Job growth and job quality: Harnessing the potential of the Social Economy in the post-Covid recovery - Blog by Peter Dickinson
Social economy enterprises (SEEs) – such as cooperatives and social enterprises – comprise around 7% of UK employment. A recent study published by the Institute for Employment Research (IER) found that SEEs weathered the storm of the 2008 Financial crisis better than other enterprises and were able to deliver inclusive growth, sustainable development and higher quality jobs. Moreover SEEs in Italy, Poland, Spain, Sweden and the UK provided faster jobs growth compared to other organisations. The resilience and jobs growth of SEEs in the wake of the 2008 Financial crisis should therefore be harnessed to support the current pandemic economic recovery.
The impact of the 2008 Financial Crisis
The 2008 Financial Crisis created the deepest UK recession since World War II, and the longest for more than a century according to the Office for National Statistics. UK Gross Domestic Product (GDP) did not reach pre-recession levels until 2013. Employment only recovered in 2014.
There were similar impacts across Europe with the severity and length of impact varying between countries. Southern European countries (such as Spain and Italy) fared worse whilst Northern and Eastern European countries (for example, Sweden and Poland) improved more quickly.
Compared to 2007/08, Sweden’s GDP had recovered by 2010, Poland’s by 2011, the UK’s by 2013, Italy’s by 2016, and Spain’s by 2017. Employment levels took longer to resurface: the UK and Poland reached pre-recession rates by 2014, Sweden by 2015, Italy by 2018, and Spain’s has yet to fully recover according to data from Eurostat.
Whilst the UK’s jobs rebound was relatively swift it was also problematic. As the UK’s 2017 Taylor Review of Modern Working Practices reported, the jobs recovery from the Financial Crisis led to more atypical and precarious employment, especially amongst disadvantaged groups of people, and was also characterised by slow wage growth.
The full extent of the Covid-19 induced recession is yet to materialise and so the impact on economic growth and jobs is harder to calculate. Most analysts expect a much sharper recession but a swifter recovery compared with 2008. The latest analysis by HM Treasury suggests a 25% reduction in GDP to midyear, then positive GDP growth from the autumn onwards. The jobs trend is more difficult to predict. In the countries cited above, the jobs lag compared to GDP (in terms of regaining pre-recession levels) varied from one year in the case of the UK to five years in Sweden.
What is more certain is that the impact of the pandemic will not be equal across the working population. The Institute for Fiscal Studies predicts the greatest impact to fall on the most disadvantaged groups in the economy: those on low incomes; young people; Black and Minority Ethnic workers; and women.
SEEs and recovery in selected countries
The response of the SEE sector to the 2008 Financial crisis provides evidence that jobs growth and job quality can both be achieved. Employment growth can be gained alongside inclusive growth and quality jobs benefitting employers, workers, disadvantaged people, their communities and the national economy.
The size and structure of the SEE varies across the five countries in the study. SEE employment accounts for around 17% of jobs in Italy, 12% in Sweden, 9% in Spain, 7% in the UK and 6% in Poland. The sectoral distribution also varies. In Poland, Spain and Sweden, most co-operative jobs are in agriculture but in Italy they are in health and social work, and in the UK it is banking (thanks to building societies).
Whilst the SEE sector varies there has been a consistent pattern across the countries in terms of jobs growth and business performance. SEEs recovered from the 2008 Financial crisis better than mainstream businesses and demonstrated higher growth rates. In Italy, SEEs recorded jobs growth between 2007-11 whilst employment levels elsewhere declined. In the UK, the number of SEEs increased whereas the number of mainstream enterprises fell. In Spain, SEE employment levels reached pre-recession levels by 2016 whereas they have yet to recover in the economy overall. The survival rate of Spanish SEEs was also higher compared to mainstream businesses.
The enhanced business and employment performance of SEEs has been achieved along with providing good quality jobs. Job quality tends to be higher in SEEs, for example, they employ higher proportions of permanent and full-time workers. SEEs are also more likely to be run by and employ women, as well as employing more disadvantaged groups such as disabled people and migrants.
The relative expansion of SEEs, we found in the study, was due to their business performance. Put simply they were better run businesses. They were more innovative, more effective at meeting market and customer needs, and were better managed.
Key practices, inherent to SEEs, contributed to their better management and business performance: governance and internal decision-making structures and processes; reinvesting (rather than extracting) surplus value; prioritising jobs over wages and profit; sharing risks and rewards; and a long-term focus and shared values among members and workers.
SEEs demonstrate human resource practices more widely viewed as underpinning high performance businesses more generally, such as: effective communication structures; generating employee engagement; better skills utilisation; greater worker task discretion; employee involvement in task-related decision-making; and investing in workforce skills. These practices appear to create a ‘virtuous circle’ by which internal practice generates positive organisational performance that, in turn, provides positive employment outcomes, thus reinforcing the practice.
Supporting SEEs to deliver job growth
There is every reason to believe that SEEs can be an important component of the Covid-19 recovery. This possibility is recognised by the OECD and European Commission. The UK Government should therefore be encouraging SEEs as a route to rebuilding the economy and good jobs. In our study, we identified policy pointers to support SEEs, many of which are relevant to the current situation:
- Provide general policy support from Government, LEPs and Combined Authorities, as well as targeted specific support, such as, start-up and business support relevant to SEEs;
- Raise the profile of SEEs amongst business support organisations, and encourage SEE to take-up business support (e.g. via Growth Hubs);
- Promote social value clauses in public tendering so that cost is not the only factor when awarding contracts;
- Mainstream SEEs in enterprise and business education so that budding entrepreneurs are aware of these business models;
- Further support the development of management skills across the sector.
Through supporting and promoting SEEs, local and regional agencies can maximise the benefits of more and better quality jobs, and inclusive economic development. They can help the UK economy be built back quicker and better.
Online learning for careers guidance community
Since the beginning of the COVID pandemic and ongoing, Dr Sally-Anne Barnes and Professor Jenny Bimrose have been drawing upon their latest research to support the international careers guidance and counselling community by delivering online learning via a number of webinars.
Nearly 400 practitioners from professional associations and government departments from across the world have participated in the webinars and are drawing upon IER research to inform their practice. Webinars have covered recent research on how to support parents and carers in providing careers support, careers labour market information, and lifelong guidance policy and practice.
Congratulations to Dr Lorraine Johnson and Dr Jeisson Cárdenas-Rubio
We would like to congratulate two of our former students who have been awarded their doctorates today, Dr Lorraine Johnson and Dr Jeisson Cárdenas-Rubio.
Dr Johnson interviewed women about their transition from public sector work during a period of austerity focusing on the intermediary systems they used. Lorraine’s research evidenced the range of support systems used to aid transitions and provided a number of recommendations for careers practice. Lorraine is currently undertaking an early career fellowship at the Institute for Advanced Studies at the University of Warwick.
Dr Cardenas-Rubio investigated to what extent a web-based model of skill mismatches could be developed for countries where the information on the labour market is relatively scarce. Jeisson’s research drew upon innovative methods in web scraping, big data analytics and machine learning to produce labour market information for Columbia that was analysed to provide a picture of the Columbian labour market. We are pleased that Jeisson joined the IER team earlier this year.
Listen to Clare Lyonette talking about her new project assessing the Covid-19 related burden on working-class women
Professor Clare Lyonette was interviewed on BBC Radio Nottingham on Thursday July 16th about her new UKRI-funded project 'Carrying the work burden of the Covid-19 pandemic: working class women in the UK'. Listen to the interview here, starting at around 11.20 am.
The project, led by Professor Tracey Warren from the University of Nottingham, in collaboration with Professor Clare Lyonette and the Women's Budget Group is being funded under the Covid-19 programme. Using new Covid-related questions from the UK Household Longitudinal Study, the research will assess how working-class women, who already juggle paid employment with the bulk of housework and childcare responsibilities, have been affected by the additional pressures of increased demands, both at home and at work. Read more in the University of Warwick press release here.
Keep up the good work – planning a way out of the Covid-driven jobs crisis - Blog by Chris Warhurst
Not even out of the health crisis, the UK is entering a jobs crisis. New data from the Office for National Statistics (ONS) shows a mixed picture of employment but with strong indications that employment is set to fall. The UK Government has done well to maintain employment levels to date but needs to be equally brave going forward and stick to its plan to create more good jobs in the UK.
The looming jobs crisis
The new data shows a slight fall in employment but likewise a slight fall in the number of workers unemployed compared to March. As the ONS suggests, that unemployment has flat lined whilst massive redundancies have been announced is surprising. One explanation, the ONS suggests, is that workers losing their jobs are becoming economically inactive i.e. they are not registering as unemployed and they are not looking for work. There may be good reasons. The number of workers starting new jobs has fallen sharply. Moreover for those workers out of work, getting back in is becoming tougher. The number of job vacancies has fallen to its lowest level in the UK for nearly 20 years.
Meanwhile since the ONS data was collected, the situation is worsening. As the lockdown eases, business is now picking up in the manufacturing and construction sectors. However employment in these sectors is falling. In addition, July has seen almost daily announcements of hundreds, sometimes thousands, of employees being laid off or about to be laid off by their companies in services such as retail.
The Chancellor Rishi Sunak acted swiftly to protect jobs as the Covid-19 crisis hit. His main strategy has been to keep the past in place. And with some success. Whilst there were problems with both, the Job Retention Scheme and Self-Employment Income Support Scheme have helped many workers retain their jobs and at least some of their income. But as those schemes are wound down and the lockdown eases firms are now starting to lay off previously furloughed employees. Moreover the self-employed struggle to find sufficient business amongst cautious consumers. Unemployment is likely to rise higher.
What should government do?
Addressing this problem by creating jobs will be important. Traditional industries such as construction and new ‘green’ industries will benefit from government-funded infrastructure projects. The government should also address the chronic labour shortages in health and social care. It can do so directly by increasing direct funding for the NHS and indirectly to care homes through increasing funding to local councils.
The temptation will be to create any jobs rather than good jobs. Such a strategy would be a mistake. It was a strategy adopted in the UK in the 1980s and led to foreign investors building ‘screwdriver plants’, assembling parts built elsewhere in the world. Unemployment went down but driven by too many low skilled, low wage jobs. Working poverty was one outcome. Dissatisfied voters in northern British towns and cities was another. Moreover as government inducements dried up, these plants moved on looking for other governments’ support. In the 1990s Scotland had a hub of microelectronics firms, building cash point machines for the world for example. Now, no-one talks about Silicon Glen in Scotland; the companies have largely gone even though microelectronics is still big business.
The outcome, as my IER colleagues Terence Hogarth and Jeisson Rubio-Cardenas have pointed out, is that the UK now has proportionally less jobs in medium to high-tech manufacturing than the rest of Europe. And over the past twenty years the UK labour market has steadily polarised into lovely and lousy jobs, as Maarten Goos and Alan Manning of the LSE once expressed it. As John Hurley and his team in Dublin discovered, some countries in Europe, such as Austria, Denmark, the Netherlands and Sweden, have generally improved the overall quality of jobs in their labour markets, creating more of the lovely jobs.
The temptation to create any jobs at any cost must therefore avoided. Instead the UK Government must stick to its pre-Covid plan to create more good jobs. Of course there is a moral case for creating jobs that pay a real living wage and enable families to lead decent lives or enable workers to fully use the skills that they have acquired through investment in education and training.
Keep the focus on creating good work
Perhaps just as importantly for an economy that needs to recover and re-expand, there is a business case for creating more good work: good work helps companies be more productive and more innovative.
In a recent initial analysis for the Carnegie UK Trust, a team of researchers at IER – Derek Bosworth, Sudipa Sarkar, Wil Hunt and myself – found that good work and productivity are positively correlated. Five of the seven dimensions used to measure good work are positively associated with productivity in the UK: pay; job design, social support in work, worker voice and representation, and work-life balance. As such, better job quality is linked to higher productivity. Importantly productivity gains do not just occur for companies offering the best quality jobs but also for those offering decent quality jobs.
Similarly, another team from IER that includes Sally Wright and myself have been working with colleagues from across Europe to examine the relationship between innovation and good work. Analysing data for 32 European countries, including the UK, our Spanish colleagues led by Rafa Muñoz de Bustillo found that product, process and organisational innovations within companies are associated with higher job quality. In other words more innovations occur in companies with better quality jobs. More innovation can help companies be more productive and, in the long run, innovation creates jobs.
The lesson? Keep up the good work
Scotland is being brave. Its government has absorbed the lessons from past economic crises. This time around it recognises the importance of job quality to the country’s social and economic wellbeing. Early in the Covid-19 crisis it announced that it was sticking to its policy of fair work – its version of good work. It is applying the principles of fair work through the crisis and beyond. It wants a better Scotland in the future and believes fair work has to be part of the strategy.
If it wants to address the impending jobs crisis, the UK Government should likewise keep to its plan to create more good work. It needs to look at the evidence. Good work can help companies be more competitive, improve employees’ quality of working life, level up the regions damaged by previous economic recessions and help the government build back better.