Welfare system must be as flexible as the workforce

Hamish McRae on the labour markets of the future

How do you reorganise a welfare state when you don't know what will happen to the structure of employment in the next century? This is the giant question behind the speeches this week at the Labour conference and getting it wrong will have catastrophic consequences for people in 50 years' time.

Look at the way in which the continental European welfare model was designed for a world where there were five or more workers for every dependent and unemployment was below 4 per cent. That model cannot continue in a world when, in another 20 years' time, there will be fewer than three workers for every dependent, and where the labour taxation to pay for the system helps create double-digit unemployment.

So what might be the structure of the labour market in another couple of generations' time, when the people now entering the workforce will be drawing their pensions? Well, 50 years really is a very long way off, but we can catch some ideas about the way the labour market might develop in the early years of the next century by looking at present trends, pondering how secure they are and how far they might run.

The trouble is that the trends are all over the place. Start with something as basic as employment, the proportion of people of working age that are employed. In the US and Japan that has been steadily rising over the past 25 years but in the UK it has been stable and in continental Europe it has been falling. The general trend of unemployment has been down in the US over the past 15 years whereas in continental Europe it has been up. True, there has been a universal growth of the proportion of women in the workforce. There has also been widespread growth of part-timers as opposed to full-time workers, but even here you have to be careful because the trend seems to have stopped in the US, as the graph on the left shows. Finally, while there has been a general rise in self-employment, the rise has been particularly strong in the UK and has not been nearly so strong on the Continent.

When the figures don't help one has to rely on instinct and hope the figures will catch up. So here are some necessarily tentative propositions about the workforce of developed countries in the future.

Proposition one is that the shift of jobs away from men and towards women will tail off. The shift was a one-off event associated with the decline in manufacturing employment and the rise of service industries. Now that manufacturing is down to about 18 per cent of total employment in the UK, much of that shift is over. It may fall further but the dramatic collapse is past; by contrast, while service sector employment will continue to grow, the new sources of employment will draw in men as well as women.

Proposition two is that employment opportunities in general will rise, as they have been doing in the US. The States has gone from having 64 per cent of its working age population in jobs 25 years ago to 72 per cent now; we have gone from 72 per cent down to 68 per cent and the levels in Europe have fallen even faster. The argument behind this proposition is that Europe will gradually shift to a US-style labour market, as the UK has done, on the grounds that it cannot afford (either financially or morally) to keep so many people out of jobs.

Proposition three is that the growth of part-time working will flatten off, or rather, that the somewhat artificial division between part-time working and full-time working will blur to such an extent that it becomes meaningless. That is because the nature of the work contract will itself become less "one size fits all" and more closely tailored to the individual.

This leads to proposition four, which is that the division between temporary and permanent workers will also blur. The general trend in much of the developed world has been for temporary workers to be hired to replace permanent ones: they are either hired directly with people on fixed contracts replacing people on staff, or the entire function is outsourced. In the latter case, though the workers may technically remain full-time workers, their employment will depend on the contractor continuing to win the contract for the work which has been outsourced. (In the US, while there has been considerable growth of temporary employment, when times are good companies prefer to take on permanent staff, as the right hand graph suggests.)

Under these circumstances, many people may prefer to employ themselves, which is proposition five, the continued switch towards self-employment. Indeed it is even possible that self-employment will become the normal form of employment, though perhaps more likely is the possibility that the distinction between employment and self-employment will itself blur.

These propositions may prove right, or they may prove wrong. But since there must be a reasonable chance that at least some of them will be right, any redesign of the welfare state ought to plan to take them into account. It would follow from one that any reform has to be gender neutral: that there has, for example, to be a common retirement age for men and women, insofar as there should be any specific retirement age at all. It would follow from two that any redesign has to be skewed to encourage a rise in participation in the workforce: if the ratio of people of working age to dependents becomes more adverse the only way to offset it is to increase the proportion of people of working age in jobs.

But it is propositions three to five which would have the most striking effect. If the distinctions between part-time and full-time, temporary and permanent, employees and self-employed all blur, then the welfare system has to be designed to cope with infinitely flexible patterns of work.

That is surely the challenge. We still hear the rhetoric that jobs are distributed by employers, despite the fact that nearly one in seven of the workforce is self-employed. If jobs are no longer "one size fits all", the social support system cannot be "one size fits all" either.

Start your day with The Independent, sign up for daily news emails
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Sales Executive / Foreign Exchange Dealer - OTE £40,000+

£16000 - £40000 per annum: Recruitment Genius: A Foreign Exchange Dealer is re...

SThree: Experienced Recruitment Consultant

£20000 - £40000 per annum + OTE + Incentives + Benefits: SThree: Established f...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE 40/45k + INCENTIVES + BENEFITS: SThree: The su...

Recruitment Genius: Collections Agent

£14000 - £16000 per annum: Recruitment Genius: This company was established in...

Day In a Page

The long walk west: they fled war in Syria, only to get held up in Hungary – now hundreds of refugees have set off on foot for Austria

They fled war in Syria...

...only to get stuck and sidetracked in Hungary
From The Prisoner to Mad Men, elaborate title sequences are one of the keys to a great TV series

Title sequences: From The Prisoner to Mad Men

Elaborate title sequences are one of the keys to a great TV series. But why does the art form have such a chequered history?
Giorgio Armani Beauty's fabric-inspired foundations: Get back to basics this autumn

Giorgio Armani Beauty's foundations

Sumptuous fabrics meet luscious cosmetics for this elegant look
From stowaways to Operation Stack: Life in a transcontinental lorry cab

Life from the inside of a trucker's cab

From stowaways to Operation Stack, it's a challenging time to be a trucker heading to and from the Continent
Kelis interview: The songwriter and sauce-maker on cooking for Pharrell and crying over potatoes

Kelis interview

The singer and sauce-maker on cooking for Pharrell
Refugee crisis: David Cameron lowered the flag for the dead king of Saudi Arabia - will he do the same honour for little Aylan Kurdi?

Cameron lowered the flag for the dead king of Saudi Arabia...

But will he do the same honour for little Aylan Kurdi, asks Robert Fisk
Our leaders lack courage in this refugee crisis. We are shamed by our European neighbours

Our leaders lack courage in this refugee crisis. We are shamed by our European neighbours

Humanity must be at the heart of politics, says Jeremy Corbyn
Joe Biden's 'tease tour': Could the US Vice-President be testing the water for a presidential run?

Joe Biden's 'tease tour'

Could the US Vice-President be testing the water for a presidential run?
Britain's 24-hour culture: With the 'leisured society' a distant dream we're working longer and less regular hours than ever

Britain's 24-hour culture

With the 'leisured society' a distant dream we're working longer and less regular hours than ever
Diplomacy board game: Treachery is the way to win - which makes it just like the real thing

The addictive nature of Diplomacy

Bullying, betrayal, aggression – it may be just a board game, but the family that plays Diplomacy may never look at each other in the same way again
Lady Chatterley's Lover: Racy underwear for fans of DH Lawrence's equally racy tome

Fashion: Ooh, Lady Chatterley!

Take inspiration from DH Lawrence's racy tome with equally racy underwear
8 best children's clocks

Tick-tock: 8 best children's clocks

Whether you’re teaching them to tell the time or putting the finishing touches to a nursery, there’s a ticker for that
Charlie Austin: Queens Park Rangers striker says ‘If the move is not right, I’m not going’

Charlie Austin: ‘If the move is not right, I’m not going’

After hitting 18 goals in the Premier League last season, the QPR striker was the great non-deal of transfer deadline day. But he says he'd preferred another shot at promotion
Isis profits from destruction of antiquities by selling relics to dealers - and then blowing up the buildings they come from to conceal the evidence of looting

How Isis profits from destruction of antiquities

Robert Fisk on the terrorist group's manipulation of the market to increase the price of artefacts
Labour leadership: Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea

'If we lose touch we’ll end up with two decades of the Tories'

In an exclusive interview, Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea