Blog and news
October 13, 2020

UK Labour Resilience and Levelling Up

Our analysis, based on a new UK Labour Resilience Index, explores labour market trends, compares strengths and weaknesses with peers, and highlights key policy areas for the new Government to help build a future of better work. It supports the case for increased devolution; ‘mega-city’ networks connecting cities with surrounding rural areas in each region; the development of local social contracts within these networks to solve local problems; and multiple ‘Powerhouses’ with beefed-up remits to stimulate different types of economic activity, alongside regional initiatives to boost the quality of work in growing, sustainable, low paid sectors.  

Trends for the 2020’s

The UK has maintained labour market resilience at a national level, fielding disruptions over last decade.

We are now the 9th most resilient labour market in the world. At a national level, our diversified economy and innovation ecosystem sets us up well for a base level of resilience this decade, even with our stagnating productivity growth rates. However, policy activism will be needed this year to maintain or exceed our current rating.

The UK’s high rating masks structural problems and regional disparities which are set to become more pronounced.

Version 1.0 of the UK index reveals a range of structural and policy problems, manifest in striking regional variations, across the dimensions of the index. We think these have given rise to insecure labour market outcomes, lower quality work, and stagnating growth over the last decade. These must be addressed as part of plans to ‘level up’ the regions.

1.    High levels of labour market polarisation are set to continue across geographies at a regional, as well as national, level. The consistent growth of high pay, high quality occupations, alongside low pay, low quality occupations, suggests that polarisation will survive the 2020s. For now, this confounds some predictions that AI capabilities and pervasive applications across skillsets and sectors will reverse polarisation trends.

2.    Labour market polarisation is linked to increasing income inequality which reduces social cohesion and holds back resilience at an individual, regional and national level. Our analysis suggests we need to think about different types of, and measurements for, inequality. We recommend a systematic, cross-department approach which takes into account underlying drivers and outcomes, including health, to promote equality across the dimensions of the index. Gender and socio-economic disadvantage demand immediate, targeted attention in the UK. It is unfortunate and surprising that the UK ranks only 46th for gender equality in the index.

3.    The UK’s strengths in entrepreneurship and innovation are not consistent or evenly spread. The UK has had consistently high ratings in innovation products, research outputs, and business creation rates over the last decade. However, these ratings mask distinct weaknesses in the success of intellectual property and patent protection, R&D applications and access to patient capital. The UK is full of ideas but is not good at hanging on to, or spreading, them. Further, we rank only 51st in the affordability of ICT infrastructure in the index and are still underperforming in digital skills, both of which would help.

The new Government will also want to watch out for falling technology indicators, including outputs (such as ICT trade and high-tech exports) and share of high-tech activities (for example in manufacturing) which threaten the UK’s overall ratings in this area.

Support for SME’s in these areas and incentives to encourage a spread of economic activities (including complex and high-tech activities) should be baked into plans for ‘levelling up.’ Priority should be given to sustainable growth areas.

4.    Levels of insecure and atypical work are increasing at notably higher levels than OECD comparators. With London acting as a bell-weather, we expect this trend to continue in the 2020s. Our analysis points to a connection with the UK’s lower educational scores in vocational and in-work training and poor scores in skills-matching, with almost 30% graduates occupied in a job not adapted to their skill levels. Further, part-time workers on an involuntary basis represent 5% of the active population, the 5th highest share among EU countries. With vocational training and skills-matching key to building a future of good work, we think that improving the quality of insecure and atypical work has become a social and economic imperative in the UK.

In addition to boosting the basic floor of statutory protections, this means regional initiatives to boost work quality, including access to training; and national initiatives to introduce active labour market policies, and to ensure that work benefits are portable.

5.    UK’s population is ageing more rapidly compared to peers, especially in rural areas. The new demographic reality means a higher dependency ratio and working age population that may shrink by three million workers by 2030. This means even faster growth of the health and care sectors, rethinking how we treat work beyond retirement age, and preparing for longer working lives this decade.

IFOW and Whiteshield Partners launched the UK Labour Resilience Index 1.0 at the World Economic Forum with Oxford Said Business School and Manpower Group. The UK Index was developed as an off-shoot of the Whiteshield Global Labour Resilience Index. IFOW co-designed the UK index, co-authored the UK Chapter, and was a Knowledge Partner for the Whiteshield GLRI.

This year IFOW will be undertaking in-depth work on regional and sectoral variations. We will be publishing a conditions of good work monitor, with the UCL Health and Opinium teams, in March 2020.



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