Hamish McRae: Forget the old certainties – the times are changing faster than you think

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The Independent Online

Reading this on your laptop? Recessions speed up structural change in the sense that they make things that almost certainly would have happened anyway take place more swiftly. We can see that now, in the big, with the way in which Asian growth rates are surpassing those of North America and Europe. There has been a lot of attention paid to that, not least in these columns.

Rather less attention has been paid to the recession's impact on structural change in the small. Yes, the way people use the new technologies as consumers is very much on the radar. For example, we in the press are finding we are increasingly being read online. That is great for journalists, because we can reach a much wider audience, but it is not so great for our industry because, as yet, online readers produce much less revenue than print ones. What is not so much on the radar is the way we use the technologies as producers.

This shift is not so dramatic as what is happening on the consumption side but it is almost certainly more durable and more important. We will spend our leisure differently, to be sure. But it will, over the next generation, change our lives even more as we spend our working time differently.

Of the several strands to this I want to focus here on just three: the greater movement between different jobs; the shift to part-time and self-employment, and the growth of teleworking.

Movement between jobs, at least in the private sector, has become ever faster. A famous presentation on YouTube, made to the Sony executives last year, discusses the way the world is changing. Among some pretty stunning facts, it notes that India has more A-grade students than the total number of students in the US. But the one fact that I found most startling was that only half a typical company's workforce had been with their employer for five years.

The point about that is that companies have to manage a completely fluid pool of people. They have to try to produce their products or services with staff who are moving in and out all the time. This leaves them with little folk memory of what goes right and what goes wrong, which has been a particular problem in the banks. Company-run pensions become an irrelevance for most of the staff. The idea of career-building is something people do for themselves rather than assuming an employer might do it for them. As for that traditional concept of loyalty, the attitude chronicled by Michael Lewis in Liar's Poker has become pretty universal. You remember the story: the head gilts trader in London was off to Goldman Sachs, and the Salomon top brass suggested that he might pause and consider his loyalty to the firm. His reply: "You want loyalty, hire a cocker spaniel."

That has been greatly reinforced by recession. Some companies, not just the big manufacturers, are shedding huge proportions of their workforces. Even supposedly safe jobs in banking and the law are no longer safe at all. But, and this leads to the next point: while jobs are much less secure, they are also becoming more flexible.

The second theme is that companies are responding to this downturn more flexibly and more thoughtfully than they did in the past. They have to cut costs as demand declines but they need to maintain capacity to cope as and when demand returns. You can see this in all sorts of ways, including people taking unpaid leave or going on to shorter working weeks.

It will take a while for the statistics to catch up with these trends, because the recession only started to bite a year ago but the absolute number of people joining the unemployment register is lower than you might expect given the severity of the downturn. This must have something to do with people shifting to part-time employment. That would square with the trend for older workers to become a rising share of the workforce. Certainly that is the anecdotal evidence and I expect it to be confirmed in a couple of years' time when was have the full data.

The trend I find most fascinating of all, though, is the trend to teleworking. Here I have been unable to find any recent stats at all, so I have gone back to the last Office for National Statistics survey in 2005 and done some rough-and-ready calculations as to what might have happened since then. These are shown in the graph.

Teleworking, that is either working from a home office or working from a variety of locations using home as a base, is approaching 10 per cent of the workforce. Total home-workers probably now account for about 13 per cent of the workforce. It has probably speeded up with the widespread adoption of broadband and the growing use of mobile links. Most of these people are involved in telecommunications, but the proportion that is not seems also to have been rising.

When the figures were last done, some two-thirds of teleworkers were self-employed. It would be surprising if that proportion had not increased in recession, given the anecdotal evidence. Regionally, the pattern was for teleworking to be more evident in London and the South-East that the rest of the country. That trend may have increased too. So we are moving towards a situation where, nationally, a little under 10 per cent of the workforce is home-based, self-employed teleworkers and in the South the proportion could be well into the teens.

Think of the implications of all this. We have government policy still geared towards people working for employers. Yet more and more work for themselves. We have all sorts of legislation about the workplace but for more and more people that means home, a hotel room or an airport lounge. We have directives about working hours, which are a fat lot of use if you are self-employed. We have private sector pensions that are supposedly provided by employers but people move jobs so fast that they spend little time with each – and by the time they retire several of their previous employers will not be there at all.

I have not begun to look beyond these themes to, for example, the trend for people to spend more of their careers abroad, or for more of our own workforce to come from foreign countries. Nor have I gone into the numbers of people who live in one country and work in another. If you are on screen, no one needs to know where you are; all they need to know is that the emails get answered promptly. But you see the point. We have a set of responses from the authorities – and attitudes among many of us – that are caught up in a world that is disappearing fast. The old certainties are gone. We can't rely on others. We have to rely on ourselves. And the shifts I am describing have only just begun.

A final footnote: this column is written partly from my home office ... and partly on a train to Scotland. We are all teleworkers now.


One of the London free-sheets proclaimed last week that the recession would end in 40 days. True? Well, yes, in the technical sense that growth will almost certainly be positive in the third quarter, so I suppose you could say that the recession has ended by 30 September. But it looks as though the bottom of this cycle was in May or June and we will get a bit of growth in the months ahead. Retail sales, by the way, are surprisingly strong.

Unfortunately, that gives no indication about the nature of the upturn. All we can say is that it is unlikely to be a straight-line climb. It is quite possible there will be a double-dip. Still, it is a relief things are not still heading down and I think Goldman Sachs's growth forecast at around 1.7 per cent next year feels about right.

What is truly dreadful, though, is the state of our public finances, as the April-to-July numbers revealed last week. Part of the problem is the overspending by government. It is now spending £100 for every £75 it receives in tax, giving it the largest deficit relative to GDP among the big developed countries. More worrying still is the state of tax revenues. July is usually a strong month for corporation tax, so government accounts should be in surplus. They were in the red. VAT revenue has collapsed; income tax is sharply down. I wonder how quickly this might recover once growth restarts.

Even in the boom years, revenue came in consistently below the Budget forecast. That was why Gordon Brown kept missing his borrowing targets and had to fiddle around with the cycle timing to claim he had not broken his fiscal rule. So there was a structural weakness that seems to have become far, far worse. If tax revenues don't recover, well, it all gets worse than it looks even now.

I am not so worried about the economy, for it may well surprise on the upside. But the fiscal position looks likely to surprise on the down – and I am not sure that the next government, notwithstanding David Cameron's warning of the danger of a debt default, has any idea of what is going to hit it.