A better route to fairer pay?

November 27, 2013 by
Filed under: Public policy, The RSA 


As I found out when I gave my annual lecture employee engagement is not a headline-grabbing issue. But the more I think about it the more convinced I am that it deserves attention……

This morning I spoke at the launch of a Resolution Foundation report on long term low pay. As we have come to expect from Resolution the report is robust, well-argued and measured in its tone. In essence it shows that a high proportion of people on low pay ten years ago have either been low paid throughout the decade or have ‘cycled’ in and out before ending up back more or less back where they started. But the report also recognises a more hopeful finding which is that levels of ‘escaping from low pay’ have risen in the last ten years while the numbers stuck long term have declined.

I found myself on a panel responding to the report with Sir Charlie Mayfield, Chair of John Lewis, and Frances O’Grady, Secretary General of the TUC.  In my response I recognised the problem of low pay and the need to take obvious steps like restoring some of the lost real value of the minimum wage and encouraging more employers to pay the Living Wage. But I also argued that we need to understand more about the nature of low pay, what might be an acceptable level of low pay (given that it is a relative measure there will always be low paid people) and what reasons there might be for people freely choosing and staying for some time in low paid jobs.

Given it was the subject of my recent annual lecture, I also managed to make sure that the issue of employee engagement became a significant part of our conversation. I argued, and Charlie agreed, that good employee engagement can not only improve staff relations and boost productivity but is also likely to exert pressure for fairer distribution of pay and profits within the firm.  Increasing employee engagement could therefore be an important part of a strategy to address low pay and poor career progression.

In my annual lecture I suggested that significant progress on employee engagement may be in reach. If we could combine the basic framework of collective rights encouraged in the 2004 Information and Consultation Regulations with best practice found in individual employee engagement (schemes like Best Companies and Investors in People) we could develop a ’Good Employer’ threshold and kite-mark which could, through peer pressure, consumer choice and public procurement, drive a step change in employment practice; something which would almost certainly benefit firms, workers and wider society.

Given that the tools are to hand, the barrier to this initiative may be largely cultural. On the one hand, advocates of employee engagement dislike talk of collective rights, while on the other side the advocates of collective worker representation (generally, supporters of trade unionism) tend to be somewhat dismissive of the voluntaristic and individualistic nature of employee engagement. But if both sides of the approach work together the mutual concerns can in part be allayed. If surveys of individual employees show high levels of satisfaction then worker representatives have fewer grounds for being adversarial, while the danger that employee engagement is tokenistic is reduced if there are also more robust channels for employee voice.

So, this morning I took the opportunity of asking Frances O’Grady if she supported my idea and one part of it in particular: ‘As long as companies properly implement the 2004 regulations’ I asked’ would you accept that it is reasonable for information and consultation to be provided through a non-trade union route, for example through an in-house staff association?’. The point being that if a campaign to improve engagement is seen as way of forcing trade union recognition on unwilling employers and unenthusiastic staff, it is unlikely to gain wider public support.

Frances’s reply was heartening. She saw pragmatic reasons for trade unions to support better engagement and voice at work regardless of whether they are involved in delivering them. To paraphrase her argument: where there are proper processes for information, consultation and voice this generally leads either to trade unions finding it easier to organise or to individual trade unionists taking on the mantle of staff representative. Frances’s position implies a willingness to support a voluntary Good Employment framework (albeit that she would prefer stronger legal collective rights) even if it doesn’t require trade unions to be part of its delivery.

The measures most often advocated to tackle low pay are regulatory and economistic; raising the minimum wage and spreading the living wage. As I say, I support this, but the liberal in me wants to address the problem in a way that maximises the degree of human discretion and minimises the necessity for state regulation.

I strongly suspect that firms with robust employee engagement also have fairer wage structures. However, it may be that in some firms some of the time the existence of low paid jobs is seen by employees as legitimate. This may reflect the nature of those jobs or the financial position of the company. If employees are asked whether remuneration is fair (an aspect for example of the Best Companies staff survey) and if employees have the opportunity to express collective concerns, then we may recognise that low pay is not always something to be opposed.

For some reason robust employee engagement is a less exciting and mobilising goal than the living wage but it may be a more effective and more nuanced way of tackling low pay and also one with many other benefits.

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2 Comments on A better route to fairer pay?

  1. Dave Boyle on Wed, 27th Nov 2013 3:41 pm
  2. There’s another factor here, of involvement and ownership.

    Essentially, there’s two things which can often go together – good employee-engagement and good employee remuneration. The first question is which is the key driver, or whether, like a moebius strip, one always leads to the other, or whether employee engagement as a process leads to better employee pay or whether its the another way around.

    We can, for example, more easily imagine an employer engaging employees well, but being a poor payer, because they can use stronger arguments to justify lower pay (economic cycle, business performance) whereas the arguments against employee engagement are much weaker to refute (because I think its a load of fluffy crap might be the honest feeling, but it’s harder to make that case publicly).

    Secondly, it’s notable that you cite JLP, when one of the reasons they engage employees and pay them well (and more equally and equitably) is because, at the end of it all, that’s the point of the business. The well-being of partners is the ‘why’ of the enterprise, and so whilst there’s incentives for executive pay to take a bigger chunk as in any corporate structure, the idea of impoverishing employees to enrich shareholders doesn’t apply here.

    In the same vein, saying that employees aren’t worth engaging with, just good enough to be the owners isn’t a tenable approach. It seems to me as well that JLP wouldn’t consider themselves to be doing employee engagement in the sense we understand it, because it’s been part of their operational DNA since Spedan Lewis became the proprietor.

    So, is there a missing dimension here of employee ownership, and how does that play into this approach?

  3. Neil Bachelor on Wed, 27th Nov 2013 5:46 pm
  4. As an indicator of fair pay, how about a corporate Gini coefficient? (i.e. require companies to publish how evenly their wage bill is distributed among employees)

    http://en.wikipedia.org/wiki/Gini_coefficient

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