Facing up to middle class anxiety

ECONOMIC VIEW

The point made by John Monks in his keynote speech to the TUC yesterday, that the middle classes are now just as vulnerable as factory workers to job insecurity, was well-timed. At the back end of last week there were a series of job cuts by large companies, including those following the Glaxo- Wellcome takeover.

This is not, of course, just a British phenomenon. This week has started with news that Olivetti, the Italian computer and office equipment company, is planning to lose 5,000 of its 33,000 workforce.

But if the choice of subject is well-timed, the analysis is weak. Mr Monks sees the problem very much in British political terms, whereas it is in reality an international economic issue. Thus his suggested remedies, like the adoption of legislation to increase job security on the lines of much of continental Europe, would merely transfer some of the burden from those already in jobs to those who do not yet have them.

Youth unemployment is much more of a problem on the Continent than it is here. (It has also become a problem in Japan, where unemployment among recent graduates is now probably higher than it is in the UK.)

Besides, there are positive aspects of the new job contract: for a start it is honest. Go back 25 years and companies promised a lifetime career - or rather that was implicitly promised in return for such qualities as "loyalty", acceptance of the company's internal disciplines, and not- very-high salaries.

As it has turned out, these old promises are not being honoured: people employed on one basis are being dismissed on another. This is, of course, why so many middle managers now feel betrayed. The new contract, where people are paid to do a specific job (and on average paid vastly more in real terms than they were) but only guaranteed the notice terms specified in their contract, does at least mean what it says.

Honesty apart, there are other advantages. From the point of view of the employer there is obviously more flexibility on costs; but this flexibility can also benefit employees. One of the effects of short-term fixed contracts is that companies will take on people more freely. It is hard to prove this statistically but anyone in the business of managing knows that it is much easier to get approval to offer a short-term contract than a staff job. The result is that companies can try out people who would not normally qualify for staff appointments. If they are good, then they can be offered jobs later.

Yet the fact remains that there are many people who are temperamentally unsuited to this type of employment: they would be prepared to accept a lower income in return for greater stability.

A generation ago there were plenty such jobs in the civil service or in the clearing banks. Now there is a whiff of insecurity even in those former safe havens. While the old security, with all its restrictions, was stultifying for one group of people, the new insecurity is frightening for another.

Statistically, the average time with any particular employer has only fallen slightly in the last 20 years, but there is no doubt the sense of insecurity has been heightened.

So what might Mr Monks have said? Perhaps the best analysis of the changing relationship comes in New Deals*, a book published earlier this year. Its argument starts from the position that we are only part of the way through the revolution and that organisations and individuals both need to develop a new deal (or rather deals) to replace the old job contract.

Mr Monks might have pointed out that this is as much in the self-interest of companies as it is in the interest of workers. At the moment the successive culls of middle management, along with the surge in rewards at the top, is creating an atmosphere that is damaging to corporate health. It is dangerous for a company to have many, maybe most, of its employees hating it. Hardly anyone who actually works as a manager believes that the answer is in the hands of the politicians or the unions. Rather it is in the hands of the parties to the job contract: what they have to do is to renegotiate the deal.

Some such deals are cited in this book. They include the lifestyle contract, where individuals go part-time, balancing work and home duties, while companies have a more flexible cost base. Another is the autonomy contract, where professionals do specific jobs for companies, for which they charge fees. Still another is the development contract, where employers contract to teach employees.

But all these contracts, like the old-style one, are open to abuse and perhaps the most helpful section of the book seeks to teach people how to negotiate deals with employers or (if there is no employment involved) customers. In other words, it is how to make the new system work better, rather than try to recreate the old one.

This is surely the right way forward. There is something unnatural about the hierarchy of a large company. The fact that these firms can be "down sized" is evidence of the waste in the traditional management structure. It is not so much that managers do things inefficiently; they do a lot of things that do not need to be done at all, including much of the traditional personnel function. A vast amount of time has to be spent on minimising the "down time" of highly paid staff. If that staff manage their own spare capacity, all this work is avoided.

But though it is more efficient, it is also much more complicated to manage a series of different contractual arrangements. Companies need to learn these skills.

A role for unions? Yes, but as a teacher and supporter, not as a pressure group calling for legislation. But that is not the obvious message for the annual conference of the TUC.

*New Deals - The Revolution in Managerial Careers, Peter Herriot and Carole Pemberton, John Wiley & Sons.

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