Choose to Act: A new social contract

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This article is part of a series in which OECD experts and thought leaders — from around the world and all parts of society — address the COVID-19 crisis, discussing and developing solutions now and for the future. Aiming to foster the fruitful exchange of expertise and perspectives across fields to help us rise to this critical challenge, opinions expressed do not necessarily represent the views of the OECD.

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The coronavirus pandemic hit the world at a time when governments were ill-prepared to cope. Years of austerity and regulatory failure to keep pace with the impact of globalisation had chipped away at working people’s collective security and undermined the resilience of our public services and institutions. Whole communities felt abandoned.

But the experience of 2020 has shown that we have the tools to build a new social contract if we choose to act. Governments worked fast to put in place emergency financial support, workers and business worked together to deliver safer workplaces, and some of the holes in the safety net were swiftly patched up. We can build on this foundation to deliver a better recovery. But we must learn from the mistakes of the past. COVID-19 exposed and worsened deep inequalities of wealth and power that have hampered recovery. The rise of the radical right and white nationalism is a symptom of the problem. Governments must address the root causes. Social dialogue and collective bargaining need to be front and centre on the path to recovery—and working lives must be more fairly rewarded.

More on the Forum Network: A New Societal Contract for a New Era: Why it’s time to rethink health systems by Ben Davies and Marion Birnstill, Johnson & Johnson

Moving from austerity to green and job-rich investment

The response to the financial crisis was to cut government investment, assuming that the private sector would step in to help deliver growth. We now know that the results of that approach were to slow the recovery badly,[1] with workers—in the United Kingdom more than anywhere—experiencing a decade of wage stagnation. The promise that work should pay was broken.

This time must be different. New challenges, such as worker surveillance and data privacy, demand new rights. We also need to act fast to tackle climate change. Governments must ramp up investment to meet the goal of net-zero emissions, injecting demand into the economy. And for this investment to achieve its potential to deliver decent jobs, we need a reform of business models too. The shareholder-first model has helped contribute to widening inequality.[2] Businesses should be required to consider the needs of a wider range of stakeholders and must take responsibility for all workers within their supply chain, with new due diligence rules. Conditionality attached to business rescue packages is key too. And the public rightly expects corporations to pay their fair share of taxes.  

Better social protection must be at the heart of a new social contract.

Moving from insecurity to security at work

Work has become less secure for many workers over several past decades. The systematic undermining of collective bargaining systems has played a large part in that decline. But the failure of regulation to adapt to new attempts by business to use atypical contracts and online platforms to help evade responsibilities and shift risk onto workers has also played a role. In the United Kingdom, many people were shocked to realise that hundreds of thousands of care workers at the frontline of the crisis were employed on zero-hours contracts, failing to guarantee regular hours or income. The delivery drivers who many more people relied on were often even more precarious—trapped in false self-employment without access to sick pay or a minimum wage.

The best way to give workers greater security is of course through collective bargaining. We have welcomed the increased recognition the OECD has given to the importance of trade union negotiation, including at sectoral level, in delivering a better quality of work.[3] The United Kingdom has a long way to go in recognising these clear findings. But we need regulatory change too. The ILO’s commission on the future of work called for a Universal Labour Guarantee, where, “All workers, regardless of their contractual arrangement or employment status…enjoy fundamental workers’ rights, an ‘adequate living wage’, maximum limits on working hours and protection of safety and health at work”.[4] Now is the time for governments to push ahead with meeting this commitment—challenging corporate voices that try to argue that the future of work is one in which workers are ever more vulnerable.

Read more articles on A New Societal Contract for the Recovery in our Dedicated Room

Moving from discrimination to dignity

The Black Lives Matter movement reminded the world in 2020 that the struggle for racial justice is far from over. An important way we can move forward in this fight is to reduce racial disparities in work. Jobs and income determine a range of other negative outcomes in peoples’ lives—including poverty, overcrowded housing and bad health—and there are stark differences in prospects. In the United Kingdom, Black workers aged between 16 and 24 are almost three times more likely to be unemployed than their white counterparts.[5]

Action to address racial inequalities is closely linked to class and other inequalities. Gender disparities at work, and the disadvantage and discrimination faced by disabled workers and LGBT+ communities must be addressed. Giving people voice and collective power in the workplace through stronger unions provides dignity for all workers, and helps bind communities together against the far right.

From a threadbare safety net to new forms of security

Austerity following the financial crisis ripped new holes in social safety nets that had already seen decades of under-investment, fuelled by a mistaken belief that decent social security was a barrier to employment growth. This trend has been experienced sharply in the United Kingdom, where billions of pounds were taken out of the social security system after 2010. Even after an emergency cash injection during the pandemic, our main out of work benefit is worth just 17% of average wages,[6] and we face rising levels of child poverty. Almost two million people have no access to sick pay because they earn too little, and the level of support is likewise far too low. Too many workers have missed out on digital skills and education which are vital to a just transition and boosting productivity.

Better social protection must be at the heart of a new social contract. Social protection must address risks we have known about for centuries, ensuring that everyone has access to decent levels of support when they are out of work, when they are sick, and when they retire. But it should address new challenges too—with a universal guarantee of funded and quality training to help those whose job is at risk due to technology or the need to transition away from carbon-intensive business models.

When we look back on 2020 we should see it as the year we took the decision to rebuild our collective security. A better recovery—greener and fairer—is possible. It needs to start now.

References

[1] See for example Laurence Boone, OECD Chief Economist, December 1st 2020 ‘Turning hope into reality’ at https://oecdecoscope.blog/2020/12/01/turning-hope-into-reality/ which argues that “this is not the time to reduce support, as was done too early in the aftermath of the Global Financial Crisis”
[2] See, for example, TUC and High Pay Centre (2019) How the shareholder-first business model is contributing to inequality at https://www.tuc.org.uk/research-analysis/reports/how-shareholder-first-business-model-contributing-inequality
[3] OECD (2019) Negotiating our way up: collective bargaining in a changing world of work at https://www.oecd.org/employment/negotiating-our-way-up-1fd2da34-en.htm
[4] ILO (2019) Work for a brighter future – Global Commission on the Future of Work at https://www.ilo.org/wcmsp5/groups/public/---dgreports/---cabinet/documents/publication/wcms_662410.pdf
[5] See Patrick Roach (11th December 2020) ‘Why I’m chairing the TUC”s new anti-racism taskforce’ at https://www.tuc.org.uk/blogs/change-coming-why-im-chairing-tucs-new-anti-racism-task-force
[6] TUC (2020) Fixing the safety net: Next steps in the economic response to coronavirus at https://www.tuc.org.uk/research-analysis/reports/fixing-safety-net-next-steps-economic-response-coronavirus 

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Frances O Grady

General Secretary, Trades Union Congress

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