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Friday, May 27, 2022

Forget all you’ve heard about working life in modern Britain. It’s wrong

Forget all you’ve heard about working life in modern Britain. It’s wrong

The myths perpetrated about modern employment have left us perilously ill prepared for true economic change

Economic change is speeding up. Technology means that industries are shrinking and growing faster than ever. The young change jobs incessantly while firms fire at will, ending the “job for life” enjoyed by previous generations. Everyone moves around the country for work these days, vacating poorer parts of Britain and hollowing out communities.

All of these statements are almost universally accepted as truths about 21st-century Britain. They guide what policymakers see as the important questions to be asked and the right answers to give. However, all of them are wrong, in many cases wildly so. In most senses, change has been flat or is actually slowing down.

A safe option for anyone needing to sell an economics book for the past decade is to put a robot on the cover and warn that machines are taking our jobs and whole sectors are set to be wiped out – from taxi drivers to lawyers.

History shows us that big structural changes do happen. There were 7.7m manufacturing jobs in 1970 and there are only 2.5m today. The share of jobs in professional services, education and health has doubled over the same period.

However, this kind of economic change, where the workforce shifts from one industry to another, has been slowing since the 1980s. In the 2010s, it was running at just one-third of the pace seen 30 years earlier because Britain’s de-industrialisation is broadly complete. More recent trends, such as the decline of retail jobs and growth in the care sector, are minor in comparison and industrial change is actually at its lowest rate for a century.

Economy-wide trends can hide what happens to individuals, but there too the evidence points in the opposite direction to popular narratives. A job-hopping epidemic is something managers moan about rather than a thing that actually happens.

In 1993, the average time that workers had been in their post was 60 months. Almost three decades later, it’s still 60 months. Nostalgia is a dangerous guide to just about anything – there never was a job for life.

The UK has a flexible labour market, where it’s easy for workers to move or firms to hire and fire. But that doesn’t mean lots of moving or firing is going on.

The rates at which people change jobs is actually down by a full quarter this century with only 2.4% of us moving during the three months prior to the pandemic. The fall is particularly large for those workers held to be most likely to move: the young.

We have seen a growth in less secure work, from zero-hours contracts to self-employment, but firms are much less likely to fire these days. In the late 1990s, 0.8% of workers would lose their jobs each quarter; immediately pre-pandemic that had halved. Modern business has nothing in common with The Apprentice.

More young adults in university means more moving away from home for education. However, when it comes to young people moving around the country for work, that is now less common, down a third from the late 1990s to the late 2010s.

More broadly, odd ideas about exactly who moves around the country are widespread. Take discussions of the so-called red wall seats that the Conservatives won at the last general election. You’d think from how people talk about the likes of Bolton and Ashfield that these constituencies have seen a youth exodus but their defining feature is that far fewer young people leave them than depart other, richer, Conservative seats – and for that matter, far fewer people are moving in.

This huge gap between rhetoric and reality on economic change matters. It focuses our attention on the wrong problems and drives us to the wrong answers, taking our politics down rabbit holes that do nothing to help us build a better Britain.

Worries about too much change distract us from the real disaster of the past decade: our pay and productivity levels have not changed nearly enough. Before the financial crisis, productivity grew at roughly 2% a year. Since then, it has averaged only 0.4%, resulting in our wages having only just recovered to their pre-financial crisis level when Covid turned up.

Those making fewer job moves, particular younger workers, have missed out on significant pay rises: individuals who moved job typically enjoy five times the pay rise of workers staying put. The young aren’t too footloose and fancy free - they’re dangerously stuck in the mud.

Far from all change is good, of course. The decline in job losses means fewer people now see the downgrades and falls in pay that often follow. Instead of panicking about jobs being destroyed, we should focus on the fact that different groups face very different risks: lower-paid workers are six times more likely than managers to lose work. They are the ones under threat from the Cameron-era decision to give workers protection from unfair dismissal after only two years in post.

Recognition that workers are now less likely to move for a new job has important lessons for us that are obscured by misplaced panic about everyone moving around the country. This is happening for a mixture of good (there are now far fewer places where people have to leave if they want to find work), bad (housing costs rise faster in higher wage areas and put better paid jobs out of reach for many) and important reasons, such as wanting to remain near family, that policy must reinforce, tackle and understand respectively.

Finally, understanding that our recent past has not involved significant economic change should warn us that we may not be well prepared if that rate of change speeds up. Pent-up desire for change during the pandemic has pushed job moves temporarily to record highs, while the lasting consequences of the home-working surge remain to be seen. The aftermath of Covid-19 and the rate at which our population is ageing could combine with Brexit and the net-zero transition to reshape our economy over the decade ahead. If they do, it’ll be a shock to Britain’s workers, companies and the state. Our benefits system without its furlough bolt-on does little to insure us against change, while corporate Britain has a weak record on investing when new opportunities and challenges emerge.

Watching Apollo 11’s 1969 triumph in taking humans to the moon was a formative experience for my dad. Whenever he’s told technological change has accelerated, he notes that it’s taken us another 50 years for Amazon to get William Shatner into space. He has a point, which is as true for economic change here on Earth as it is for travel to the stars.

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