Wealth distribution in the future world of work
Rachel Sharp, February 11, 2019
How money could be fairly distributed in different, potentially 'post-job' future worlds, and the implications for the psychology of work
It was a simpler time. When the alarm clock roused you at the same hour each morning, you waved goodbye to loved ones and got to the office for 9am. Then came the hour lunch break (always taken), and clocking off at 5pm on the dot. At the end of the month the pay packet landed with a guaranteed amount – no surprises. And so it was, week in week out at the same firm for 40 years until the day you were handed your long-server pen or pocket watch and pension.
But no more. Thanks to technology, a rapidly-growing gig economy, globalisation, and a host of other factors, the structure and availability of work is changing dramatically, as is the way people – in and out of work – receive an income.
“There’s a new unease equilibrium emerging around work; coming from many different trade-offs and growing movements,” says economist and principal at Hertford College, University of Oxford Will Hutton, highlighting the resulting growing pressure to adapt societal models of income distribution.
“The exam question, if you like, is how to spread capital and assets around the economy in a world where we have brilliant jobs with people able to live off their wealth, and then other people in menial, low-paid or no jobs,” says the Institute for Public Policy Research’s senior economist Carys Roberts.
How to do this is the subject of much debate. Universal Credit is being rolled out as we speak, with the aim of bringing our social security system into the modern age and simplifying how people either out of work or on a low income receive capital from the state. Reformative at best, draconian at worst, it’s received a mixed reception. Many prefer the idea of a universal basic income – where every citizen receives a regular unconditional payment from the state irrespective of employment.
Another school of thought places responsibility at the door of businesses rather than the state, in the form of stakeholder capitalism.
But none of these models are new so why such focus now?
Hutton points to a number of factors emerging over recent years contributing to something of a pivot point. He cites the imbalance of power between workforces and businesses (“stagnant wages, the gig economy, zero-hours contracts”), the trade-off between flexibility and the need for mutual respect and ethics from companies, and traditional organisational structures of the past being in full decline, taking with them the average company lifespan.
Then there’s the UK’s impending exit from the European Union – something that could exacerbate the “biggest pay squeeze for 200 years” and decrease job security says Kate Bell, head of rights, international, social and economics at the TUC.
“Brexit underlies everything we say and do and think at the moment, and is arguably the most important thing on the horizon in terms of how our economy will change in the future,” agrees Chris Goulden, deputy director of evidence and impact at the Joseph Rowntree Foundation.
The biggest reason new models of distributing wealth are being looked to with increased urgency though is technology. Specifically: the fear that it’s poised to automate a growing proportion of jobs.
“The work flux with AI, robotics and automation has dramatically accelerated in the past year and is transforming the way we work,” says Deloitte’s UK human capital leader Anne-Marie Malley. “Some roles will be automated, with all research indicating those with lower education levels are most likely to be displaced.” “The downside is that many will be left without job opportunities at all and will be forced to live on social security for the long term, without future prospects,” warns Goulden.
Reskilling will be imperative, with financial support needed for when workers take time out of the workplace for this. “We need to retrain people to understand the role tech will playversus the role people will play in blended human/tech teams,” Malley says.
The problem is that the lower-skilled jobs lost to automation are the very experiences that make people work-ready, highlights Caroline Nugent, HR director of the Financial Ombudsman Service. “If we take away the boring junior jobs where do we all learn the basics to then move up?” she asks, pointing to a need to rethink learning at both an education and workplace level.
But “we shouldn’t fear the future”, according to Roberts. “Instead we should see it as a choice to perhaps do less work.”
The exact future world of work to emerge is tricky to predict – particularly in relation to technology. “One scenario is AI takes over everything and everyone is out of work so money has to be paid to everyone to live off,” says editorial board chair at Duke Corporate Education and executive director at Authentic Leadership Liz Mellon. “Another is that AI never develops emotional intelligence so there’s a mix of AI and people in the workplace, and some people needing social security.”
Which means the model or combination of models for redistributing wealth we arrive at (if any) is also difficult to forecast. But whatever the outcome change is on the horizon, with huge ramifications for the world of work.
We’ve explored three key models for redistributing income, and their implications for the psychology of work and HR.
Perhaps the least extreme prediction is we’ll continue along the existing path of precarious and uncertain work for some – with the need for state support for such individuals. Indeed many think automation will be less the dramatic usurper of human employment and more of a taskmaster colleague taking on aspects of roles, and perhaps leading to human-bot job-sharing.
“Without doubt there’s a significant change coming around how people work and their relationship with work, but I don’t think it will be as extreme as everyone thinks,” muses Matt Elliott, incoming chief people officer at Bank of Ireland.
In this reality Universal Credit (UC) – on paper – promises to deliver some much-craved security, as unlike Jobseeker’s Allowance payments it doesn’t cease when work fluctuates above the 16 hours a week threshold. “If implemented in the right way it could open up long-term prospects as it does away with the old system where you have one for people out of work and one for people in work – Universal Credit can smooth away these differences,” says Goulden.
That said, in his eyes “this is a big if”. While many believe there’s potential to make the model work, Universal Credit is fraught with controversy.
The benefit was first announced in 2010, amid claims of simplifying the benefits system, making social security fairer, and incentivising work. More than one million households have shifted so far to the new benefit, which replaces six means-tested legacy benefits and tax credits. By 2023 around seven million households should receive it.
But much criticism has been levelled at the system, including that it’s difficult to navigate, it disincentivises low-income workers, and that it could leave some worse off. In January four single working mothers won a High Court challenge over the system, which they said left them struggling due to the way payments are calculated. In efforts to defuse criticism, work and pensions secretary Amber Rudd announced a series of changes, including delaying the widespread transferal of benefits claimants to the new system, instead trialling its effectiveness on a smaller proportion of people, and scrapping plans to extend a benefits cap on families with more than two children.
But the TUC is calling for Universal Credit to be dropped altogether. “[There’s] poor admin in the system and it’s paid monthly which won’t sit well with many people’s pay packets. And even after the action taken in the Budget many people are going to be left significantly worse off,” says Bell, referring to chancellor Philip Hammond’s pledge to increase work allowances and invest over £1 billion in better supporting the scheme.
Disruption will hit low-paid workers most heavily, she says: “It’s going to make it harder to keep jobs... and also add to that sense of insecurity that unfortunately many workers feel today.”
For Malcolm Torry, director of the Citizen’s Basic Income Trust, the issue is that the system isn’t fit for the current – never mind future – world of work. “Universal Credit, like the means-tested benefits, is designed around the national assistance set up after World War Two when people had straightforward employment structures and family structures, which they don’t today,” he explains. “Trying to run a system that worked in the 1940s isn’t going to work.”
Single parents and second earners may be discouraged from working beyond their work allowances, adds Resolution Foundation senior economic analyst Stephen Clarke. That said, he believes “it does incentivise employment for some groups and encourages them to pick up more hours” – something that has perhaps never been more crucial as the job market becomes more flexible and people change jobs more regularly.
Many think that if rolled out properly the system could encourage people to pursue more fulfilling work. “Some level of conditionality in terms of applying for jobs or the types of jobs people do is effective in helping people into work,” says Goulden. “The problem is that conditionality has been based on getting any job, whereas if we think about preventing people being caught up in low wages we need to think about their longer-term progression.” Universal Credit has the potential to help people “plot a path out of poverty… and into longer-term thinking about their career prospects”, he adds.
Universal Credit work coaches will be critical to achieving this though, Goulden caveats. “There will need to be enough work coaches with the right skills to help people who need support, and give people the right training while they’re in work,” he says. “The work coaches will need to deal with the employer as much as the employees to find out what’s feasible, so it will be a collaboration between employee, employer and the state.”
And this is where HR will need to play a critical role. “HR will be the key liaison with the work coaches in terms of opportunities for people claiming Universal Credit while in work. So HR needs to get its head around Universal Credit; particularly in low-paid sectors as in some industries nearly everyone will likely have some interaction with it,” says Goulden.
It’s a sentiment shared by Elliott, who sees HR’s position as paramount. “Most people stay on one career path unless they choose to change. But in the future that freedom of choice might shift, and this might be forced on people as they can’t stay in one profession but will need to reskill to stay useful in society,” he says.
Universal Credit is something that should be on HR’s radar. So it’s concerning to hear that it perhaps isn’t. As Clarke says: “I’m not sure HR has given much thought to Universal Credit and what it means for the workforce as a whole. If workers are encouraged to enter work and stay in work then we’ll all be better off.”