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Scottish Economy

We’re emerging from lockdown but we’re still a long way from anything that resembles life as we knew it.

Difficult choices remain in the weeks and months ahead and as with any shock to the economic system, not all businesses will survive. As the UK Chancellor has reiterated, he (nor any other politician for that matter) is not able to save every job.

But can we try to influence the types of businesses and jobs that have a better chance of survival?

The persistence of poor-quality jobs before the pandemic was a real concern and perpetuating this post-crisis, as happened after the last recession, is deeply undesirable. Where poor quality jobs exist at scale, so does poverty, and we know that poverty and poor health are inextricably linked. It is no coincidence the highest death tolls from Covid-19 have occurred in the more deprived parts of the UK.

With close to eight million people in the UK (470,000 in Scotland) in ‘in-work’ poverty, we have to address why so many workers are unable to keep their heads above water. This includes many of the ‘key workers’ we’ve rightly recognised through the pandemic. A job seemingly can no longer guarantee a life outwith poverty for you and your family.

On the other hand, there are no doubt substantial challenges ahead for businesses. In many sectors, it will be those businesses with the lowest fixed costs that will have a better chance of survival. Firms who can flex their labour force needs, sending staff home on quiet shifts, for example, are likely to do so to boost their chances of survival.

But this can come at a substantial cost to the workers if they find their incomes increasingly volatile and unpredictable. ‘In reality, what can workers do to manage this risk? Levels of employee input and collective bargaining or unionisation vary from sector to sector, which can limit the power of employees in some roles to have an impact on their conditions. It gets increasingly difficult across sectors when unemployment is growing meaning there are fewer employment options elsewhere.

Ultimately, it must be the employer’s responsibility to run their businesses in a way that safeguards their employee’s wellbeing, but without a level playing field, it can be hard for an individual firm to act in a way that they may perceive as being higher cost than their competitors.

This is less clear cut than maybe first assumed once recruitment and training costs and potential productivity gains that can be reaped by investing and nurturing the workforce are factored in. Nevertheless, in the current era of businesses fighting for survival, short-term cost concerns may well override longer term benefits.

We still await the outcome of the UK Government’s 2019 consultation on so-called ‘one-sided flexibility’ that could, for example, see employees compensated for cancelled shifts. Action on this feels overdue and would help set minimum standards across the economy.

In Scotland, most support so far dispensed via the business rates system has gone out with no strings attached, but there is some evidence of the Scottish Government now seeking a commitment to Fair Work guidelines in return for some of its additional business support funds, although the extent to which this will be enforced is unclear. Monitoring and evaluation of compliance will be necessary to see how this has worked.

And beyond the government, there is of course a role for society to shape the type of economy we want to see. We, as consumers, can consider where our cash is going. Those taking advantage of the soon to be available discounts for eating out will be deciding on where the UK Government’s money is being spent as well.

Government intervention is keeping many viable businesses afloat but we know that not all businesses will last out the crisis and many jobs will be lost.

As a society, we can ill-afford a situation where companies providing low -quality jobs survive at the expense of those that provide financial security and stability for their employees. It makes little economic sense either beyond the very short term.

Yet, given what we know from the last recession, there is a risk that further deterioration in working conditions will be inevitable unless concerted action is taken to avoid it.

Authors

Emma is a Knowledge Exchange Fellow at the Fraser of Allander Institute