Thursday, January 13, 2011

The toxic effects of job insecurity

From lower productivity rates to family dysfunction and from poor customer service to depression and lack of motivation. What lies behind David Cameron's calls for "less red tape".

David Cameron's recent plans to make it easier to sack staff in the first two years of their employment have sparked an intense debate over the nature of Britain's labour market.

After the "fluffy years", it was only a matter of time before the crook-eyed default Tory approach to the world of paid employment would resurface.

The problem for Cameron and the bosses' organisations, however, is that - unlike the Thatcher years - there's very little left in terms of workers' protection for the government to wade in with the axe.

Extreme job insecurity in the UK is already a growing reality.

According to the OECD, Britain is in the top three along with the US and Canada (and well under the OECD average) in the strictness of employment protection index (1985-2008), which measures "the procedures and costs involved in dismissing individuals or groups of workers and the procedures involved in hiring workers on fixed-term or temporary work agency contracts".

Given the companies' free access to casual staff on "zero hours contract", or the free use of "temps" (which, by law, can be hired repeatedly on fixed-term contracts for up to four years before any tie comes into place), the lax regulation on probationary period for regular staff, as well as some of the lowest levels of statutory redundancy pay in the Western world, the notion that Britain's employment regulations may be at the core of the current dole rates is simply comedy material.

If we carry on this way, soon the only crusade left for the British Chamber of Commerce and the Tories to embark upon under the guise of "cutting red tape" will be against the right for workers to empty their bladder or take a crap at work.

However, what the last few days also highlighted is the almost total abdication on the part of the left and Labour in the fight against the galloping job insecurity and its noxious effects.

This line from the normally commendable Stumbling and Mumbling blog bothered me to the extreme. While sceptical of David Cameron's proposals, author Chris Dillow also wrote:

"There’s good evidence that [employment protection] reduces workers’ effort and increases absenteeism. This suggests that - at the margin - Cameron’s proposals might increase labour productivity".

Now, the reason why the above quote bothered me so much is that it shows how toxic and widespread certain myths are that even well-informed and well-read people can buy into them without questioning.

In brief, the Daily Mailesque-fable that a permanent job or certain guarantees at work will automatically turn you into a slacker. They ain't gonna sack me, so why bother, basically.

And how can you dispute that if even the usually meticulous and pro-left Chris Dillow can cite "good evidence" on the matter?

Except that said "good evidence" points to three pieces of research from Portugal and Italy which are solely and exclusively focused on specific (and already obsolete) legislation passed in those two countries in the 1980s and 1990s. Those laws were extremely protective - overly protective in fact - in a way not remotely comparable to anything Britain ever experienced, not even at its unionised peak.

It's like saying "there's good evidence that January is not a cold month and in fact look at this link to prove it". Except that it points to average January temperatures from the Canary Islands and Dubai.

The fact is, instead, that there's literally a mammoth body of research out there warning of the toxic long-term effects of job insecurity (click here for a summary).

Over the years detailed studies took place around the world, from the US and Canada to Australia, Sweden, Korea, Germany and more. The findings leave room to no doubt: there is a clear correlation between excessive levels of job insecurity and a variety of negative outcomes.

The initial advantages of "increased flexibility and lower costs" for the employers are undisputed. But little is ever said about the long-term effects that "casualisation may have on important aspects of national economic performance such as skill formation" and, most importantly, the ticking time-bomb that is widespread casualisation as weighed against "long-term financial planning".

But the strongest and most consistent evidence is the one seen across firms, industries, and countries linking job insecurity with "negative employee attitudes, behavio[u]rs, and health" and with the fact - as noted by several researchers - that "job insecurity is more stressful than job loss itself".

Amongst the negative effects, a "powerful negative influence on motivation", "reduced effort" and "poor safety compliance by employees". Low levels of job satisfaction are also associated with negative employee attitudes, lower customer performance and effectiveness with customers as well as with -in turn- a detrimental effect on group morale.

And that's without taking into account what "the longer term negative effects on workers' depression levels", or "the systemic [relation] between job insecurity and marital and family dysfunction" or, even, the proven effects that "parents' job insecurity has on children's school performance as measured by grades" .

The fact that "job insecurity reduces job satisfaction is attributable to the uncertainty of not knowing how to predict or control job threats".

And that's because, while insecurity in the short-term may spur a worker to perform better if the goal is a latter stage of more protection and various perks, an ongoing perception of "precariousness" will start having an adverse effect, as the worker will feel increasingly uncertain that their persistence can be sufficient enough for them to retain their job.

For a worker with little to lose, the lack of ties will offer no incentives to stop them from slacking off or "looking elsewhere" altogether.


Jackart said...

If you don't think making it easier to fire, makes it easier to hire, then why don't you ban firing anyone ever?

Jackart said...

Oh. Sorry, I forgot. You already have though only in the public sector.

claude said... that the best you can come up with? I'm impressed!

claude said...

"You already have though only in the public sector."

Of course all the facts about the use of casual workers and temps (which is copious AND increasing in local authorities as well) went over your head like an airplane.

Jackart said...

I'm going to deal with this on my blog in detail. I'll post a link when I'm done!

claude said...

Alright, keep me posted.

Mark said...

Spent much time in the public sector then? It's a myth you can't sack people.

Stan Moss said...

Well said Mark (welcome back btw).
Jackart is guilty of regurgitating the same shallow crap you find in the Daily Star or below.
He's overheard a few too many of those stories that public sector workers are all rich, privileged and unsackable while all employers in the public sectors are all, of course, self-made hard-working heroes who play by the book and that is that.
Others go to great lengths to point out studies, figures and various research. He childishly replies "then why don't you ban firing anyone ever?".
It's like banging against a brick wall. Then he takes it to heart when Daniel pulls him up on the futility of his appearances.
And so an anecdote of a civil servant caught wasting his time on Facebook, Jackart remembers like fuck, he requotes and he brandishes.
Evidence of employers breaking the law, exploiting and underpaying their staff, Jackart conveniently ignores.
It's the Tories. Tories. Tories. If he had been for them, slavery would still be with us.

Jackart said...

Mark. Yes, I spent a 6 months in the DTI, as a temp. Work was entirely optional.

Stan gets a bye for suggesting I'm pro slavery?

Blog post here In summary 1) Job insecurity is less a function of job protection than being in the right job with the right skills and less amenable to legislation. 2) having jobs to go to significantly mitigates the risks of redundancy
3) increasing employment is more effective than reducing redundancy on unemployment numbers
4) the evindence is clear: job protection does at the margin have an effect on job creation, though this is swamped by cyclical effects.

Either these effects are small, in which case, what are you worried about, or they will drive down costs and drive up profits significantly, which itself increases unemployment, a far greater evil than the small increase in job insecurity which might be caused by weaker job protection.

No-one's making big claims for any individual policy, but taken together, lots of "red-tape" reducing policies may have a significant effect on the jobless numbers over time.

The lady doth protest too much, methinks.

claude said...

I don't wanna sound too harsh, Jackart, given the time and effort you took to write your response and I know how knackering that can be.

However, I do think we live on different planets, full stop.

As it's getting late, I will address one fundamental question. You ask:

"But he can't have it both ways: either cutting these rights is a big issue which will benefit company profits (which does lead to increased hiring and help reduce unemployment) or it is a drop in the ocean and have little effect, in which case, why is he so upset?".

It will have little effect on (un)employment rates. But it'll be a hefty gift to crap bosses and a kick in the teeth at the expense of bullied or cornered people with nowhere else to turn. And you do realise that there are some crap bosses out there, dont you? Just like there are crap doctors, bus drivers, journalists, football players and waiters. Bosses though can do no wrong in Magic Toryworld.

Oh and I like the way you gloss over the stuff I repeated many a time already and over which I challenged you many a time before: the patent fact that British bosses already have plenty of time and opportunities to fire people. In fact, not even to fire people, but to tell them not to bother the following morning.
You really do speak as if the current system was like bleedin North Korea. Get real.

But -in brief- your trite and tiresome references to the Soviet Union (yaaaawn), or the fact that a "nice break" happened to you ("meeee") while you were working as a temp (hence it should be the case for everybody, natch) are not going to do much to substantiate your point.

Less so the inconsistency of rubbishing the OECD data ("Statutory employment rights, whatever the OECD's metrics, are a poor indicator of employment conditions.") while endorsing hook line and sinker much feebler ones that happen to tickle your fancy.

Or the selective bit you choose to quote from the Australian link, just one line, out of context, from a whole a chapter -oh the irony- which debunks the myth of "casual employment as a short-erm bridge into better work".

Or, the poor taste of "Having criticised Chris Dillow's links on the grounds that they're obsolete and foreign", except that they're not foreign to me, caro amico.

And I could go on forever. In brief, a microtale of someone who, honestly enough, admits that he met some luck along his path - therefore expecting the whole world, regardless of circumstances, to get their ass into gear and reach for the stars as well. Or, at worst, a world of employment where "stakhanovite effort will get you a couple of hundred quid extra in your pocket at the end of the month, with tickets to a football match and hand-written note from the boss that a couple of days extra paid holiday". Sure.

Coz that's run of the mill chaps, isnt it? If it happened to Jackart...

The consolation though is that you repeatedly write:

"more evidence is provided that job insecurity is a bad thing. No-one disagrees."
In which case, whats all the fuss about?

Stan Moss said...

So basically, decades of economists and experts fighting against downturns and scratching their heads in an attempt to fight ciycles of unemployment and poverty or identify patterns of job satisfactions...

If only Jackart had told the world before.

Make everyone sackable 100% and, voila, we're ALL happy, wealthy and satisfied. Oh...and national productivity will fly.

claude said...

Given that anecdotes are being thrown left right and centre ("me" and "my dad" and "my mates"), here comes my anecdote (which is partly what inspired this blog entry two days ago).

The other day I spoke to a friend who had just finally landed a permanent job after 14 (FOURTEEN) years of hopping from casual to short-term and from temping to casual again one after the other.

She told me how, for the first time in years, she felt happy professionally and how she wanted to perfom to her best and give all she's got as she feels proud of having a "proper" job. "The long-term rewards will finally make it worth my while", she said (obviously I dont remember the exact quote).

She added that in her last two short-term jobs she was slacking off, losing interest and feeling increasingly depressed at work. She just couldn't be arsed to do anything that wasn't the minimum necessary because she knew that there just were no incentives either way.

gastro george said...

The idea that job insecurity is a boon to business is frankly barmy - unless your line of business can be done by monkeys.

For any business with any level of skill, a big problem if you have a turnover of staff is training and knowledge retention. Your staff should be an asset. Without staff that are skilled and understand the business, you're toast.

But I guess the emphasis of this ideology merely shows the direction British business has been taking in recent decades - away from skilled profitable work towards low-skill call centre work. Work that will be more easily done by India and China. Not a model being taken by successful Western economies.

Jackart said...

I'm not throwing anecdotes about. I linked to research and quoted the same paper you did.

My point is simple. Job insecurity is not particularly amenable to legislation, temp and casual work is not an entirely bad thing, Good management should be encourageed as it can't be compelled.

All I'm asking is that you accept there IS a trade-off between unemployment and employment protection. Isn't it naive and simplistic to believe that you can have something for nothing? Isn't it naive and simplistic to believe state action is the answer to everything?

Oh, and I think Stan's catching on!

claude said...

you are being dishonest because you insist on portraying "the Left"'s point of view as the one that says that ALL bosses are bad, that NOBODY should EVER be sacked EVER, and that the STATE should armour every single employee til the day they pop their clogs.

It's obvious that it suits your argument if you portray the opponents as some sort of conveniently made-up strawman ("Isn't it naive and simplistic to believe that you can have something for nothing? "- except that you're the only one saying that, not me).

Until you stop caricaturing other people's viewpoint for the sake of pointscoring, there is little point in debating.

Again, I'm trying to be objective here. You aren't.

I have said in the past that elements of flexibility are good and necessary. Point: however, there is such a thing as too much flexibility. I have said in the past that managers should have the right to dismiss bad/inefficient/whatever workers following the right procedures.

But I also advocate the importance of protecting vulnerable workers from abuses. Abuses that have always existed and need addressing. The same way there are crap fottball players, journalists, doctors and there are crap bosses. There are excellent ones, and I've had the pleasure of meeting plenty of them...but there are also proper crooks around.

You delude yourself that the job market is a level playing field where the a desperate employee (the one with nowt to fall back on) has the same negotiating tools as a multi-million company. Even an idiot would clock that's absolute bullshit.

I say it loud and clear that the same way there are workers who take the piss, there are also bad and unscrupulous bosses. To you, instead the latter category is infallible and god forbid a negative word is ever said to deal with the issue.

The way you are debating this issue, I don't see any will to be objective whatsoever on your part.

Jackart said...

I used the phrase "naive & simplistic" because that's the phrase you used over at mine (now deleted for some reason.)

I am trying to be objective.

I too am against abusive practices, which is why I don't have a particular problem with a minimum wage for example (not that I think it achieved much). I just think that a dynamic job market gives workers more options is better than counterproductive legislation. Bad bosses deserve to have their workers walk out. There are vulnerable workers, but they are better served by a job market where another job can be had easily than an over-regulated one where the most vulnerable (and in economic terms, with the lowest productivity) will never be hired. by anyone.

A further point. If you have strong job protection, you ensure widespread casualisation by splitting the workforce into highly protected insiders with jobs they can't be fired from, and casual outsiders who have little prospect of a permanent job.

This is what has happened in France.

If casualisation and temping you're against, you need to make it less risky to take someone on on a proper contract.

We both want the same thing: full employment and a richer country and opportunity for all. It's just your methods for getting there have failed over and over. The state is NOT your friend!

claude said...

That's better, Jackart, that's better.

The key is to provide enough protection and enough flexibility without creating an Italian-style situation (blog post coming up, time permitting) where you have a tier of super-protected employees and another tier of people who are literally thrown crumbs ("If casualisation and temping you're against, you need to make it less risky to take someone on on a proper contract." - that's exactly my view).

"It's just your methods for getting there have failed over and over. The state is NOT your friend!".
And so has "yours". Places where workers have no protection whatsoever create monsters (Dubai springs to mind).

By the way, yeah, one of my comments at yours disappeared yesterday...Just so that you know.

Blogger does strange things sometimes.

Jackart said...

So you and I would draw differet lines of protection vs flexibility, but that's the joy of democratic politics. Acceptable and functioning compromises are thrashed out over time. Tories broadly accept the welfare state post '45 and Labour accept that state ownership of industry was idiotic post st Maggie of Thatcher.

Your post, though suggests that you think the Tories are motivated by class loyalty towards the bosses. Is that what you think?

Finally, the remaining issue is the protection/employment trade-off, which you don't seem to admit esists, because in my view that swings the balance towards flexibility and away from protection somewhat.

claude said...

"the remaining issue is the protection/employment trade-off, which you don't seem to admit esists, because in my view that swings the balance towards flexibility and away from protection somewhat."

Which is where we disagree. Take the years between 1976 and 2011 (35 years), Germany has enjoyed lower unemployment rates than the UK all the way between 1976 and 1995 and again since 2009. 22 years out of 35 (and consider also absorbing the shockwaves of 18 million people from the former DDR) with stricter labour laws and still lower jobless rates.

The US has the most flexible employment laws in the Western World. Their unemployment rate has been looking sorry for years now.

Jackart said...

So you think there's something - employment protection in this case - which can be had for nothing?

Comparing 2 countries is extremely poor way of teasing out the cause and effect. Germany has endured 10% unemployment for most of the last decade as did france. This was usually blamed on an overregulated employment market. True, for the last couple of years, The UK (which incidentally has been heading backwards in business freedom under Labour) and the USA are more volatile and are currently enduring high unemployment. You're data mininig to support your case.

Unemployment is not constant: it is a statistical result of two fast flowing streams: people entering the job-market from education for example, or redundancy; and those getting jobs. Even during a recession 10% of people leave the unemployment pool every month, and it is this stream: getting jobs, which is the more variable. Jobs are lost at a more constant rate over the cycle than are created. Thus it makes sense if, and if you're a sensible government you do, want to reduce unemployment, it makes sense to concentrate on job creation rather than job destruction which is much less amenable to government action.

The effect, as I mentioned above of job protection on unemployment is extremely difficult to tease out of much larger cyclical effects of the business cycle. But the effect is clearer in the more volatile seasonable data. Job protection significantly reduces job flows. It can also be teased out of intra-regional data: flexibility reduces (some) unemployment. The coalition's policy is a step towards creating a more dynamic job market that has a better chance of creating full employment than ever stronger job protection for the decreasing band of workers lucky(?) enough to secure a job for life, ever will.

claude said...

"Germany has endured 10% unemployment for most of the last decade".

Basically facts can go fuck themselves.

According to the International Monetary Fund, Germany went over the 10% jobless rate only in 2005.
If you look at other data (the ILO), Germany did so only over three years (2004-5-6).
(see here for details).

Either way, hardly the sentence Jackart spelt out above.

If you want I can take a leaf out of your book and we can start debating with me saying that "during the whole of the Thatcher years the UK had unemployment rates of 35%"...I suppose it would make my argument automatically more dramatic.

So you look at the UK model under Thatcher of extreme market deregulation and hammering the Unions and you look at the German model (and REMEMBER the toll that reunification had, having to re-absorb 16-18 million of incredibly poor people) over the last 31 years and you tell me which country had the highest jobless rates. It's a matter of simple maths.

"it makes sense to concentrate on job creation rather than job destruction which is much less amenable to government action."
Ideological Rant Alert. Stop it.

You wanna see some systematic "job destruction"? Look at the millions your idols literally destroyed in the 1980s, including when Thatcher flogged off £100bn of taxation-created assets for around half that price in the name of the Free Market Bible. Talk about economic competence...