Published on CapX in December 2018
Britain has undergone a jobs revolution since 2010. On average, 1,000 jobs have been created every single day, and at the time of writing, only six have been taken by George Osborne. Despite this, Britain’s productivity growth has struggled to keep pace and remains well below its long term trend prior to the 2008 financial crisis. This has been a key factor in the squeeze on living standards.
There is much that the government has done. The National Living Wage has increased by 35 per cent. The personal allowance – the amount of money you can earn before paying tax — has increased by a staggering 93 per cent. To address the cost of living, fuel duty has been frozen for eight years – with a ninth year freeze announced in the recent budget — and free childcare has been doubled to 30 hours per week for many parents.
It is often argued that it is Government’s responsibility, and its responsibility alone, to address our productivity problems. But business has a key role to play too. To misquote John F Kennedy: “Ask not what government can do for productivity, ask what your business can do for its productivity.”
As Phillip Hammond said recently, improving productivity is the “single most urgent challenge facing the UK economy”. Low productivity growth is holding back the long-term prosperity of our country. But it doesn’t have to be that way. So here are three suggestions for what business can do if they are serious about transforming productivity both for their individual employees and the company as a whole.
Employee ownership schemes are nothing new. The John Lewis Partnership has been proudly held up as a great example of this for decades. It is, however, the exception not the norm. Employee ownership schemes are more commonly reserved for the most senior executives, inaccessible to the everyday employee.
Businesses should embrace employee ownership on a far broader basis. There are benefits to be had for both employees and employers. A recent study found that employees who work for companies with Employee Stock Ownership Schemes (ESOPs) have a 92 per cent higher median household wealth, 33 per cent higher income from wages, and 53 per cent longer median job tenure than those who did not.
However, don’t confuse this with John McDonnell’s double rip-off model of collective ownership. At Labour’s annual conference in September, the Shadow Chancellor unveiled a plan to compel firms with more than 250 employees to hand over 10 per cent worth of shares in the company. Workers, he claims, will receive an annual dividend. Crucially however, this would be capped at £500, with anything in addition being pocketed by the government. Labour’s plan would not only punish those who have set up their own companies by confiscating large chunks of them, but would punish workers too, minimising their dividends so government can pocket the rest. It is a double rip off.
We do not agree with Labour that employee ownership schemes should be compulsory. But to increase take-up, the Government could look at how existing tax arrangements that currently benefit participating businesses and employees could be extended in an efficient way.
The “9 to 5” has a long and well established history, but armed with a laptop and mobile phone, employees can work from almost anywhere. Too many people mistake productivity with time sat behind a desk. But most employees can now work flexibly and complete their tasks from wherever suits them best.
The law currently states that employees have the right to request flexible working if they have worked for the same employer for at least 26 weeks. But does such a restriction fit with 21st-century Britain? Now is the time to embrace flexible working.
One company leading the workplace revolution is Atom Bank. Crucially however, it is a business based not in Dalston, but Durham. The vast majority of their employees have not set hours. The office is open 24/7 and employees can choose to complete their tasks at whatever time of the day or night they choose. Employees say that these freedoms are appreciated, but crucially, the results are born out through increased productivity and effectiveness.
The government is taking action to help make flexible working a reality, unveiling proposals earlier this year to require employees to state in job advertisements whether the role can be performed flexibility. It is the clarion call for employers to step forward and offer flexible working from day one – as an integrated part of an employee’s contract.
Introduce the Mid-Life MOT
We are all now used to getting a text message from our doctor or dentist when it’s time to go for a check-up, but why doesn’t anybody give us a nudge to think about our financial health?
The Mid-Life MOT aims to address this. It is a private sector led, government supported programme to help ensure people nearing retirement sit down and assess their financial health. Aviva recently ran a pilot scheme with a cohort of employees over 45 which saw them engage in 12 hour-long classroom sessions covering wealth, work and well-being. Aviva recently published the findings from their pilot, and the benefits were stark. They found that motivation amongst employees increased, there was a greater likelihood the employees would stay with the business longer term, and there were better relationships between the employees and the employers.
Research from Mercer found that just 32 per cent of employees feel that they have the mechanisms in place for financial security in retirement. Anxiety about financial security is a leading cause of workplace stress, which itself has a negative impact on productivity. Employers can and should play a greater role in ensuring the long-term financial security of their staff. In addition to Aviva, several companies are piloting a Mid-Life MOT programme, and after a successful pilot, Aviva are rolling the scheme out across the company.
Everyone accepts that there is no silver bullet for the problems with business productivity. Government has done a great deal, but business needs to do much more. If we approach things differently, we can get better outcomes for both businesses and employees. These are not revolutionary ideas, they are simple, easy to implement, scalable and cost effective, but if business adopts even just one of these ideas, we can help to deliver the productivity revolution that Britain needs.