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
Arts and Entertainment
The Doctor and Clara have their first real heart to heart since he regenerated in 'Deep Breath'
TV
Arts and Entertainment
Jamie Oliver
filmTV chef Jamie Oliver turned down role in The Hobbit
News
The official police photograph of Dustin Diamond taken after he was arrested in Wisconsin
peopleDownfall of the TV star charged with bar stabbing
Life and Style
tech
PROMOTED VIDEO
Arts and Entertainment
Jeremy Clarkson, left, and Richard Hammond upset the locals in South America
tvReview: Top Gear team flee Patagonia as Christmas special reaches its climax in the style of Butch and Sundance
News
people
Sport
Ashley Barnes of Burnley scores their second goal
footballMan City vs Burnley match report
Arts and Entertainment
Peter Mayhew as Chewbacca alongside Harrison Ford's Han Solo in 'Star Wars'
film
News
i100
Arts and Entertainment
Man of action: Christian Bale stars in Exodus: Gods and Kings
film
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Arts and Entertainment
Tracy Emin's 1998 piece 'My Bed' on display at Christie's
artOne expert claims she did not
Life and Style
Apple showed no sign of losing its talent for product launches with the new, slightly larger iPhone 6 making headlines
techSecurity breaches and overhyped start-ups dominated a year in which very little changed (save the size of your phone)
Arts and Entertainment
Catherine (Sarah Lancashire) in Happy Valley ((C) Red Productions/Ben Blackall)
TV
Arts and Entertainment
Clueless? Locked-door mysteries are the ultimate manifestation of the cerebral detective story
booksAs a new collection of the genre’s best is published, its editor explains the rules of engagement
Sport
Robin van Persie is blocked by Hugo Lloris
footballTottenham vs Manchester United match report
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

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

iJobs Job Widget
iJobs Money & Business

Selby Jennings: VP/SVP Credit Quant- NY- Investment Bank

Not specified: Selby Jennings: VP/SVP Credit Quant Top tier investment bank i...

Selby Jennings: Quantitative Research | Equity | New York

Not specified: Selby Jennings: Quantitative Research | Global Equity | New Yor...

Selby Jennings: SVP Model Validation

Not specified: Selby Jennings: SVP Model Validation This top tiered investment...

Selby Jennings: Oil Operations

Highly Competitive: Selby Jennings: Our client, a leading European Oil trading...

Day In a Page

A timely reminder of the bloody anniversary we all forgot

A timely reminder of the bloody anniversary we all forgot

Who remembers that this week we enter the 150th anniversary year of the end of the American Civil War, asks Robert Fisk
Homeless Veterans appeal: Former soldiers pay their respects to a friend who also served

Homeless Veterans appeal

Former soldiers pay their respects to a friend who also served
Downfall of Dustin 'Screech' Diamond, the 'Saved By The Bell' star charged with bar stabbing

Scarred by the bell

The downfall of the TV star charged with bar stabbing
Why 2014 was a year of technological let-downs

Why 2014 was a year of technological let-downs

Security breaches and overhyped start-ups dominated a year in which very little changed (save the size of your phone)
Cuba's golf revolution: But will the revolutionary nation take 'bourgeois' game to its heart?

Will revolutionary Cuba take 'bourgeois' golf to its heart?

Fidel Castro ridiculed the game – but now investment in leisure resort projects is welcome
The Locked Room Mysteries: As a new collection of the genre’s best is published, its editor Otto Penzler explains the rules of engagement

The Locked Room Mysteries

As a new collection of the genre’s best is published, its editor explains the rules of engagement
Amy Adams on playing painter Margaret Keane in Tim Burton's Big Eyes

How I made myself Keane

Amy Adams hadn’t wanted to take the role of artist Margaret Keane, because she’d had enough of playing victims. But then she had a daughter, and saw the painter in a new light
Ed Richards: Parting view of Ofcom chief. . . we hate jokes on the disabled

Parting view of Ofcom chief... we hate jokes on the disabled

Bad language once got TV viewers irate, inciting calls to broadcasting switchboards. But now there is a worse offender, says retiring head of the media watchdog, Ed Richards
A look back at fashion in 2014: Wear in review

Wear in review

A look back at fashion in 2014
Ian Herbert: My 10 hopes for sport in 2015. Might just one of them happen?

Ian Herbert: My 10 hopes for sport in 2015

Might just one of them happen?
War with Isis: The West needs more than a White Knight

The West needs more than a White Knight

Despite billions spent on weapons, the US has not been able to counter Isis's gruesome tactics, says Patrick Cockburn
Return to Helmand: Private Davey Graham recalls the day he was shot by the Taliban

'The day I was shot by the Taliban'

Private Davey Graham was shot five times during an ambush in 2007 - it was the first, controversial photograph to show the dangers our soldiers faced in Helmand province
Revealed: the best and worst airlines for delays

Revealed: the best and worst airlines for delays

Many flyers are failing to claim compensation to which they are entitled, a new survey has found
The stories that defined 2014: From the Scottish independence referendum to the Ice Bucket Challenge, our writers voice their opinions

The stories that defined 2014

From the Scottish independence referendum to the Ice Bucket Challenge, our writers voice their opinions
Stoke-on-Trent becomes first British city to be classified as 'disaster resilient' by the United Nations

Disaster looming? Now you know where to head...

Which British city has become the first to be awarded special 'resilience' status by the UN?