise output from where it otherwise would be without the flexibility. Therefore, total wages would rise. You are quite right as a point of logic to reason that high levels of job insecurity should lower discretionary spending and raise saving. We have certainly seen some of that since the financial crisis. However, the opposite was true prior to the financial crisis, which suggests people did not feel particularly insecure.

    I don't think looking at vacancies really answers the skills shortages issue. Many of the firms who complain about skills shortages do not advertise with government agencies. Business is always lamenting skills shortages, but the sheer scale of the complaints about STEM shortages is food for thought. With young people the complaint is more profound than skill shortages, they simply think they are unemployable to do anything. One recent case with a car dealership looking to employ apprentices found 80 per cent of applicants were unemployable. Moreover, this was not the can not be bothered brigade. The young people had been motivated enough to apply for an apprenticeship. Schools are not just there to prepare workers but they are letting down pupils by pretending that is definitely not part of their function.
    http://www.scotsman.com/the-scotsman/politics/today-s-youth-not-fit-to-be-employed-says-car-firm-arnold-clark-1-2308822

    Just as in the comments one often hears people asking where will growth and jobs come from in the future? Even asking the question suggests people do not know economic history. We do not know and we cannot know. Moreover, the absolute last people we should ask is incumbent business. What would they have answered in 1900? How many of them would have forecast their own demise? Only 5 of the largest 100 UK companies in 1900 survived to the end of the twentieth century. What would business leaders have said in 1970 about future growth? None of them would have forecast the rise of the PC, internet or world wide web. Most of the people who really drove those things into all our lives were still at school in 1970. Beyond the immediate future, drivers of growth and the labour market is unknowable.

    What is not coming back is the large heavy industries that absorbed a great deal of low skill or unskilled male manual labour. All over the country that is the group that finds it hardest to adjust to the new economy. The only industries left to absorb that type of male manual labour is construction, transport and the army.

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    1. Your assertion that "most Amazon workers were still at school when the mine closed" doesn't fit with the facts. Rugeley mine closed in 1990. If the average age of a Rugeley miner was 30 in 1990 - not an unreasonable estimate - the average age of those ex-miners would now be just over 50. The 50+ male age group has more difficulty finding work than any other adult age group.

      You assume that increased labour market flexibility is ALWAYS a good thing. That's the modern mantra and to my mind it needs to be questioned. Up to a point a flexible workforce is indeed a good thing, but there is a point beyond which the chronic insecurity and low wages associated with an extremely flexible labour force actually inhibit growth. The countries with the highest proportions of low-wage self-employed (the most insecure workers) are poor. And business efficiency carries human costs: for example, the cotton mills deliberately employed 6-year-olds because being small they were able to get under the looms while in operation and clear threads. It was efficient, but socially unacceptable. I don't think we really want to return to a world where business efficiency trumps social justice.

      Labour market bifurcation existed long before the financial crisis but was masked by growing levels of debt. There was an illusion of prosperity but real incomes for most people actually weren't growing to the extent needed to support their desired lifestyles. Why people believed in the debt prosperity illusion I don't know, but it has nothing to do with the reality, which is that real incomes were not keeping pace with either productivity or profitability, and most people therefore were not really participants in the UK's growing "prosperity". Which is of course why it was an illusion. Now that illusion has been shattered, people are realising how poor they actually are. But no-one yet has questioned the corporate behaviour and government policy stance that has enabled such a divergence between productivity and workers' remuneration to develop. Productivity is now falling, but so are real incomes, so the divergence still exists. This needs to be addressed or there can be no real recovery. It really isn't economically viable for workers not to share in the output they create. That sounds Marxist, but it isn't intended to be - it is simply an acknowledgement that businesses don't exist separately from people, and systematic deprivation of the vast majority of people through wage repression and job insecurity is economically disastrous in the long run.

      Although I've mentioned education, this post is not about youth unemployment, which I think is a slightly different phenomenon. I will return to it in a later post. But skills mismatches exist in the adult working population too, and the adult education services don't exist to meet them. Most adult education facilities are leisure-related, rather than work-focused, and companies REALLY don't think they should have to train adults. There is a massive gap there.

      But labour market bifurcation does not imply inadequate skills, despite what businesses say - that frankly is an excuse. Many people in insecure, low-wage and low-skill occupations are highly educated, particularly if they are women with children or older men. Among other things, they simply may not want the long hours and international travel that goes with being part of the core. I don't agree with AGCAS's "lovely jobs and lousy jobs" definition. The core may be wealthy, but they pay for that in disruption to their family life and outside interests. Being part of the core is in some ways no easier than being part of the shanty town. In 2002 I chose not to be part of the core because I didn't want to be the sort of mum whose kids were brought up by paid carers.

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  11. "but it has nothing to do with the reality, which is that real incomes were not keeping pace with either productivity or profitability, and most people therefore were not really participants in the UK's growing "prosperity". Which is of course why it was an illusion."

    Same in the US and it's getting worse. Must...compete...with...third...world...labor.

    http://stateofworkingamerica.org/who-gains/#/?start=1971&end=2008

    http://www.scribd.com/doc/125269359/Getting-Richer-Edmund-Saez

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  12. I have no idea what the average age of Rugeley Amazon workers. It is not that important but if you not unreasonably assume that the average age of a Rugeley miner would be the same as the average age of the population in 1990. That was around 39, so most of the average age miners and older would be all over 60+ now. All the limited pictures of the place that I have seen most of the workers looked pretty young to me.

    " Up to a point a flexible workforce is indeed a good thing, but there is a point beyond which the chronic insecurity and low wages associated with an extremely flexible labour force actually inhibit growth. "

    I think we can agree that chronic insecurity and low wages are in fact bad things no matter what they do to growth. However, you are making unwarranted association that flexible which is just another name for efficient, is in fact associated with low wages. The absolute opposite is true. There is a positive correlation that the countries with the most flexible labour markets have the highest wages. I can't see any countries with flexible/efficient labour markets that would meet the criteria of low wages inhibiting their growth. There are plenty of low-wage economies but they have rigid labour markets.
    http://www3.weforum.org/docs/WEF_GlobalCompetitivenessReport_2012-13.pdf

    "And business efficiency carries human costs: for example, the cotton mills deliberately employed 6-year-olds because being small they were able to get under the looms while in operation and clear threads."

    Well yes, it is safe to assume that efficiency does not have to mean maximising efficiency. Just as growth should not mean maximising growth at the expense of equity. There is always a tradeoff.

    "There was an illusion of prosperity but real incomes for most people actually weren't growing to the extent needed to support their desired lifestyles."

    Was that a problem of their incomes or their desired lifestyles?

    " ...which is that real incomes were not keeping pace with either productivity or profitability, and most people therefore were not really participants in the UK's growing "prosperity".

    Far from not keeping pace labour compensation in the UK was exceeding productivity.
    See figure 3.3: p29- growth of labour productivity.

    See Figure 3.4: P32- growth of wages and labour compensation.

    The UK growth in labour compensation 1995-2009 was the fifth fastest in the OECD. An interesting comparison is the UK and Japan are recorded as having the same rate of labour productivity over that period. However, UK labour compensation hugely outpaced that of Japan for the same growth in productivity.
    http://www.eu-employment-observatory.net/resources/reports/WagesProductivityandEmployment.pdf

    " But no-one yet has questioned the corporate behaviour and government policy stance that has enabled such a divergence between productivity and workers' remuneration to develop."

    There is no divergence other than statistical quirks between the median and mean.
    http://www.livingstandards.org/wp-content/uploads/2012/02/Decoupling-of-wages-and-productivity.pdf

    "Productivity is now falling, but so are real incomes, so the divergence still exists."

    If productivity falls then so will incomes of that there is no doubt. Productivity is ultimately what determines incomes.

    "...and systematic deprivation of the vast majority of people through wage repression..."

    Frances, that is just hyperbole and you know it. The majority of people in the UK are not on low pay as all the data shows. In fact, the median worker in the UK is near the top of the EU tree. You can't pick out small subsets from a labour force of 30 million and extrapolate into a theory of everything.
    http://en.wikipedia.org/wiki/Income_in_the_United_Kingdom





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    1. Richard,

      I have not assumed that flexible employment necessarily neans low wages. But there is definitely an association between flexible employment and insecurity. And it is a fact that the most insecure workers - temporary workers and the self-employed - are also generally the poorest paid. In the case of the self-employed, this chart from ONS report shows how their incomes have collapsed since 2008:

      http://bit.ly/X2VJKb

      The proportion of self-employed and temporary workers in the UK economy has been rising considerably, particularly in the last two years.

      Page 14 of your third link has a chart which maps labour productivity against mean and median earnings from 1970. It shows that since mid 1990s productivity has been outstripping both mean and median wages adjusted for inflation. Total compensation for employees (which doesn't include the self-employed, casual workers, temporary workers and many part-time workers, since they don't get job perks or pensions) has kept pace with productivity and in fact has exceeded it since the financial crisis, but that is probably because pension contributions are sticky, especially for highly-paid employees. But notice the divergence of mean and median. Mean wages have not quite kept pace with productivity but are not far off. But median wages have fallen considerably compared to both mean incomes and productivity and now are actually declining in real terms. The divergence of mean and median incomes is not just a "statistical quirk". It supports my argument that the labour market is bifurcating. If the median is moving downwards then real wages are falling for the majority of people, but the mean is distorted by the presence in the workforce of highly-paid people whose wages are rising. Which is what I said. In fact that is the conclusion that the Living Standards report comes to as well. There is rising inequality in the UK.

      I don't agree that flexible = efficient, and your WEF link doesn't support that either. Some of the most flexible workforces in the world are very far from efficient. Bangladesh, for example: according to its page in your WEF link it has hardly any restrictive employment legislation and a very good work ethic, but it's way below the UK on the WEF's efficiency index. Your assertion that poor countries have rigid labour markets doesn't stand up either: Bangladesh doesn't have a rigid labour market, but it is very poor.

      The UK actually has one of the most efficient workforces in the world (ranked 5 out of 144 on the WEF's index). It does not need labour market reform. Increasing flexibility in an already highly efficient workforce is counter-productive because it reduces aggregate demand without creating compensating improvements in productivity. That was essentially the argument I was making in my post on perverse incentives and productivity.

      In your second link you rely a lot on comparisons with Japan. Japan was stagnating during the whole of the 1995-2010, which that report covers. It is hardly a poster child for economic performance. The UK prior to 2008 was doing far better. The remarkable thing is that Japanese productivity is so high relative to compensation growth, not that the UK's compensation more-or-less equated to productivity. It might be reasonable to ask whether the poor performance of Japanese wages compared to productivity has something to do with its stagnation.

      The relationship of productivity and incomes is not simply causative as you suggest. In the case of the current productivity and income decline, I suspect that there is no direct causative link: the underlying cause of both is the unwillingness of companies to invest either in physical or human capital.

      I really don't care where the median worker is on the EU wage tree. I'm interested in the UK's increasingly polarised labour market and growing inequality. That is the subject of this post and it is not in any way hyperbole.

      Delete
  13. "Flexible labour force" is such a wooly term. It can mean anything you wish it to.

    When uttered by politicians or business in the UK it is generally assumed to be a euphemism for workers that will bend in any direction management directs - without question.

    For truly flexible working there has to be a large investment in training so that employees can perform multiple rolls - unless of course it is only intended to relate to hours of attendance?

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    1. Sorry, that should be 'multiple roles'.

      I did not intend to suggest employees should perform gymnastics :-)

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  14. The oppressive working conditions at Amazon probably mean that management believe full automation is not far off.

    When a business stops thinking about its staff as an asset, and starts seeing them as commodities, it will tend towards more coercive and untrusting modes of management. This is partly deliberate (e.g. making the job unpleasant so that perms leave and are replaced by temps, which avoids future redundancy payouts), and partly unconscious (dehumanising the workers to avoid guilt).

    There is a lot of aumtomation going on in goods distribution at the moment, powered not only by retaliers like Amazon but by the supermarkets. They're not quite at the point where humans can be wholly dispensed with, but that end is in sight.

    The location in Staffordshire clearly owes as much to its central location (it's a distribution centre, after all), as the handily-placed reserve army of labour. If they had a thing about ex-miners they could have gone to South Wales or Northumberland. Amazon are undoubtedly a company that plans for the long-term, so I suspect their ultimate vision was always a dark factory between the M6 and the M1.

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    1. David, I think you are spot on. Someone sent me this just after I published this post:

      http://www.pcworld.com/article/252193/amazon_to_acquire_warehouse_automation_company_kiva_systems.html

      Automation of Amazon warehousing is indeed not far away. In which case those jobs are indeed temporary.

      Amazon certainly need access to good transport links. Their business stands and falls on physical delivery of products to customers.

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    2. HI,

      The link did not work. Wonder if someone is trying to hide "bad news"

      Delete
  15. Workplaces evolve and change over time, and if you're doing the kind of job that involves largely following procedural steps, and doesn't involve much in the way of human judgement, creativity, craftsmanship, personal relationship skills, or the kind of physical work that robots can't do yet, then I don't think you should be surprised when your job disappears through automation.

    Humans are terrible at repetitive, rule-based tasks. They're also great at creative, empathetic, adaptive tasks, and are generally happier when doing them. So while the transition may be difficult for some, maybe it's for the best overall. We do need to support people who for whatever reason are not ready for this transition, but I don't think we should necessarily lament it.

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  17. A very thoughtful balanced piece.

    The impression given that GDP is unlikely to go anywhere fast because of the increase in very insecure work patterns and a cratering middle class, isn't a "theory." It's something that I experience almost daily.

    Chris

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  18. Really thoughtful and useful refections in this post and many comments: thanks. So many people conclude that something has to be done to re-value different kinds of work and that seems the important thing to me. Most of these activities we describe as 'low skill' can actually be very rewarding emotionally and socially, and if we could just change the remuneration system so they were well-paid, they would make good careers. Caring for people (choose your preferred age group), providing retail services, catering: with more esteem and money many people would be happy there.

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  19. Thought provoking and keenly observed. However, it occurs to me that the labour market bifurcation that you comment on is primarily a consequence of the recent period of globalisation (during which advanced capitalist economies have taken advantage of new access to cheap sources of energy and labour markets to restructure, redesign and relocate work processes in order to boost competitiveness and profitability), rather than a new paradigm of production in which the information age has made skilled and semi-skilled work newly substitutable by machines. Automation still requires human agency to supervise, analyse, maintain, develop and renew the robots. A shock to globalisation (EU trade tariffs on China, for example, or a full-blown war in the middle east) would disrupt and possible reverse the hollowing out of skilled and semi-skilled jobs. And globalisation appears increasingly vulnerable to such a shock.

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  20. I love your website.. its have nice and helpful and informative content. thank you..

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