UK: Job insecurity and other myths - The Employment Climate.

UK: Job insecurity and other myths - The Employment Climate. - The idea that we should all live in daily dread of losing our jobs has passed into urban legend over recent years. Yet, for most people, the evidence fails to support the fear.

by David Smith.
Last Updated: 31 Aug 2010

The idea that we should all live in daily dread of losing our jobs has passed into urban legend over recent years. Yet, for most people, the evidence fails to support the fear.

It is, according to some, the most dramatic change to have affected management in modern times. In the labour market of the 1990s, those who hire apparently enjoy unbridled supremacy over those they employ, and can fire. The reason for this? Because, more than ever before, according to popular wisdom, people are suffering from massive insecurity about their jobs, afraid to put a foot wrong for fear of an early exit to the dole queue. Thus, workers are flexible, compliant, frightened even, and managers have the unrestricted freedom to manage.

Not that this is all one way. Learned seminars are run about the problems of motivating an insecure workforce. Are insecure workers less loyal and productive? Do they encourage a climate of low morale which inevitably spreads around the organisation?

Then there is the upward spread of insecurity. We all know of companies where, as a result of the recommendations of management consultants, entire layers of middle management have been removed, of organisations where the number of senior managers has been pared back severely. No one, it appears, is immune.

Certainly if you want to read about insecurity, there is plenty of material published every day. A computer trawl through Britain's national newspapers from last year found 2,778 stories on insecurity in general and 977 on job insecurity in particular - that's nearly three a day. Ten years earlier, when unemployment in Britain was substantially higher, a similar search found only 234 stories on insecurity, and just 10 on job insecurity.

This is more than a little puzzling. No more so, however, than when other supposed indicators of widespread insecurity are examined. Job tenure, the average length of time people remain in a job, might be expected to have fallen sharply in this newly insecure environment. In fact it has barely changed in 20 years. Average tenure is currently five-and-a-half years, compared with a shade over six years in the mid-1970s. Admittedly men now change job more frequently; in 1975, average tenure was just over eight years, compared with six-and-a-half years now. But for women, average tenure has risen from four years to more than four-and-a-half.

Perhaps the oddest thing about tenure, given its prominence as a piece of evidence for those who claim widespread professional insecurity, is that it has actually risen quite significantly during the 1990s. In the spring of 1990, for example, before the boom of the late 1980s had turned to recession, average tenure for all was under four-and-a-half years, compared with the current five-and-a-half.

The other argument frequently used by those subscribing to the cult of insecurity is the decline in statutory employment protection in Britain.

Apart from the fact that true job security actually has little to do with legal constraints on firms, the evidence, again, is unconvincing.

Employment rights, largely protection against unfair dismissal, are currently gained after two years of continuous employment. It was not always this way. Under the last Labour government in the 1970s, the qualification period for employment rights for full-timers was six months, and for part-timers a year. At that time, more than 90% of full-timers and nearly 80% of part-timers were covered.

Currently, three-quarters of full-timers and nearly 60% of part-timers have statutory rights. So the case is proved?

It seems not. For, against this measure too, the 1990s have been a period of increasing, not decreasing security. In 1990, a smaller proportion (70%) of full-timers, and just 30% of part-timers had employment protection.

The case of the part-timers is instructive. The recent increase in the number covered was entirely due to a legal reversal suffered by the Government, which, having increased the qualification period for part-timers to five years in 1990, was forced to bring it down to two years when this was judged discriminatory.

Part-time workers may not have become genuinely more secure in the 1990s, although there are more jobs for them. But they have not become less secure either: the proportion with employment rights now is almost exactly the same as it was in the mid-1980s, when the qualification period was also two years. So the employment protection figures represent another red herring, numbers which do not show that job insecurity is increasing, and may indeed prove the opposite.

Most of the other statistical supports for the talk of widespread job insecurity also fall away on closer examination. When was the biggest increase in part-time work in Britain? In the supposedly secure 1950s, when the proportion of people working part-time jumped from 4% to 9%. It has certainly gone up since then, rising in the past 15 years from 19% to 28%. But this has nothing to do with insecurity and a lack of full-time jobs. It has everything to do with the rising proportion of women in the workforce, many of whom work part-time and, as successive Labour Force Surveys have shown, do so by choice.

The idea of Britain as a society of temps, with few permanent jobs on offer, but plenty of short-term contracts (thus allowing employers to avoid the burdens of statutory employment rights) is similarly flawed.

There has been an increase in temporary work in Britain, from 5.5% of the workforce in the mid-1980s to 6.5% or 7% now. But to suggest that Britain has an unusually high proportion of temporary workers flies in the face of the facts. In Spain, a third of workers are temporary (and 96% of new jobs are on short-term contracts), in Australia the figure is 23.5%, in Sweden 12.7%, in France 12.4% and in Germany just over 10%. There is nothing remotely surprising about this. In countries where employment regulations are more onerous, there is naturally a greater reluctance to take on permanent staff, because of the difficulty of laying them off when times get tough. In fact, the European Commission in a document last year that embarrassed some member states (and appeared to argue against a far-reaching social chapter) concluded, 'It appears that where termination costs are high, firms tend to adopt a cautious recruitment policy'. And so they do.

There are, of course, lies, damned lies and statistics. What relevance is all of this if, in fact, people are feeling insecure? Insecurity, after all, is a sense of uncertainty, as much a state of mind as anything else. Whether logical or not, if people believe themselves to be insecure, there is insecurity. There is only one way to know whether people are feeling insecure and that is to ask them. You have to ask them, however, in a particular way. A straightforward question, such as 'Do you feel more insecure about your job than a few years ago?', will almost certainly produce a resoundingly positive response. People hate, above all, to appear complacent. They have heard about this insecurity and think it must mean something. They may have forgotten what things were like in the past.

Asked in a more subtle way, however, surveys show little generalised insecurity. The annual British Social Attitudes Survey, for example, whose 1995 findings were published recently, showed that in 1995, 59% of respondents had been with the same employer for five years or more, compared with 48% in 1991. Around a quarter, 27% of people, said that they expected to leave their present employer at some point during the next 12 months in 1995, a similar proportion to that in the mid-1980s, but only 13% expected to do so as a result of redundancy. This compared with a figure of 18% in 1991 and 20% in 1984. In 1995, by a small margin, most people expected their firm to increase employment, a similar result to that which prevailed in the boom years of 1987-89 (rather tellingly, perhaps, most of the time people expect a decline in jobs in their organisation).

'There is little evidence of substantial job insecurity,' concludes Professor Peter Spencer of Birkbeck College, who analysed these results for British Social Attitudes. 'Despite a high degree of turnover in the labour market, there remains stability of tenure for a considerable group. People now appear to feel more confident about holding onto their jobs.'

Strangest of all is the popularity of the notion that it is the white-collar middle classes who are these days most prone to insecurity. This, it seems, is a confusion of two different factors. The first is that the 1990-92 recession was more even in its impact between services and manufacturing than its 1980-81 predecessor, which wiped out one fifth of Britain's manufacturing industry. The second is that some of the highly-publicised job cuts in recent times have been to cut out the fat, some would say the muscle, from sectors such as banking and the civil service, where the job-for-life mentality was powerful.

The first effect was plainly short-term - it is four years since employment, including white-collar employment, began making a recovery after the recession although, as always, perceptions lag behind reality. One suggestion about the media's obsession with job insecurity, indeed, is that not only has it apparently affected the people they rub shoulders with, for example civil servants, but that media organisations themselves, including newspapers and the BBC, at one time rigid and heavily unionised, have switched over to short-term contracts in a way that is unrepresentative of the rest of the economy.

There are several points about the other cause of middle-class feelings of insecurity. Look, for example, at the case of banking and financial services, where recent job cuts followed a period of massive expansion in the 1980s. Over this period, employment rose by around 25%, since when it has slipped by 5%. Even in that sector, new, secure employment is being created in the 1990s - think of the people who staff the telephone banking operations of First Direct and its imitators, or the insurance selling of Direct Line and its counterparts. Things change. The friendly branch bank manager and the high-street insurance broker are being replaced by a voice at the end of a telephone. That that the newly secure make less fuss about their situation than the newly insecure is a fact of life, but it doesn't mean there is an overall increase in insecurity on any scale.

The British Social Attitudes Survey, indeed, confirms a long-run truth, that it is the unskilled and poorly-paid who are the most insecure. Thus, for white-collar professionals and managers, 14% had experienced unemployment in the past five years in 1995, a significantly lower figure than in preceding years, and similar to the 1983-89 proportion. By contrast, 29% of unskilled manual workers had experienced unemployment in the latest five years in 1995.

This is by no means to say there have been no white-collar victims of downsizing. It is possible, indeed, to pinpoint a particular group, certainly the over-55s, and in many cases the over-50s, which has proved to be particularly vulnerable. Companies have used the interaction of generous occupational pension schemes and the belief that older workers and managers are less likely to be able to adjust to changes in corporate culture to adopt a first-in, first-out strategy when cutting their workforces. If this becomes permanent, so that younger people begin to believe that their careers will inevitably be foreshortened, then a particular type of insecurity could take hold, manifesting itself, for example, in a reluctance to take on new financial commitments much beyond age 40.

Again, however, this may be changing. The backlash against indiscriminate downsizing in America, on the grounds that it does little to improve underlying performance, is beginning to spread to this side of the Atlantic. In addition, some companies have discovered that the loss of experience that goes with automatically off-loading the over-50s can be damaging.

Those with grey hairs may - quite rightly - require some convincing that recent talk of reversing such trends will translate into action. For them, and others at the margins, feelings of job insecurity are a logical reaction to recent employment trends. For the bulk of the working population, however, it would seem such fears are more rooted in press hype and unrepresentative examples than in current reality.


No automatic trade-off between job insecurity and labour flexibility

Another widespread myth is that insecurity is necessary for flexibility, and that there is an automatic trade-off between the two. This is complicated by the fact that as with most official boasts, glowing testaments to the flexibility of the current labour market are a mixture of truth and hyperbole.

On the plus side, in the 1990s, Britain has shown a degree of labour flexibility far greater than that exhibited in the 1980s and unimaginable in the 1970s. Unemployment has fallen by over a million to under 7% of the workforce, just over half the rates Germany and France are now struggling with. Despite this, 'realism' on pay has persisted, with average earnings growing by around 4% a year; in the 1980s when unemployment was last at this level, they were increasing at around twice the present rate.

This said, there is evidence that British companies could be adopting far more flexible practices than they are, in fact, doing. Government deregulation of the labour market and the emasculation of the unions has, as it were, led the horse to water, but it is not yet drinking.

Research into this area by Cranfield's Professor Chris Brewster suggests that while many would have us believe that Britain has a free-booting, unregulated job market compared with its European competitors, 'there are few areas where the UK is the leading country in its use of flexible working practices'. Rather, he believes, Britain's increasing labour flexibility is part of a Europe-wide change. The typical British response to extra labour requirements is still to increase overtime, 'an expensive and less productive form of working'.

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