Brexit bleakness

The repercussions of Brexit will be seismic – turmoil, followed by uncertainty. Things are never going to be the same again.

In the short term, a sliding pound will add to inflationary pressures, pushing down real wages. Any boost to exports from a lower-valued pound will depend on likely trade renegotiations with the EU.

The uncertainty surrounding the UK’s exit from the EU will have a depressing effect on investment, both domestic and foreign, and will inhibit growth. Recession remains a real possibility. This would be in line with the prediction of the majority of economists.

The reaction of the Bank of England will be important. It will face pressure to raise interest rates due to the inflationary threat from Brexit. Any rate rise would put further downward pressure on the economy.

The government’s stance will also be crucial. George Osborne, the chancellor of the exchequer, talked about an emergency budget in the event of Brexit. This would be the wrong course of action; more austerity at this stage will simply depress the economy and impose greater hardship on UK citizens. Osborne would do better to abandon his surplus target and to loosen fiscal policy. The task for the Labour Party is to promote an alternative (anti-austerity) economic policy that addresses the challenges of a post-Brexit economy.

One important message from the EU referendum is that a majority of the British electorate believe that economic policy and the economy is not delivering for them. Sadly, Brexit is not going to address people’s real concerns; instead, it is going to mean more hardship and pain. This is a bad day for the UK.

Why Brexit should not blind us to the errors of current macroeconomic policy

The Institute for Fiscal Studies is the latest body to highlight the costs of Britain leaving the European Union (EU). It has warned that austerity measures would be prolonged by two years in the event of Brexit.

The independence of the IFS adds credibility to the case for Remain and its intervention has provided valuable ammunition to the government against the vote Leave campaign.

Yet, beneath the blur of claim and counterclaim over Brexit, there is a broader critique to be made of the present government’s policy position and of austerity more generally. This critique remains valid, regardless of Brexit. It also feeds into considerations around the need for reform in the EU that go beyond the current debate over Brexit.

The sad reality is that neither the Remain nor Leave side in the Brexit debate is offering any real alternatives at the level of economic policy – indeed depressingly, both sides seem to be taking austerity for granted. This needs to change.

The IFS suggests that lower GDP growth and extra borrowing costs caused by Brexit would worsen the public finances. The effect would be that the government would only be able to achieve its self-imposed target of a budget surplus by 2022, rather than by 2020. If Britain votes to leave the EU, then it faces two more years of higher taxes and/or spending cuts – a dire prospect.

The forecasts of the IFS assume continuity in government policy – in effect, they accept the continued commitment to a budget surplus target and with it a programme of austerity.

The criticism here is that the budget surplus target is arbitrary and self-defeating. There is no justification (other than naked ideology) for such a target at the present time – rather, under present circumstances, with a large trade deficit and weak private sector investment, there is a strong case for maintaining a budget deficit. Indeed, given the above circumstances, the government risks jeopardising recovery by sticking to its surplus target. It creates this risk by taking demand out of the economy at a time when growth is being propped up by households spending and borrowing beyond their means.

The point is that, Brexit or otherwise, the government’s current pro-austerity policy stance needs to be reversed. The danger is that the government is buying support for its own flawed economic policies by citing the costs of Brexit. In effect, it is seeking to cultivate a commonsense around the legitimacy of its macroeconomic stance, stifling critical debate. We should be wary of the diversion tactic and keep our sights on the errors inherent in present macroeconomic policy.

This is not a coded appeal to the Leave side. The latter are seemingly just as committed to the folly of a surplus target and austerity as many on the Remain side. Rather it is an attempt to cut through the rhetoric of Brexit and to promote the case for alternative economic policies (from a renewal of publically funded infrastructure investment to a revived industrial policy). These alternatives, it should be said, are ones that the electorate can potentially vote for at the next general election.

One further point can be made here. This relates to the polarisation of the Brexit debate. Either you believe in the EU or you reject it. That is how the debate has been framed. Missing is any wider awareness of the need for a reformed EU. The idea of an EU that supports greater cooperation between nations, say via an expanded EU-wide fiscal and regional policy and stronger labour rights and protections, has yet to be fully heard (though the barriers, economic as well as ideological, to reform remain formidable). This positive and progressive vision of a reformed EU indeed is in danger of being crowded out by the promotion of a commonsense that takes austerity for granted.

The choice for the electorate in the referendum is between austerity and more austerity – no other alternative is on offer. This sorry state of affairs reflects badly on the state of economic and political debate in Britain. It highlights, in short, the way in which such debate is hemmed in by a narrow agenda that is ultimately supportive of the status quo.

The referendum should be an opportunity to challenge conventional wisdom including current macroeconomic policy in Britain. In reality, it provides the opposite – a vote for continuity, and with it, an austere future. The people of Britain, and of the EU, deserve better.

The two big failures of George Osborne’s budget

After a rollercoaster week for Britain’s chancellor, his eighth budget has been approved. George Osborne will be breathing a sigh of relief. After proudly announcing his budget on March 16, things began to unravel just 48 hours later, thanks in part to the shock resignation of the work and pensions secretary, Iain Duncan Smith.

The furore over plans to cut disability benefits brought about a farcical backtrack on the issue and an effective rewrite of large parts of the Budget. This script could have easily formed part of an episode of the political satire The Thick of It.

The reality, however, is that the chancellor has presided over countless failures, from missed targets to growth downgrades. Worries over how Osborne will now fill the £4.4 billion gap that has resulted from the U-turn on welfare cuts are overblown. The UK economy remains in a poor state, despite and indeed arguably because of his budgets and much vaunted long-term economic plan.

Two of Osborne’s notable failures are his fetish for a budget surplus and his seeming unwillingness to invest and spur growth.

Budget surplus 

Osborne has set himself the target of achieving a budget surplus by 2019-20. This target, in truth, has no basis whatsoever in economic theory. It is a fiction invented by the chancellor that, along with connected rhetoric of “living within our means”, is part of a naked attempt to reduce the size of the state. It constitutes an attack on the principles of collective interest and mutual support that have underpinned the welfare state in the UK from 1945 onwards.

In his latest budget the chancellor loosened fiscal policy – for example, he announced several tax giveaways favouring higher earners. This pragmatism partly reflected the slowdown in growth. But the result is that Osborne faces having to make deeper cuts in the future to meet his budget surplus target. This translates into even more austerity coupled with poorer public services. One wonders why he needs to adopt such a strict budget surplus target when the realities of the economy suggest that a looser fiscal stance would be more appropriate. Perhaps ideology is ruling economic policy?

The truth is that the budget surplus target is neither needed nor justified. Osborne, in short, would do better to target other objectives such as that of full employment. His fiscal mandate is ultimately a distraction from the real policy interventions needed to revive the fortunes of the UK economy.

Route to recovery

Osborne’s second major failure relates to the routes he is using to bring about an economic recovery. In his view of the world, cuts in the budget deficit and the return to a budget surplus will be matched by a revival in the fortunes of the private sector, via higher investment or high exports (or ideally both). Growth in the private sector, he hopes, will fill the gap left by the public sector.

This view is wrong on several counts. First, it fails to see how the state can lead in the growth process – not just by investing in vital infrastructure, but also by supporting the private sector through, for example, an industrial strategy. The fact that the government has cut capital expenditure is a real concern here and highlights the contradictions in the government’s own growth strategy.

Second, there is the fact that the UK is reliant on a budget deficit to offset imbalances in other parts of the economy. With the continuation of the trade deficit and the continued sluggishness of business investment, the budget deficit has provided a vital prop to the UK economy by adding to aggregate demand.

The growth of the UK economy, in recent years, has come mainly from households running deficits. This is not sustainable. The government, through its use of the budget deficit, has a role to play in re-balancing growth away from consumption and towards investment. This it can do through increasing spending on capital investment projects. It can look to offset, in this case, the failure of private business to use its own excess funds to invest and export more.

But none of this is happening. Instead, we face the reality of the UK government sticking to an arbitrary budget surplus target that will restrict growth and lead to a more unbalanced and precarious economy.

Osborne’s failure, in essence, stems from his lack of understanding of basic economics. What he fails to grasp is that the government has a vital and essential role to play in supporting aggregate demand when other parts of the economy are spending too little. We should worry less about the government spending too much and focus on policies that revive investment and exports.


***This article was published at the Conversation (see here). It replaces an earlier blog post called "Budget reflections: Bad economic policies underpinned by bad economics"

How strengthening the bargaining power of workers could boost UK productivity

The UK’s employment rate is at a record high. The latest figures from the Office for National Statistics show that unemployment in the UK fell by 60,000 between October and December 2015, with the highest number of people in work since records began in 1971.

But this masks several problems in the UK labour market. These include the problem of sluggish wage growth – the latest figures show that, despite lower unemployment, wage growth actually fell in the UK. Another major cause for concern is low productivity. The amount UK workers produce per hour remains stubbornly low and the latest government figures reveal the biggest gap with other leading western economies since records began in the early 1990s.

Much debated by politicians and talking heads, something that has been overlooked when it comes to solving the UK’s productivity problem is the imbalance of power that exists between employers and workers in the economy.
Low productivity in the UK is a symptom of a labour market and workplace in which workers are too weak and employers are too powerful. It reflects the dysfunctional nature of the UK economy where employers have the relative freedom to pursue low investment routes to higher profitability that are ultimately detrimental to long-term productivity growth.
To break the cycle of low productivity there is a need for more radical reforms that tackle the imbalances of power in the UK economy. Sticking with the status quo, by contrast, will perpetuate the current malaise of low productivity and sluggish wage growth. 

The fear factor 

Workers in the UK have faced a more buoyant labour market in recent times. Record employment levels have eased job insecurity for many. But there remains no great surge in workers' bargaining power. On the contrary, it continues to be thwarted.

There are reasons for this. At a broad level, years of economic crisis and now austerity have created a climate of fear for most people in jobs. There is an acceptance of hard times and a reluctance to push for higher wages and better working conditions. This environment has created the context for low private sector investment and low productivity.
At a more specific level, workers are facing acute financial pressures. As research from the Social Market Foundation think tank shows, more and more people are reporting increasing financial difficulties linked to high levels of debt. The research indicates how worry and anxiety over finances is leading to increasing levels of stress and to lower levels of concentration at work. The net effect of these factors is to blunt the UK’s productivity.
The short-termism of employers and the lack of sustained pressure to invest in new technology, skills and productive capacity help to explain why productivity has remained low in the UK. While employers can make profits by utilising a weak and weakened workforce, there will be no sustained improvement in investment and no long-term improvement in productivity. 

Low quality jobs

Another problem is the proliferation of low quality jobs in the UK. Jobs have been added in sectors such as retail and hospitality – these are low paid, low skill, and low productivity. The march of the shop workers, hotel staff, and cleaners provides a another reason why overall productivity in the UK has remained low.
These jobs also have low or zero levels of unionisation and low worker bargaining power. They allow employers to sweat labour in order to improve profitability, rather than to upgrade production and improve wages. These jobs reflect and reinforce a labour market that is skewed in favour of employers. They, in turn, help to worsen the conditions for growth in UK productivity. 

Creating a level playing field

Productivity will only recover, and be sustained at higher levels, once measures are taken to improve workers' bargaining position. The issue of ownership of assets matters here and the welcome move by the Labour Party to consider how workers might acquire assets speaks to the kind of measures required to tackle the low productivity cycle that the UK finds itself in.

The productivity problem in the UK, at root, is a reflection of unequal power. With the demise of unions, the financial fragility of many workers, and the ascendancy of the shareholder value model which privileges short-term profitability over long-term investment, there is a lack of strong modernising forces in the workplace.

A shift in the balance of power towards workers would help to block off low productivity routes to higher profitability. It would, in turn, encourage employers to look for more sustainable routes to higher profitability that are based on higher investment.

The quest for higher productivity requires a fundamental rethink of the UK’s political economy. It requires powerful vested interests being challenged and a move to an economy where the ownership and control of assets is more equally shared. It requires, in short, an economy that serves the majority, not just the few.


*** This article  was originaly published at the Conversation: see here

The pathology of presenteeism

Feeling ill? Well, staying at home would seem to be the sensible course of action. Yet for many, going to work while sick has become the norm, even a necessity in the face of the pressures placed on us by the organisations which employ us.

In many cases, illness is no longer seen as a valid reason for not working; rather, it is considered to be something that people must put up with and get over. Sick days are for wimps.

Yet, working while ill – or “presenteeism” – adds to the costs of organisations. It impairs the performance of workers and results in lower productivity. Organisations may actually pay a high price in terms of lost productivity by allowing workers to work while they are ill.

The costs to employees are also high. By staying at work, they may be compounding their own ill health. In the extreme, they could even be working themselves to death.

A vicious cycle

The causes of presenteeism are varied. On the one hand, it stems from fear, the fear that staying off work, even when ill, will be interpreted as a lack of commitment. This induces people to attend work when they shouldn’t.

The latest research suggests that high job demands, stress and job insecurity are key to explaining involuntary presenteeism. Lack of adequate sick pay and other financial difficulties all encourage employees to work while ill.

The role of fear in driving presenteeism was suggested in the recent case of temporary agency workers at a Derbyshire site of retailer, Sports Direct. Reports alleged that some workers there were “too scared” to call in sick for fear of losing their jobs, although Sports Direct has said that agency staff should not fear losing their jobs over sick days and that it aims to provide safe conditions for all.

But while some workers feel pressured to work when ill, others choose to. These workers wish to demonstrate passion and commitment for their jobs even when they’re feeling under the weather.

The irony here is that attendance at work may be one of the causes of poor health. Stress related to a high workload, lack of autonomy, and job insecurity may lead to illness that then requires recovery time away from work. But by fearing the consequences of staying away from work, workers may be sucked back to it, even though doing so is likely to compound their illness.

Even among those who are devoted to their jobs, ill health may be caused by continual and uninterrupted work attendance. If devotion to work leads to long hours, including unpaid overtime, then even the most committed worker may confront problems of burnout and physical ill health. In such cases, staying away from work may be a good thing, especially if it allows time for recovery and creative distraction via other, non-work activities.

Whatever the reasons for presenteeism – negative or positive – its effects on our health are likely to be the same. Working while ill leads to greater sickness. By taking time off work, in short, you can protect yourself against even worse health – and possibly even premature death – in the future.

Managers have a role to play here, too. Under pressure to achieve short-term results, they may be tempted to turn a blind eye to presenteeism. But by doing so, they risk creating higher costs for themselves and their companies. They would be better to seek solutions to the causes of ill health – high workloads, low job security, and work-related stress – than managing sick workers in a functional way.

Kicking the work habit

There needs to be greater honesty and openness in the workplace and an acceptance that work pressures cause illnesses that require time off. This means challenging the belief that work is the great cure-all for life’s ills and more value being placed on having a life beyond work. It requires us to reappraise work and to value the worth of the time we have away from it.

Presenteeism is a symptom of a society which allows work to dominate its citizens' lives. It reflects the pressure put on people to act as model workers and to identify with work as the most important activity in life.

Work is and can be good, if organised in the right way. But it can also consume us and make us ill. Where it makes us sick, we should reject it. 

Presenteeism, in short, is a wake-up call for us to think differently about work and to explore how we might live our lives with less work.

*** This article originally appeared at the Conversation: see here

Why we should get three-day weekends – all the time

As we approach the August bank holiday and a three-day weekend, it is worth reassessing the amount of time we devote to work. What if all weekends could last for three or even four days? What if the majority of the week could be given over to activities other than work? What if most of our time could be devoted to non-work activities of our own choosing?
To even pose these questions is to invite the criticism of Utopian thinking. While a fine idea in principle, working fewer hours is not feasible in practice. Indeed, its achievement would come at the expense of lower consumption and increased economic hardship.

For some advocates of the work ethic, the route to health and happiness lies with the perpetuation of work, not with its reduction. Work makes us healthier and happier. Such pro-work ideology is used to legitimate welfare reforms that seek to coerce the non-employed into work, whatever its rates of pay and qualitative features. It also offers an ideological barrier to the case for spending less time at work. Working less is presented as a threat to our health and happiness, not a means to improve it.

Yet, the idea of working less is not only feasible, it is also the basis for a better standard of life. It is a mark of how we have come to accept work and its dominant influence in our lives that we do not grasp this idea more readily.

The costs of working more

A growing number of studies show the human costs of longer working hours. These include lower physical and mental health. Working long hours can add to the risk of having a stroke, coronary heart disease and developing type 2 diabetes.

By working most of the time, we also lose time with family and friends. And more than this we lose the ability to be and do things that make life valuable and worth living. Our lives are often too much tied up in the work we do that we have little time and energy to find alternative ways of living – in short, our capacity to realise our talents and potential is curtailed by the work we do. Work does not set us free, rather it hems us in and makes it more difficult to realise ourselves.

All this speaks to the need to work less. We should challenge the work ethic and promote alternative ways of living that are less work centred. And, if this reduction of time spent at work is focused on eliminating drudge work then we can also better realise the internal benefits of work itself. Working less may be a means not only to work better but also to enjoy life more.

Barriers to less work

Technological progress has advanced continuously over the past century, pushing up productivity. But not all the gains in productivity have fed through to shorter work hours. At least in modern times, these gains have been used to increase the returns of the owners of capital, often at the cost of flatlining pay for workers.

The lack of progress in reducing time spent at work in modern capitalist economies reflects instead the influence of ideology as well as of power. On the one hand, the effects of consumerism have created powerful forces in favour of longer working hours. Workers are constantly persuaded to buy more and in turn are drawn into working more, to keep up with the latest fad or fashion and to stay ahead of their peers.

On the other hand, the weakened power of labour relative to capital has created an environment that has suited the extension of work time. The recent expose of work practices at Amazon speaks to the power of capital in imposing poor working conditions, including excessive work hours, on workers. The effects of rising inequality has also fed a long work hours culture by increasing the economic necessity to work more.

David Graeber makes the provocative claim that technology has advanced at the same time as what he calls “bullshit” or pointless jobs have multiplied. This is why we have not realised Keynes' prediction that we’d all be working 15-hour weeks in the 21st century, as a result of technological progress.

Instead, we are living in a society where work gets created that is of no social value. The reason for this, according to Graeber, is the need of the ruling class to keep workers in work. While technology with the potential to reduce work time exists, the political challenge of a working population with time on its hands makes the ruling class unwilling to realise this potential. Working less, while feasible and desirable, is blocked by political factors.

Working for change

The costs of long work hours, as mentioned above, are poorer health and lower well-being for workers. But for employers too there are costs in terms of lower productivity and lower profitability. Yet these costs seem to go unnoticed despite evidence pointing to their existence. Here again politics may explain why shorter work time has not been embraced by many employers.

Experiments in shorter working exist, to be sure. Uniqlo, a Japanese clothing retailer, is to allow its employees to work a four day week. This has been widely reported in a positive way. Workers will benefit from a better work-life balance, while the firm will reap the benefits of lower labour costs due to lower turnover costs.

Yet, on closer inspection, the new scheme to be introduced by Uniqlo has its downsides. In return for a four-day working week, workers will be expected to work ten-hour shifts during the days they work (a 40-hour working week will be squeezed into four days).

This is not only an extension to the normal length of the working day; it also puts at risk the potential rewards of working four days in the week. Workers may be so exhausted after working a four-day work week they need a full day to recover from their previous exertions. In this case, their quality of work and life may not be enhanced at all; indeed it may be diminished, if they suffer the ill-effects of overwork.

Ironically, schemes such as the one to be introduced by Uniqlo illustrate the obstacles that remain in achieving less work. Only a reduction in the working week to 30 hours or less can be seen as genuine progress in the achievement of shorter work time.

For us to reach – and enjoy – a three or ideally a four-day weekend, we need to reimagine society in ways that subvert the prevailing work ethic. We need to embrace the idea of working less as a means to a life well lived. We need to reject the way of living that sees work as the be all and end all of life.

So enjoy the bank holiday while you can. See it as a reminder of a life that could be – a life that we should seek to achieve, by resolving to overcome the barriers, economic as well as ideological and political, to working less.

This article was originally published at the Conversation: see here

Taking a stand at work is good for your health – in more ways than one

Standing up at work can be good for your health. That is the finding of recent research which links standing-based work to improved health outcomes. It follows numerous other studies that show how our sedentary work habits may be killing us.

The latest research, co-commissioned by Public Health England, looked at the health effects of prolonged periods of sitting in offices. It found that workers who sit at their desks for long periods are at increased risk of various physical illnesses, including cardiovascular disease, diabetes, and certain types of cancer. Sitting down for long hours can potentially lead to premature death.

The solution? Get a standing desk and get out of your chair more by working standing up and taking short active breaks. The research recommends at least two to four hours a day of standing-based activity and highlights the health costs of modern office work and the need to resolve them. The findings go as far as suggesting the need for a “revolution” in the way that offices are designed and organised.

Novelty value

Stories such as these catch the eye for their novelty, but there are some far broader questions about work-related health that they fail to address. Beyond the question of office ergonomics, there are some other crucial factors that influence our health at work. Though their novelty value is far less, they are likely to persist, even with the wider availability of stand-up desks and active breaks.

Workers who are given a stand-up desk won’t experience better health outcomes if they are also exposed to a heavy workload, intensive and long work hours, restricted work duties, and job insecurity. Indeed, in the face of these conditions, workers may view the encouragement of stand-up working as some kind of sop from managers – a hollow gesture that fails to address the real problems they face at work.

Work-related mental ill-health – including stress, depression and anxiety – remains a significant problem in UK workplaces. It is induced not just by the pressure of high workloads and high work intensity but also by the lack of control over work. Workers who lack autonomy at work find it more stressful. They also face greater physical ill-health and are more likely to die early.

The problems of limited autonomy and its negative impacts on health illustrate the wider changes needed in the workplace – beyond redesigning office furniture and extending active stand-up breaks. It indicates the need for broader changes in the governance and structure of organisations. Workers need to have greater say over how they work and when. This would improve both their physical and mental health.

Democratising the workplace

Standing up at work, in short, cannot resolve the ill-health effects of low autonomy work. Nor can it make workers appreciate and enjoy work more, where it is imposed on them, without their direct input.

If they are to improve their health as well as well-being, workers ultimately need to stand up for their rights at work. They need to demand not just stand-up desks and more frequent active breaks but also more control over their work. They need to push for, and secure, access to more democratic forms of workplace governance, in which their voice is heard more loudly and more frequently acted upon.

A more democratic workplace would have a flatter management structure and would allow greater worker participation in decision-making. In practice, work would be managed cooperatively and would be arranged in a way that gives workers the freedom to decide the scope and performance of the tasks they are allocated. Such an environment would not only be more pleasant to work in but would also help to support better health outcomes. Indeed evidence supports the health-improving effects of a more democratic work environment.

Employers, of course, are much more likely to change the type of desks available in offices than change the management structure in organisations. But if they are serious about raising employee health and well-being they need to take these more radical steps.

“We need an environment where people feel much more liberated to do desk standing”, it has been argued. In fact, what we need is an environment in which workers have the autonomy to take genuine decisions over the way they work. In other words, we need workplaces that value workers not just as instruments of production but also as real human beings with rights and needs of their own.

Only by creating more democratic structures at work can the health and well-being of workers be significantly and decisively improved.

***The above blog post was originally published at the Conversation: see here