In retrospect, it is amazing how long the UK population lived in denial over the shift in the global economy heralded by the enormous growth in the emerging economies such as China.
The threat this development posed to the UK was clear and simple: these countries were churning out higher-skilled workers, willing to work for longer hours and for less money – in 2005, for example, a top-level postgraduate qualification would only earn an employee in China between £3,000 and £4,000 a year.
At the same time, UK workers insisted on more work-life balance, flexible working and early retirement. They believed this would boost productivity, but instead it bred a culture of dependency among staff.
Critics quickly pointed to a trend of ‘asking not what you can do for your country, but what your country can do for you’. This was reflected in figures at the start of 2006, which put the UK productivity growth rate at 0.9%, compared to 1.8% in the US and an astonishing 8.4% in China.
At the time, Bill Midgley, president of the British Chambers of Commerce (BCC), warned that work-life balance had tipped too far in favour of life.
“We are talking about the survival of Europe as a major economic force. Europe is looking for a softer living that it can’t yet afford,” he said in 2005.
Meanwhile, the UK faced a double dilemma: a quickly ageing workforce that needed to keep people in work, coupled with the need to foster family values. A rapid succession of laws came into effect, including the Work and Families Act, to give employees ever-greater rights to demand flexibility from their bosses.
Businesses complained that continuing regulation was stifling the UK’s economy and undermining competitiveness, but the government retorted that employers were not doing enough to tackle the ‘demographic time-bomb’.
Predictions at the start of the 21st century said the Chinese economy could become the biggest in the world by 2015. It took considerably longer than this because skilled graduates vastly outnumbered the skilled managers, but still the Chinese economy boomed. The result for the UK was catastrophic. Higher unemployment ensued as organisations outsourced offshore, which in turn led to wage freezes for all but the best staff and a resurgence in trade unionism.
- Future work-life balance: reality or myth?
“We can still be a dynamic, competitive economy if we have work-life balance, but employers need advice not regulation on how to take advantage of the opportunities. Flexibility gives the UK the competitiveness that employers need.”
Regulation and policy adviser, British Chambers of Commerce
The first half of the 21st century saw radical changes in fortune for the trade union movement in the UK.
The first sign of things to come was the formation of a ‘super-union’ in 2007 – a merger between Amicus and the Transport & General Workers’ Union. Behind this was a dramatic fall in members. In the 1970s, unions comprised 55% of the working population. By the end of 2005, this had dropped to just 29%.
So desperate were the unions that they began targeting workers in other European Union labour markets, hoping they would sign up if they decided to work in the UK. And in early 2007, Amicus signed a deal with three international unions, hoping to create a global trade union.
Vicious fighting for a shrinking membership ensued, with unions increasingly targeting one another’s staff, causing fierce internal rivalries. Meanwhile, businesses called for a greater partnership approach, but this fell on deaf ears. Unions took an increasingly hard line in the belief this would separate them from their rivals and protect them from the accusation they were colluding with management.
Employers’ rights continued to increase, and eventually staff found it easier to engage ‘no-win, no-fee’ lawyers rather than pay their unions subscriptions.
This called for a drastic rationalisation of the union movement. Now all that is left is one private sector union and one public sector union, each with subdivisions catering for specific industries.
Ultimately, it was the world economy that really saved the trade union movement. With wages frozen, unemployment high and many companies rushing to offshore to cheaper locations, employees no longer felt safe in their jobs, and suddenly union membership grew exponentially. Employers were left floundering by this return to the combative industrial relations of the late 19th century.
- Future trade unions: reality or myth?
“Trade union mergers are being driven not through a position of weakness, but one of strength. Trade union membership decline has halted. Our objective now is to consolidate our resources and avoid duplication to be able to focus on growth and expansion strategies and increase our political influence.
“This consolidation process is going on in every other European country. Mergers are a necessary precursor to the creation of globalised trade unions. In a world where business operates globally, trade unions have to organise in the same way to prevent transnational corporations standardising pay conditions on a third-world model.”
Secretary general, Amicus
The HR profession
The war for talent got worse in the early decades of the 21st century, and good HR practices became a key differentiator among UK employers striving for competitive advantage.
Designing and executing innovative recruitment programmes can now make or break a company, and businesses must now recruit their best workers across international boundaries and numerous different technological platforms.
But while HR has gained prominence by boosting employer profiles, it has not been exempt from the job cuts associated with globalisation. Early on this century, it became increasingly obvious that numerous HR roles could be done just as effectively in cheaper foreign locations.
Leading organisations that paved the way for this change included the BBC, Barclays Bank, communications firm Marconi and computer giant IBM.
At the time, Brett Walsh, who was head of human capital at professional services firm Deloitte, saw the writing on the wall.
“Jobs will migrate to outsourcing companies. In the next five to 10 years, around 50% of all HR jobs will be with outsourcing suppliers,” he predicted.
The shift was slow, as businesses ironed out security issues and the language barriers, not to mention difficulties ensuring compliance with UK law. But many adventurous HR functions had huge success in countries such as India and China, as contractors took over transactional work and even dealt with management problems.
The upshot of these developments is that, in 2050, HR has never been more important in its relatively short history, but only to the favoured few. HR generalists and administrators based in the UK are now almost unheard of.
That said, good HR specialists now command huge salaries. Early signs of this trend included a survey back in 2006, which showed the average HR manager’s annual earnings rose by almost half in the preceding 12 months. In the same year, separate research showed many HR directors broke through the £200,000 barrier for the first time.
It is the average worker who has suffered the most, with no proper outlet to vent a grievance or discuss a performance issue. Critics believe that too many cases that could have been solved early through HR mediation now end up in tribunals.
- The future HR profession: reality or myth?
“I’m sceptical about the number of HR jobs that are going offshore, and that will go offshore, beyond the merely transactional-type activities. I think as big an impact in the reduction of many of these activities will be continued advances in HR technology, which will reduce the need for HR interventions and will increasingly mean that employees and managers do more of their own HR activities.
“In terms of outsourcing, I think it will continue to be talked about as ‘the next big thing’, and has been for the past 10 years. But growth is maybe not so great as was originally thought possible. Indeed, some deals entered into five to 10 years ago are not being renewed.
“The big question to ask will be around the roles that HR will fill and the fact that business is looking to HR for people management advice on business issues such as risk management, environmental issues, innovation, finding talent (such as through a migrant workforce), which will all be business realities in 2050. Where HR will survive and thrive is where it can tap into these agendas.”
Adviser, organisation and resourcing, Chartered Institute of Personnel and Development
Skills and training
Despite repeated attempts by the government, business and the unions to emphasise the need to become a high-skill ‘knowledge economy’ to compete in a global economy, the message seemed to fall on deaf ears.
At the end of 2006, the Leitch Review of Skills reported that five million adults in the UK lacked ‘functional’ literacy, 17 million adults had difficulty with numbers, and more than one in six left school unable to read, write or add up properly.
Meanwhile, instead of churning out the science and IT graduates desperately needed to give the UK the competitive edge, ‘soft’ subjects, such as media studies, consistently topped the intake tables of further education institutions.
The government introduced a host of education reforms and attempted to make young people stay in education until 18, but the message that the country was living ‘a softer life it couldn’t afford’ was not one the British people wanted to hear.
Business constantly had to educate new employees in basic skills before it could impart the kind of advanced knowledge that would make the UK competitive on a global scale.
Research by the Learning and Skills Council found that more than one in 10 young people would drop out of education to be on TV, even though the odds of being picked for a reality TV show and being successful afterwards were around one in 30 million – worse odds than winning the national lottery.
Growing increasingly frustrated, business looked offshore to recruit skilled staff. This had the effect of even fewer UK staff being trained as there was a surplus of foreign staff who were ready and raring to go. One study showed that average spend on learning, training and development per employee fell by almost one-quarter between 2005 and 2006.
It would not be an over-exaggeration to say that it was not energy costs, transport infrastructure or any of the other big business concerns, but a lack of skills that eventually forced the UK into the position of an also-ran in the global economy.
- Future skills and training: reality or myth?
“This perspective on skills is a depressing one, but one that could be realistic if we do not heed the clear messages about the need for us all to up-skill and treat this as the serious business and social issue that it truly is.
“There are many changes to this picture that I would want to paint. The first is that we create a greater hunger for learning right across our society. You see this in the eyes of people from countries across the world who see learning and skills as their best way of improving their life chances and standards of living. We need that realisation here.
“Second, I want more employers to believe that investing in their employees helps them to stay, not to leave or be poached. 2006 needs to be seen as the year that we woke up to global skills as well as to global warming.”
Director of skills, Learning and Skills Council
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