Government support for businesses should be conditional on employee welfare

8 June 2020

By Rosie Fogden

5 minute read

Rosie Stock Jones writes for Prospect Magazine and argues that it is essential for the health, skills and productivity of our nation that businesses use government funding to support better job quality for their staff.

Precarious work is disproportionately experienced by those on low incomes, and by those who have been most affected by Covid-19. The frailty that comes with precarious work is damaging to both individuals and the wider economy. A recent study conducted by the Centre for Progressive Policy shows that the public demands an improvement to job conditions after Covid-19.

The affluent, with the security of their savings, the ability to work from home and assets such as cars and second homes, are in a good position to weather the fallout. Care workers, warehouse packers and delivery drivers who have got us all through the last few months are not. Many are not paid enough to meet their basic needs and often face uncertain hours. Care work, for example, has been hailed as the “forgotten front line” of this crisis yet 60 per cent of domiciliary care employees work under zero-hours contracts. This was never acceptable, but our reliance on these workers in the last few months makes the reality particularly uncomfortable. JP Morgan CEO Jamie Dimon has said that the crisis must be a “wake up call” to businesses and policy makers but warm words from the super-rich are not enough. Something needs to change now, and government loans to business provide a timely opportunity to lock in better working arrangements.

If the government is to deliver on its “levelling up” commitment, making good jobs a reality for all must be a central focus of the economic recovery. “Good jobs” mean jobs that pay a living wage, that are secure, prioritise staff wellbeing and offer skills development and progression. All of these are critical for an inclusive recovery. Decent pay is needed to prevent people from falling into poverty or long-term unemployment, both of which can have long lasting repercussions for communities, and affect lives for generations. Security is important for health, which is hugely unequal across the country. Insecure arrangements such as zero-hours contracts are known to increase stress. Poor mental and physical health can lead to inactivity or poor performance. Offering progression, opportunity and skills development is imperative for reducing the skills gap between places and is key to building economic resilience—CPP research finds that low skill levels make places and their people less resilient to economic shocks. Good jobs are not a “nice to have.” They have a key role to play in limiting the impact of the economic crisis and helping to build a more inclusive society in the longer term.

Research from CPP shows that the public agree—they think that all businesses large and small have a responsibility to provide good jobs. The government should be taking this opportunity to encourage businesses to be better employers. Financial support from government, such as bailout programme Project Birch will be vital to shoring up economies in places like Pendle, Yeovil and Broughton, which are highly reliant on specific industries such as aerospace. But this support would be even more effective at levelling up if it stipulated that workers should take priority. Although redundancies will be necessary for businesses to remain viable in the new economy, this does not negate the importance of providing good jobs. It is essential for the health, skills and productivity of our nation that businesses use government funding to support better job quality for their staff.

HMT’s latest loans for big business include some conditionality around dividends and executive pay but CPP research shows that a majority of the public would like to see government go further: 56 per cent said they expect tax-funded grants to be conditional on securing job contracts, 52 per cent want them to support staff payrolls. Others suggested that they should be required to eliminate insecure zero-hour contracts. 51 per cent want companies receiving support to pay their fair share of tax in the UK.

Business leaders have long been discussing inclusive capitalism: last year, the Business Roundtable sought to redefine the purpose of the corporation to promote an economy that serves all. But despite growing agreement among business leaders and international institutions that business is about more than shareholder value, there has been a lack of action. This suggests that many companies need to be nudged in the right direction. The Covid-induced imperative for business support loans provides an opportunity for government to signal a change in direction and prove to our care workers and delivery drivers that we value them. It will then be up to investors and big corporations to follow this lead and put their money where their mouth is when it comes to good jobs.

This article was first published by Prospect Magazine.