THE PRINCIPLES OF THE LABOUR MARKET HAVE FOREVER CHANGED POST PANDEMIC

• The shift towards early retirement, greater mental health difficulties, and desire for more flexible and part-time work require a major rethink by government and business alike.
• Younger generations are demanding businesses adopt new values of work and society and this will force employers to forge a New Deal to win the war for talent.
• The Chancellor can make major headway on this in the Budget and get thousands of people back to work – through childcare, healthcare and skills budget flexibility.  

After a year of labour market shortages post pandemic, the CBI is arguing that business and the government need to stop fighting the same old war for talent and embrace a new set of principles to solve the ongoing people and skills shortages crisis.

In the opening speech of the CBI Future of Work Conference – sponsored by Mercer, Phoenix Group and BAE systems – Tony Danker, CBI Director-General, will set out his vision of the future of work by saying that “New realities demand a new approach. And if we as business leaders don’t start leading the change, we will end up chasing it.”

Danker will argue that generational shifts, alongside the pandemic and longer-term trends are completely transforming the world of work. He will say “We in Britain don’t have the workforce and the skills we need to prosper and grow. Why? Our demographics have changed. The population is ageing. And a generation in their 50s and 60s – with private pensions and property wealth – can take early retirement.

“We are suffering from a mental health epidemic. It is keeping many at home, and impacts many more still in work. More broadly, the pandemic has changed perspectives on the balance of work in our lives and the way we lead them. This means many may work still, but not like before. Meanwhile, in this country, political views on immigration have hardened. With politicians afraid to explain its benefits even in a world of massive labour shortages. And technology has evolved so fast, that 90% of today’s workforce need to retrain by 2030. Yet our skills system is still operating in an analogue world – in so many ways.”

Danker will state these forces are combining to challenge traditional ways of working and the UK’s labour market, pushing both policy makers and business leaders to take radical action in response.

In his speech, Danker sets out five new principles to boost productivity and overcome the ongoing labour shortage crisis:  

1. The UK Needs a Childcare Revolution
   • The UK has some of the highest childcare costs in the OECD, with public funding for childcare comprising less than 0.1% of GDP – the second lowest investment in the OECD.
   • Danker will argue that the Government needs to boost funding for the existing childcare provision for three- and four-year olds and expand free childcare hours to cover one- and two-year-olds to get parents back into work. 
   • In England, the cost of a part-time nursery place for a child under two grew by 60% in cash terms between 2010 and 2021 – twice as fast as average earnings.  And it prevents parents from working, especially women who continue to carry the burden of caring responsibilities.

Danker will say: “As the Government contemplates labour inactivity – fighting an uphill battle against early retirement or long-term health problems, they must turn to the parents who would be in work or increasing their hours but for unaffordable childcare and conclude – The UK Needs a Childcare Revolution. We simply can no longer trail other countries in enabling parents to work.”

2. Wellness is becoming an Employer’s Job
   • Over a quarter of those who are now economically inactive are out of the workforce because of long-term sickness. The cost of poor health to the UK economy is upwards of £180bn GDP, with around 131m working days still lost to ill-health annually.
   • Employer-led health interventions, to prevent common physical and mental health risks, could help save £60 billion every year – reducing the impact of ill-health on the UK workforce by up to 20%.

Danker will say: “This is what employees want and need. It’s what those who are at home and could be back, want and need. The country needs it too – to have business lead on preventing illness because the NHS just doesn’t have the bandwidth. There is nothing to fear here, because we in business are good at this.”  

3. Flexible Working is becoming Mainstream Practice
   • Danker will cite research from Timewise, which shows that nine out of 10 people want flexible work. But only three out of 10 job adverts offer it.
   • He will argue that the stats around part-time work are even starker – where the volume of people wanting to work part-time is outpacing available part-time jobs 4:1.

Danker will say: “Flex has always had deep merits. But given today’s shortages, and without immigration, it’s vital to growing supply because it’s likely the only way to get those who’ve left to return. It’s hard to see how those now economically inactive, will become full- time active overnight.”  

4. Skills Policy and Immigration Policy must finally be brought together
   • Danker will argue that governments of all flavours have serially failed to have the most elementary approach to our labour market.
   • He will go on to state that we need to work smarter in upskilling and reskilling existing workers and attracting the best talent in the world. This means migrating the Apprenticeship Levy into a new Skills Challenge Fund, where businesses can invest in accredited training, for the variety of skills they know their people need − working alongside a cross-departmental approach to immigration policy.

Danker will say: “We must admit what’s blatantly obvious: that all this  will take much longer than we’d like. So, in the meantime, we need fixed, short-term immigration to bridge the gap. And we can get that by updating the Shortage Occupation List and granting visas for roles in obvious shortage areas – at all skill levels”.   

5. Automation is our Friend
   • Danker will state that AI across the economy could add an estimated £38bn to UK GVA in 2030, and SME adoption of digital technologies around £45bn.
   • Research shows that we’re currently behind our competitors in Europe in innovating to work smarter. In fact, we’re right at the back of the pack, behind Italy, Portugal and everyone else.

Danker will say: “We need more robotics and AI to help us deploy the people we have more effectively, as well as take the place of people we can’t hire. Any firm not reviewing now how to do this will find themselves chasing in vain to catch up. The politics of automation have changed too. Politicians and academics now champion it as a replacement for immigration. They seem to ignore the reality that it’s likely to replace as many if not more skilled jobs than lower- skilled ones. They seem to believe the UK can miraculously achieve an economy with only higher-paid, higher-skilled jobs. They are wrong about that. But not that automation and AI are now a must-do. They are.”

With competition between businesses for talent heating up over the past year, Danker will also set out three new principles for firms to get the best and brightest employees:  

1. Your business must be progressive – with a small p – this is not about politics
   • Danker will argue that “Without strong societal values, a central sense of purpose, a commitment to better employee lives, and active diversity and inclusion strategies, you will lose the talent war.”
   • He will also state that younger generations are increasingly choosing where to work based on a firm’s behaviour to them and the world.

Danker will say:“Today’s war for talent is about numbers too – we’ve already discussed the shortages crisis. But more than ever, it is a competition about values. The values a company holds. And the values of work it promotes. Much of this is driven by the different generations now in the workforce, and their expectations of how business should contribute to their own lives and wider society.

“Younger workers especially are looking for value and purpose in their jobs. And they’re more than ready to challenge the organisations they work for – on that. Be it interrogating firms’ net zero credentials, commitment to equality, diversity and inclusion, or public advocacy. But a lot of this is also about the values we hold as bosses towards employment – it’s no longer just they work for us – we have to work for them.”  

2. Work must become a Platform For a Better Life
   • Danker will argue that work is the place where so many of us find solidarity, purpose, and stimulation, as well as emotional reassurance and support for better physical and mental health.

Danker will say: “Today’s workforce is looking to employers, to ensure that work is the place where people get in and on in life. Where we get a good job, with work that’s meaningful and rewarding. Where we get paid well, then trained or retrained for a better job and better pay. Where our physical and mental health are factored into our working lives and our employment relationship. Where our colleagues are our community who can support us. Where flexibility to our world outside work is not exceptional but default.”  

3. Every Firm Must Strike a New Deal for the Workplace
   • Danker will argue that business need to update their relationship with their employees to attract and keep the best talent.
   • Businesses need to always be evaluating and evolving their offer to their employees and wider talent.

Danker will say: “The New Deal is a truly mutual value exchange of what the employee gives and gets that goes way beyond terms and conditions. The return for bosses from this better proposition is this: loyalty, discretionary effort, leadership. If we want these – not merely employees who clock in − we have to earn them. 

“So, this is the deal. Codified in Employee Value Propositions. The Get and the Give. And vitally, a deal validated in both higher retention and better company performance.”