System thinking plus entrepreneurial action equals better work?

^{*An updated version of this blog was published after the budget announcement} 

I hope RSA Fellows will forgive me again using this blog to provide an update on my role as Chair of the Modern Employment Review set up by the Government. I have an excuse in the work the RSA is doing in this area, with an excellent recent report on self-employment and one forthcoming on the gig economy. 

There is another tie-up between the Society and the Review: In our research and social engagement the RSA seeks to develop credible models of change. Increasingly this means applying our nostrum ‘think like a system, act like an entrepreneur’. Working with the Review members and our team of officials, I am trying to apply this approach to the Review.

The systemic focus on what is driving patterns of work in the UK economy has led us to go beyond immediate reform proposals (although there will be those too) to explore a set of strategic shifts. These are medium-term changes which will be complex and emergent. The Review can describe the destinations needed to bring about better work but not the precise route to be taken. At present we are exploring five of these shifts:

The move from taxing forms of employment differently to taxing labour more consistently. The goal here is to reduce the incentives for business models and forms of employment driven not by productivity or the desire for individual flexibility but by the attempt to avoid paying tax or meeting employment entitlements. There is also a wider case for reform to be made in terms of fairness and fiscal sustainability.

Developing the capacity of Government to provide services and support to the self- employed. Through Government-accredited platforms – delivered by private, voluntary or cooperative providers – self-employed people could access PAYE services, access entitlements and services, find work and share information. As part of this development, and in the face of disastrously low pension savings rates among the self-employed, Government should in particular explore incentives to encourage self-employed people to opt into NEST. As we move towards a cashless economy, these platforms could also shift the default on paying for casual self-employment thereby helping to tackle that most intractable of policy challenges – the informal economy. 

Encouraging a coordinated sectoral approach to better work. Given the way employment issues and challenges vary across industrial sectors (something we are learning on our national road show), and in line with the direction of its industrial strategy, the Government should encourage and incentivise key partners in sectors – employers, employees, consumer groups – to work together to improve the quality of work and tackle bad practice.

In pursuit of the ideal that all work offers scope for development, the Government should bring together the many useful suggestions for a generic skills framework to develop a unified national approach. Starting perhaps with the generic components of apprenticeships and the frameworks being developed for graduate employability, a set of, say, twelve skill sets such as ‘communication’, ‘enterprise’, ‘creativity’, ‘team working’ and ‘problem solving’ should be agreed. These categories could then be the criteria for identifying and pursuing the individual development potential of all work roles, as well as providing a framework for both formal training and informal learning opportunities (something which could be facilitated by the digital badge approach being explored in the RSA’s City of Learning initiative).  

To ensure the momentum of the Review is maintained and these strategic shifts pursued, the Government should develop mechanisms to ensure a more holistic and dynamic approach to the quality or work in the UK economy, recognising its importance to social inclusion, citizenship and economic dynamism: Much as I am enjoying myself I don’t want to lead another Taylor Review in 2027.

In addition to these strategic shifts the Review will make detailed recommendations for more immediate action in areas like employment status, worker empowerment and the enforcement of rights.

But if these strategic directions reflect the systemic approach of the Review, what about the idea of ‘acting entrepreneurially’ in the pursuit of change? I am considering an initiative – led by the RSA – ahead of the publication of the Review to win support for the very idea of good work. The aim here is to get millions of people, directly as individuals or indirectly through the organisations to which they are affiliated, to sign up to a statement along the lines of ‘all work should be fair and decent with scope for fulfilment and development’. Were such an initiative to gain traction it would provide a vital platform of legitimacy for the Review’s recommendations. There is a risk this will be a damp squib, but I want the RSA to lead the initiative because it aligns with our charitable mission and we can be more dynamic and focussed advocates than Government.

Another example of acting responsively is that the Review should aim to influence decisions being taken now which could make our job easier or harder. That’s why, with the first of the five shifts laid out above in mind, I wrote to the Chancellor over the weekend in the following terms:  

As you know the Modern Employment Review is looking at the factors influencing the shape of the UK labour market, and in particular what might be driving unwanted outcomes such as business models which appear to be designed not to maximise productivity and flexibility but simply to circumvent worker rights or tax liabilities.  Whilst we are not empowered to make specific tax recommendations, the Review will be reporting on these factors and offering thoughts about the strategic direction that policy should take to align incentives with fair competition, fair employment and the public interest.

In that context, I think it likely the Review will recommend that in the medium term the Government seeks to move towards a more level playing field between different forms of labour, regardless of the employment status of the person roviding that labour.  The route to full reform will be complex and take time and need detailed engagement with business and other interests.  It is not for us to prescribe that route.  However, I do think it would be unfortunate were our Review to coincide with the Government taking a step which goes in the opposite direction.

This is why I am writing to encourage you to reconsider the widening of the differential between employed and self-employed national insurance contributions brought about by the abolition of Class 2 self-employed NICs.  Whilst I recognise that Class 2 payments are anachronistic and regressive, I believe that it would be better to place their reform, and the cost of that reform, in the context of a wider assessment and reform of self-employed NICs with the goal of a system which is rational, fair and better aligned with broader fiscal and policy goals.

And in conclusion….

As I have gone round the country for the Review I have heard many different ideas about what reforms are necessary, but there has also been a consensus that we should take the quality of work in our economy more seriously. This growing concern reflects the rise of in-work poverty, the sense that bad employment practices are out of keeping with 21^st century expectations of individual dignity and autonomy and the urgency of thinking afresh about the purpose of work as the revolutionary impact of technological change becomes clearer.

It is a great privilege for me to be leading the Employment Review and tapping into what feels like a growing national mood. It will be even more exciting if we can use this as an opportunity to demonstrate the potential of ‘thinking like a system and acting like an entrepreneur’.