Dont Leave Me This Way
There’s a political consensus at present that the solution to the UK’s problems is growth. In fact, it’s the prescription for the world economy right now as anxious eyes are cast at China, which has has been the engine of the past decade or so, as it relaxes COVID restrictions.
I’m going to park the issue as to whether this growth is desirable in planetary terms. Suffice it to say I’m a big fan of Kate Raworth’s ‘Doughnut Economics’ and I think a serious discussion about what growth looks like going forward is urgently needed. I see some hopeful signs of that happening but I also see the dead hand of vested interests and the status quo that have resisted this to the point that we are in crisis. I’m cautious optimistic but no more.
So what makes growth happen? I read a pithy tweet yesterday that said “Growth comes from more people or more productivity”. We have a unique problem in the UK in that in both these areas the numbers are static or falling, which may be why the IMF forecasts put us at the bottom of the table for growth in the next three years. Indeed, as every major country grows - even sanction-hit Russia! - we alone are forecast to contract.
Let’s look at the people bit. The Conservative government trumpeted the economic growth of the mid-2010s but it was mostly due to a bigger population, swollen by immigrants from the EU who disproportionately increased the working population. Brexit reversed that flow, with many returning to the EU. This was accelerated by COVID. This has caused very visible shortages of labour, notably in the NHS and care sectors, transport & logistics, agriculture and hospitality.
The workforce has been further depleted by the health crisis caused by record NHS waiting lists and long-COVID. There also a significant number of people who have stopped working due to caring responsibilities and soaring childcare costs.
But the government thinks the biggest problem is the over-50s who have left the workforce. They are going to offer tax cuts to induce them to return to work.
I don’t know what proportion of the workforce this group represents but I am pretty sure this is not the solution. It’s not even the right part of the problem.
Firstly, this departure from the workforce is quite normal and was predictable. It’s the baby boom of the 60s working it’s way through. 90% of the 50-year olds who left the workforce where over 55 i.e. they were approaching retirement anyway. It was predictable, even if COVID hastened it a little.
Secondly, it seems likely that many of them are sufficiently financially secure to retire a few years early, being beneficiaries of good pension schemes and house price inflation during their lifetimes. Otherwise, it will be ill-health or caring responsibilities that causes them to give up work. Either way, tax cuts are not going to be much of an incentive to go back.
The fact is that this tightening of the labour market was happening before COVID and was predictable because it’s down to birth-rate fluctuations. It’s also a long-term issue that immigration cannot fix, although it can provide some relief. Other countries will also be affected in this way, although the precise dynamics are different for each one.
A report from Riley Research on the UK labour market summarises the issue.
(See this thread from FlipChart Rick for more detail)
There are people over 50 who would like to return to the workforce but the barriers are not financial. The largest is ageism, which I’ve written about before. Employers simply don’t want to employ older workers. They are also unwilling to offer the training and flexibility that older workers would like.
The other actions that would enable more people to return to the workforce are reducing childcare costs (which are at ridiculous levels), reducing waiting lists (as part of addressing the wider crisis in the NHS) and increasing social care capacity. Greater immigration, whilst not a long-term solution, would ease the more immediate problems.
But the government has boxed itself in with doctrine that prevents it from even acknowledging the problems or using any of the possible remedies. These are also hard to solve and take a long time, so instead it going to bring in an ineffectual policy that addresses a minor part of the problem. (You might think this has parallels with some businesses you’ve known. I couldn’t possibly comment.)
It’s going to get worse before it gets any better. And we’ll see similar scenarios in other countries.
More, More, More
So, we’re going to have to fix the productivity bit, right?
How hard can that be? After all, John Maynard Keynes said we’d all be working 15-hour weeks by now due to advances in ‘labour-saving devices’ that would massively increase productivity.
Today, we’d call that ‘tech’, and we’ve got loads of it. There’s lots more on the way too, as robots, AI, the meta verse and all sorts of goodies hold the promise of automating away much of what we do today and transforming how we work.
Hang on, though. We’ve had 40 years of computers and personal productivity tools and yet we’re still working 40 hour weeks. In the UK, working hours have actually increased. What’s going on?
The picture gets more complex as we look further into it. In the UK we have a particular problem as productivity has pretty much flat-lined since the financial crisis in 2008, and has historically lagged behind our main competitors, especially in the EU.
However, the problem is very unevenly spread. In a paper by Andrew Haldane, then Chief Economist of the Bank of England, he points out that the top UK companies (what he calls ‘frontier companies’) are as productive as their global competitors. It is the rest that are failing and falling behind.
My take on this is that these frontier companies have not just embraced technology but also the new ways of working. We know that when COVID hit, companies that already had high levels of flexible working and distributed teams coped far better than those who were very office-centric. For all the buzz around ‘hybrid working’, it’s been a fairly small step for those frontier companies whilst others have found it a traumatic leap.
When I worked in BT in the 1990s, I was already working flexibly and in distributed teams spread across different time zones. I was able to work in different offices, in hotels, in airports, plugging in my trusty laptop. I was part of the vanguard but that way of working became much more common (and easier - no crocodile clips required!) across telecoms, tech and professional services. “Hybrid’ is just more of the same.
Undoubtedly there are gains to be made from employing AI and the other new technologies but experience teaches us that they will create additional work (even if much of it is in the ‘Bullshit Jobs’ David Graeber warned us of). After all, someone’s going to have to deal with all that crap Chat GPT will be effortlessly churning out …
I think the real productivity gains will be from moving to democratic, distributed, flexible ways of working. There’s been a lot of focus on the short terms benefits of the COVID-induced shove in this direction, such as reduced real-estate costs, but the really big wins lie not in changing where people working but in changing HOW people work (see this blog ‘The irresistable advantage of the future of work’ for my more detailed thoughts).
This will enable companies to dramatically reduce bureaucracy (Gary Hamill reckons a 50% reduction would save £3 trillion in the US alone) and the layers of management that we won’t have enough people to fill anyway (according to the Riley Research report referred to above).
The frontier companies are already well on the way down this road. It’s the rest that are not just struggling but, in some cases, actively resisting. There has to be some doubt as to whether many of them have the capacity, let alone the inclination, to make the necessary changes. I think a lot of them are going to have one of two fates. They either allow the younger cohort of managers through and let them make the changes, or they die.
Either way, there’s no quick fix to productivity problem but there IS huge potential.
Danger Zone
I have to say something about ‘workplace bullying’, which must properly be called for what it is, abuse.
(This is a distinction I make whenever I hear the term, I urge you to do so as well.)
It’s in the news because of the case of Dominic Raab, the UK’s Deputy PM, who is facing a barrage of claims against him about his abusive behaviour and treatment of civil servants over a protracted period of time.
I’m not going to comment on his case as it is being investigated as we speak. However, I am going to speak about the interjection by the haunted pencil and 17th-century cos-play enthusiast that is MP Jacob Rees-Mogg. In TV interview in which he sought to defend Raab, he opined that we were “all getting a bit ‘snowflakey’ about this”. This made me so angry I am surprised I didn’t self-combust.
It should not surprise us that leading Conservative politicians seek to downplay the seriousness of this behaviour and protect their own. After all, Pritti Patel was found guilty of this abuse when she was Home Secretary and allowed to keep her job, so the bar has already been set at a subterranean level.
However, we should not for one second allow him to get away with it. Workplace abuse is deeply, deeply damaging and must be condemned in the strongest terms. It ruins health, it ruins lives and, in extremis, leads to suicide. It is not in any way a trivial matter, which is why I refuse to call it ‘bullying’.
We are familiar with all usual excuses - it’s just being demanding, it’s just banter, it’s a high-pressure environment, people are very passionate and go over the top from time to time. They are just that, excuses. This behaviour is not necessary for high-performance (indeed, it is counter-productive) or for maintaining high standards. It is not justifiable in any terms and has no place in today’s working environment. It is old-fashioned, out-of-date and it’s time to stamp it out.
Chain Reaction
It’s been a bit UK-centric this week (well, it IS where I live) but there are broader lessons contained in all this.
Labour force constraints are going to be a long-term issue across the developed economies, to which immigration is not the answer (and creates its own problems, in any case).
You can’t solve a problem that you refuse to identify but you can mis-diagnose it so that it fits the easy solution that you’ve already thought of.
Productivity gains might come from changing where we work or from applying new technology but the real gains will come from changing how we work and how we organise ourselves. A lot of that gain, in the short term, will come from cutting unnecessary bureaucracy and management oversight.
Workplace abuse must be removed completely. It has absolutely no place in any working environment.
Everything is connected. There were several more threads I could have pulled on connected to this topic, from the distribution of the gains to leadership training to a lack of system thinking.
If you agree, disagree or just fancy a chat, get in touch and let me know.
It’s great to hear from you and they are always fascinating conversations.
Email me at colin@colinnewlyn.com
DM me on LinkedIN
Tweet me @colinnewlyn
It’s good to talk!