Category Archives: Covid-19

Protecting the Industrial Commons: Redundancies at Roll’s Royce and the wider impact on UK industry

By Dr Ian Greenwood,
Centre for Employment Relations Innovation and Change

Ian Greenwood 300x270The announcement by Rolls Royce that in response to the impact of the COVID crisis, worldwide, 9000 jobs are to be cut -most at its aerospace centre in Derby- will reverberate beyond the confines of the aerospace industry.

That the company has been in financial difficulties for a while is no secret. In December 2019 the company announced that it was to reduce its intake of apprentices and graduate trainees by almost a third. This continued a five-year trend and takes place within an ongoing programme of contracting its management head count by 5000. The company has also disclosed that it will experience a £2.4bn cash fall between 2017 and 2023. The crisis in profitability that has beset the company has been exacerbated by serious problems involved in resolving quality issues with its Boeing bound Trent 1000 engines. The aircraft industry is suggesting that 2019 levels of output will take five years to attain.

Further job losses are, therefore, not unlikely and the company has declared there will be a retrenchment in its R&D expenditure. The history of Rolls Royce is one peppered with crises and restructuring (involving nationalisation) and although its share price has dropped 2/3 since mid-February of this year, the demise of the company is not imminent.

The wider impact on the UK’s Industrial Commons

The survival of Rolls Royce is vital to the industrial sectors in which it operates, as well as to the broader UK economy. Clearly one company does not make an economy. Nevertheless, the nature of the jobs that will be lost at Rolls Royce, the contraction of trainees and diminution of R&D effort have significance beyond their headline metrics. Engineering UK, the sector employers organisation, estimates that leading up to 2024, there will be a shortfall in satisfying demand of between 37,000 and 59,000 core engineering roles requiring level 3+ skills. Reducing the demand for engineering graduates and trainees through the contraction of engineering firms might be one solution to the problem of excess demand across the wider occupational labour market. This though, is surely a recipe for a general downward spiral in skills, R&D and innovation and culture for a low skill equilibrium.

Taken together, the R&D, engineering, manufacturing capabilities and supplier infrastructure of an economy has been referred to by Pisano and Shih, as a nation’s ‘Industrial Commons’. Crucially, the health of the Commons depends on a strong and vibrant manufacturing sector, particularly the component of this sector that is associated with high skill, high value output. That is, firms such as Rolls Royce. Pisano and Shih (2012) use the example of the declining international competitiveness of the USA to argue that if this Commons is allowed to wither on the vine, the ability of an economy to innovate and create high tech, high value added products will decline, ultimately depressing wage growth and undermining the health of the wider economy. Furthermore, the ability of innovation to ‘spawn new industries’, will be undermined.

Industrial Commons are often connected to sources of high-level knowledge such as universities, which ensures a vital, symbiotic generation of basic, applied and commercial research.  Commons are also often geographically defined. For example, a feature of the aerospace industry in the UK is that 90% of aerospace jobs are outside the South East, providing a valuable dynamic for a balanced economy. The economic and social multipliers of the aerospace industry are significant. The industry has an annual turnover of £31B. It supports 12800 direct and 14000 indirect jobs with average earnings of £43000, 45% higher than the UK average. Through its supply chain programmes, 330 companies have been helped to ‘boost their competitiveness to world-class levels’.

The focus of concern here is that the retrenchment of a firm such as Rolls Royce rarefies the Industrial Commons that it supports and by which it is -in turn- supported. Pisano and Shih argue that manufacturing is essential for the development of new products: it connects product and process innovation. In contrast, the decline of manufacturing invokes a negative ‘chain reaction’ in which the infrastructure for advanced process engineering and the attendant expertise and jobs are diminished. The high-value up and down stream supply chains that network around firms such as Rolls Royce will be lost or offshored.

Whither the future?

It is not possible for governments to support every company. Governments can, though, act to shape the nature of their economies. UK high-value manufacturing and the Foundation Industries that underpin it, must, however, be supported. UK manufacturing accounts for around 10% of GDP value added. This is an ever-diminishing proportion of the economy and well behind Japan and Germany’s 20% of GDP value added. It should not be allowed to fall further. In 2017 the UK spent around 1.7% of its GDP on R&D. The ambition of the UK government is for this to reach 2.4% by 2027. Assuming other countries do not also raise their games, this will raise the UK from 21st to 12th in the international league table of R&D spending. The government needs to be more ambitious.

Through its Industrial Strategy, (explicitly connected to addressing investment in R&D), the UK government appears to have understood the challenges faced by UK Inc. and specifically, through the Aerospace Sector Deal, companies such as Rolls Royce. This strategy though, must be implemented with great determination, emphasise the local dimension and crucially, it must endure.

In the here and now, the COVID crisis poses a clear and present danger to the economies of all industrialised nations. Through its announcement of, ‘Project Birch’ (26.5.20) to rescue industries badly affected by the COVID crisis, whose demise might ‘disproportionately’ affect the economy, the UK government appears to has recognised this. The call by some in the UK trade union movement for a National Council for Recovery, that would represent a range of stakeholders, seems a sensible, indeed essential, step that must ultimately reflect a broader engagement with manufacturing, hence the future of the UK economy.

Covid-19 and the impact on gender equality

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By Dr Helen Norman,
Centre for Employment Relations Innovation and Change

Covid-19 is the worst public health crisis for a generation that it is fast becoming an economic crisis with gendered impacts. Although men make up three quarters of coronavirus critical care patients, women are at greater risk of contagion due to their higher concentration in frontline work. Of the ‘key workers’ identified by the UK government as essential to the provision of services during the pandemic, 60% are women.

The labour market

Women are more exposed to the risk of redundancy and low pay because of their precarious position on the labour market. Not only do women make up the majority of the UK’s low paid earners, they also comprise a higher proportion of those in part-time employment (74%), part-time self-employment (59%), temporary employment (54%) and on zero-hours contracts (54%). Women and low paid earners have also been some of the hardest hit by the shutdown of businesses. Women are around a third more likely to work in a sector that has now shut down with one in six (17%) female employees working in such sectors compared to one in seven (13%) of their male counterparts.

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Care and domestic work

Women already do twice as much unpaid work at home so are more likely to assume the burden of additional caring responsibilities that has resulted from the closure of schools and nurseries. This is perpetuated by a persistent gender pay gap, which creates a financial logic for the second earner within a couple (usually the women) to reduce or exit paid work, as well as prevalent norms and beliefs about gender roles. Lone parents (90% of whom are women) are likely to find it even more difficult to reconcile work and care, particularly as access to informal networks of friends and family is restricted.
How has the government responded?

A ‘furlough’ salary retention scheme was introduced on 11 March, which will help some but not all – such as the self-employed. It is not possible to request furlough on a part-time basis – an option that would help both parents (within a two-parent household) to divide paid and unpaid work more equally. Where there is a choice, it makes more financial sense for the lower earner (i.e. usually the woman in a two-parent, opposite sex household) to request furlough so that the higher earner (i.e. usually the man) can continue to work. This has the potential to damage women’s earnings and career progression. The furlough scheme also risks pushing many lone parents and low paid earners into poverty because of the further reduction in pay. 45% of lone parents already live in poverty in the UK.

There is no right to be furloughed – both employer and employee have to agree. The recent surge in claims to Universal Credit may suggest that some employers are opting to make people redundant rather than furlough them, or they are reducing hours (and therefore income), which may force people who are in work to make a claim. From 16 March to the end of April, over 1.8 million people applied to Universal Credit – six times the usual claimant rate. This data is not sex disaggregated but women are more reliant on social security payments because of their disproportionate share of unpaid care and precarious position on the labour market.

What are the next steps?

It is important to consider the different economic positions of women and men in the response to the Covid-19 crisis, including the specific challenges that women face such as higher rates of poverty, the disproportionate load of unpaid domestic work and care and the increased risk of domestic violence and abuse.

The Women’s Budget Group rightly calls for a gender-sensitive approach to the crisis that also gives consideration to other marginalised groups such as the disabled and those already suffering race and ethnicity-based inequalities. It is positive that the Women and Equalities Committee have called an inquiry into the disproportionate impact that Covid-19 and the measures to tackle it are having on women and other marginalised groups. However, a more radical reassessment of how ‘low skilled’ work is defined and valued is needed, alongside a review of the systemic undervaluation of so-called ‘women’s work’ – such as cleaning and caring – which are critical jobs that continue to be undervalued and under paid.

The Coronavirus crisis exposes further the fault lines in the proposed post-Brexit Points Based System of immigration. But will it lead to a re-think?

Gabriella Alberti, Ioulia Bessa, Zyama Ciupijus, Jo Cutter, Chris Forde, CERIC

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The coronavirus crisis has ignited debate over ‘essential’, ‘skilled’ and ‘high public value’, and has brought into sharp focus the contradictions in the government’s post-Brexit points-based migration system. In this blog, and a more detailed briefing, we ask whether the current crisis will compel policy makers in the UK to rethink the narrow economic and salary threshold criteria that have been proposed to determine the eligibility of migrants to undertake work in the UK.

The COVID-19 pandemic is having profound effects on work and employment across the world. 4 out of 5 workers, out of a total workforce of 3.3 billion globally, have had their workplaces partially or totally closed as a result of the crisis.

The impact of coronavirus on global mobility and migration flows is also profound. The pandemic has led to an urgent re-assessment of the regulation of migration, with more than 200 countries implementing coronavirus-related restrictions on border entries, including on those migrating for economic reasons.

In the UK, the COVID-19 crisis has brought into even sharper focus the crisis of labour mobility that was triggered by the UK Exit from the European Union. Should the UK government should seek to extend the transition period beyond December 31st 2020, in order to avoid inflicting a double pain for UK economy from the coronavirus crisis and Brexit? More fundamentally, will the coronavirus pandemic force a re-think of the way that governments intervene to regulate migration, given changing perceptions of essential and high public value roles?

The Points-Based System: outdated and unfit for purpose?

The analyse the Points-Based System in more detail in our longer briefing paper. The main features are that all applicants will require a sponsor before moving to the UK, a job offer at the required skill level (RQF 3 and above) and a required level of English language, each of which generates a number of points. Other characteristics, including the salary level of the job, and whether the job is on the Shortage Occupation List can be ‘traded’ to reach the required points threshold to qualify a work permit.

Prior to the coronavirus pandemic, there had already been widespread criticism of this new system by unions and employer bodies. The underlying approach of seeking to attract ‘the brightest and the best’ was seen as outdated and likely to lead to acute labour shortages in particular sectors. There had been widespread calls for a lowering of the salary and skills thresholds that were in the proposals.

The coronavirus pandemic has further exposed the fault lines in this points-based system. Occupations that are recognised as essential in the COVID-19 crisis, and where migrants are heavily concentrated – in healthcare, healthcare, transportation, food processing and delivery – include many roles that are defined at low-skill and value in the proposed post-Brexit points Based system of migration. The proposed new system regulating migrants’ entry in the UK does not include a channel for such “low skilled” workers, only allowing entry in exceptional circumstances where workers are classified by the Migration Advisory Committee under a shortage occupation list.

Mass Brexodus?

The capacity to retain EU workers in these sectors will depend on the effective functioning of the EU settlement scheme. Yet, many EU citizens in the UK have already made alternative choices: to go back home or leave the UK for another EU member state where they can still enjoy free movement. The most recent ONS data for the year ending September 2019 shows EU net migration falling sharply by 64,000 and the number of EU citizens arriving for work at its lowest since June 2016.

Some of the sectors with the most urgent and pressing needs for labour to respond to the coronavirus pandemic are those that have been those most affected by this ‘Brexodus’. In healthcare, where unfilled vacancies are at record levels, there have been sharp declines in the numbers of nurses and midwives registered from the EU over 2017 and 2018. In agricultural food picking, there have been widely reported labour shortages during the coronavirus crisis. The same sector has suffered large falls in numbers of EU migrant workers since the Brexit referendum.

Some jobs classified as essential in the COVID-19 crisis are already defined as having high skilled and/or of high social value in the government’s mapping of the ‘value’ of occupations under the proposed points-based system. This includes teaching professional and nurses, for example.

But many jobs are not seen as essential under this mapping. 55 per cent of EU migrants work in occupations that are categorised by the government as ‘low-skilled’ under the proposed migration regime, and thus would not be eligible for the skilled workers’ route to secure a work permit. Included here are many caring, construction transport, food processing and packaging jobs. This has already led to calls for a rethink of the points-based system. Just last week, Liz Kendall, the new shadow social care minister wrote to the Health Secretary, requesting a fast-track visa regime to be created for care workers.”

Conclusion: Towards a future social value of migrants

Will the COVID-19 crisis lead to a re-think by policy makers in their approach to post-Brexit migration regulation? Will perceptions of the value of particular occupations and migrant workers in the UK move beyond narrow economic modelling, salary threshold and shortage occupation criteria, and how might this be achieved?

The current crisis may offer a new terrain for migrant workers themselves to show their ‘value’, not only to the economy but for society at large and to bargain for better conditions, beyond statutory and employer-controlled salary thresholds.

It seems to us that in the field of migrant labour the pandemic opens up a number of opposing scenarios. On the one hand there are utilitarian and draconian approaches focused on state self- sufficiency and restrictions on movement of labour. On the other hand there may be approaches which better recognise the inevitable interconnectedness of our lives, mobilities, care and survival in a world that cannot travel back from globalisation.

This blog is based on an ongoing wider programme of research undertaken within CERIC on migration. If you would like to comment on the issues covered in this report, or be involved in future events around migration, please contact:

Dr Gabriella Alberti
Email: g.alberti@leeds.ac.uk

Human Resource Management & Covid-19: Some Uncomfortable Truths

Written by Mark Butterick

The statement ‘people are our greatest asset’ is widely used by many employers. For some this represents a genuine belief from the top of the organisation. For many others, however, this kind of rhetoric can feel like pseudo-socialist guff that actually has limited -if any- meaning.

The recent and ongoing Covid-19 crisis has inadvertently provided a unique opportunity to consider leadership behaviours and the effectiveness or otherwise of contemporary Human Resource Management (HRM) practices. Covid-19 has shined a bright light upon many organisations, their approaches to HRM best practice and whether employees really are treated by their employers as ‘the greatest asset’ that they are said to be.

Presenteeism & Succession Planning

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Let’s start at the top. As the UK Prime Minister stood applauding the NHS on the steps of 11 Downing Street on Thursday 2nd April he was clearly unwell. He had tested positive for Covid-19 on Friday 27th March but stubbornly continued to work rather than rest. By Sunday 5th April Mr Johnson had been admitted into hospital. By Monday 6th April he was in intensive care and clearly very ill. Throughout this period the Prime Minister was unwilling to relinquish power even when he should have been resting. For a time he even tried to conduct business as usual from his hospital bed. Was this exceptional “Churchillian” leadership deserving of admiration. Or did Mr Johnson provide a personal endorsement of the ‘working lots of hours shows greater commitment’ culture that plagues so many workplaces?

In addition there was no obvious deputy to assume Mr Johnson’s duties when he was no longer able to hold virtual court from his hospital bed. The UK was therefore left, for a while at least, in a highly precarious situation. The country faced the very real prospect of losing its Prime Minister during the most serious national crisis in 75 years. A situation that was greatly aggravated by the lack of a clearly defined number two to take over the reigns of power. The seriousness of all this was clear to many. Why was Mr Johnson unable to take a step back when he became so obviously unwell? And why did he not confirm who his second in command would be sooner?

Good leadership necessitates an understanding of a leader’s limitations. It also requires the leader to fully understand and accept these limitations. Good succession planning requires strength, depth and resilience at all levels of an organisational structure. In terms of these two key areas of HRM practice the UK government exposed itself and the country to a potentially catastrophic and entirely avoidable level of risk. The underlying reasons for this will no doubt be debated in the future. But a combination of bad decision making, poor HRM practice and ego clearly played their parts.

The Value of Work

In the social media age that we all now live, the value that society places upon work has become increasingly distorted. Covid-19 brought this distortion sharply into focus. The England footballer Harry Kane reportedly earns £200,000 a week. A Band 5 Staff Nurse on the other hand can currently earn £24,214 to £30,112 a year. At the higher end of this a Band 5 Staff Nurse therefore earns in a full year what Harry Kane earns in a day. By any reasonable measure this is absurd.

Some will rightly say that this is not an appropriate direct comparator and perhaps it isn’t. But the kudos rightly given to healthcare professionals during the Covid-19 crisis has challenged the value society places upon the work that people do. Not only in relation to healthcare workers either. The same also applies to those who empty our bins, postal workers and the often zero hour workers who deliver our parcels, groceries and takeaways amongst many others. It now seems clear -maybe even obvious- that the relentless race to the bottom in relation to labour costs and the widespread lack of value placed upon so many employees now requires urgent reconsideration. A recalibration exercise is long overdue. But whether this will deliver tangible holistic changes in the longer term remains to be seen.

Homeworking is not a Silver Bullet

Picture the scene. It’s Monday morning and you are sitting in your car on the motorway. Every other car has one other person in it and the traffic is barely moving. You know all the pinch points along your commute and the timing cycle of every set of traffic lights that slow your journey. Your heart rate increases continually as the time you start working approaches. You pray that a broken down car or an accident won’t block a carriageway and make you late. Then came Covid-19. The 09:00 meeting that the technology-averse (often older and male) senior managers in your organisation insist on having in person is now taking place online. Not by choice, but because it’s the only option now available. The meeting takes place. The same or similar outcomes are achieved.

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Given this triumph of technology (all of which has been around for many years) will we now see significant amounts of work activity moving online? I doubt it. Whilst there is definitely a place, and indeed need, for more online working its limitations have been highlighted during the lockdown. Human beings are social creatures. We need to have human interaction. Softer interactions can be just as important -and sometimes more important- than hard outputs.

This said, with a fair wind, we now have an obvious opportunity to end the nine to five working day culture and foolish, counterproductive and polluting rush hour chaos this brings. All this can be achieved simply by using tried and tested technology more effectively. It has to happen. But the notion of the majority of workers simply getting up, working from home and then going back to bed before doing it all again is totally unrealistic. Many workers have always gone and always will have to go to “a place or places” to do “a thing or things”. No amount of technology will alter this significantly.

In addition, the goodwill currently being shown by many workers toward their employers has obvious limits. A limit that is fast approaching for some. Many workers are currently using their own equipment (PCs, internet connections, facilities etc). Employers will encounter significant challenges if they choose to migrate to a more home based operating model. Work/life balance considerations, training and development needs, setup costs, health and safety and data integrity are just a few HRM issues that require careful consideration. But there is clearly now an opportunity for more home working and there will be obvious productivity and environmental benefits that could and should flow from this.

Trust and Confidence

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In many organisations a doughnut model is operated by employers. A relatively small core of permanent employees at the centre of the doughnut is supplemented by an ever growing outer ring of contingent employees. An outer ring populated by temporary, contractor, freelancer and zero hour workers. After decades of outsourcing, subcontracting and the widespread peripheralisation of employment activity the so-called “gig economy” in the UK had grown to over 5 million by the time the Covid-19 pandemic began.

Anyone who works in the gig economy develops an inherent ability to pivot and change. They have to be resilient in what can be a Darwinian professional existence. Gig economy workers hope for the best but often expect the worst. This precarious world of insecure employment just got unimaginably worse due to Covid-19. With the likelihood of even peak and trough employment (often with many troughs and relatively few peaks) now snuffed out for many. When combined with other extraneous variables Covid-19 has effectively created a perfect storm for those working in the gig economy.

But what of the favoured few at the center of the organisational doughnut? Some of whom have often fought tooth and nail for permanent contracts of employment. Including the face fits yes men and women who don’t rock the boat and always claim to love their employers come-what-may. Has Covid-19 resulted in their employers repaying this loyalty and obedience? Apparently not.

A staggering 25% of employers plan to make permanent redundancies as a direct result of Covid-19. In addition almost half of companies plan to place employees in the “furlough” scheme. Many of these employees probably won’t return when the dust settles and normality eventually returns. Somewhat bizarrely the question of whether a company can use the furlough scheme to pay their employees isn’t means tested for employers. Unlike state benefits such as Universal Credit, which many employees -particularly those in the gig economy- are now finding at best unfathomable and, for many, inaccessible. For many employees falling out of what, until a few weeks ago, many may have considered to be “safe employment” the pace of recent events will come as a major shock. Attempts to access the benefits system will invariably prove to be emotionally damaging and exasperating. Many will question whether the system into which they have paid national insurance for many years is fit for purpose.

At the heart of a contract of employment is an implied obligation of mutual trust and confidence. As many of the projected 3.5 million employees currently heading toward Universal Credit are now finding out, however, millions of employers had neither the resilience nor a reciprocal commitment to them when the going got tough. For many employees the elastic band of trust and confidence was broken by their employers almost immediately when Covid-19 took hold.

Many employers have had no choice about this. But there will inevitably be employers who make tactical redundancies and adopt unethical HRM practices to deal with perceived problems and legacy issues. For some rogue employers the dark clouds of Covid-19 will have a silver lining. The impact of some employers adopting such approaches will be that the centre of some organisational doughnuts will become even smaller. The gig economy will get even bigger and levels of trust and confidence will inevitably deteriorate further. The low trust, low productivity puzzle that nobody seems willing or able to tackle will appear to be even more of an enigma.

Yesterday’s Greatest Asset?

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Dr. APJ Abdul Karam famously stated ‘love your job but not your company, because you may not know when your company stops loving you’. None of us could have accurately predicted the devastating impact of Covid-19. Or the speed at which this catastrophe has unfolded. But many thousands of employees are now indeed realising that the love of their employers suddenly ran out. The greatest asset, it transpires for many, is no longer in fact the greatest asset. Many workers will understandably -albeit belatedly- be asking if they ever were truly valued as their employers had previously claimed.

Major change is the only certainty that most workers now face. The ability or otherwise to adapt to the huge changes and disruption that lie ahead will have profound consequences for all. Two key choices now present themselves. An acceleration of the race to the bottom HRM practices of the past. Or a root and branch appraisal of and change to how we value and treat people. Nothing can ever be the same again though and those of us in the worldwide HR community will all hope that this proves to be for the right reasons.