ILO: The future labour market in dire straits, time for action

“Technological changes do not happen without national politicians and the social partners having the power to influence the development. Employment, education and social policies must help stop the rising inequalities and uncertainties in the labour market. We must take advantage of the opportunities that new technologies bring, while also making sure nobody become outsiders. We should have a socially fair and sustainable working life,” said Finland’s Minister of Justice and Employment Jari Lindström when he opened the seminar ‘The future of work and new ways of working in a global and Nordic perspective; Future priorities for the ILO after the centenary’. The seminar was held in Helsinki on 5 September and kicked off the Nordic debate on the future of work ahead of the ILO’s centenary in 2019.  

Determination is just what the ILO’s Raymond Torres asks from all parties, including the social partners. New questions need addressing: How do you deal with new technology and new ways of working? Should you remove the link between job security and employment? Should you make plans for a social safety net which encompasses the entire global supply chain? Raymond Torres thinks politics is now lagging behind developments in the labour market. Something needs to be done.

“Work is about to change in fundamental ways. We see more inequality and insecurity in the labour market,” Raymond Torres said in his opening speech.

He is the Director of the International Labour Organisation (ILO) research department. The organisation has initiated a global debate on the future of work which will culminate in a program for the ILO’s work over the next 50 years.

“If there will be another 50 years,” Raymond Torres tells the Nordic Labour Journal thought-provokingly.

The development is driven by mega trends like globalisations, changing technologies including digitalisation, automation and robotisation along with demographic changes, war, instability and migration. The danger signs are mounting up, but it is not entirely a black and white picture.

The need for life-long learning

“We don’t know whether there will be enough jobs for all. In future, jobs which can be done by computers, robots and artificial intelligence can disappear.  We still don’t know what will happen, and not all jobs will disappear. Professions where human contact is crucial, like health care, education and within art and culture, will not disappear,” says Raymond Torres.

The technological progress and the fundamental changes to working life also lead to what he characterises as “the huge need for education”. 

“Not just for education, but for life-long learning to allow people to update their knowledge in order to fit new labour market demands. Nearly everyone says they want to learn, but not everyone gets the chance to do it,” says Raymond Torres.

A fragmented labour market

A fragmented labour market is another emerging pattern. Standard employment contracts which regulate the relationship between employer and employee are no longer the standard. An increasing number of people are outside of the organised labour market. They are freelances and sole traders, or crowd workers who offer their services over the internet. They are the ones who are both employed by a company and work for themselves.

“The positive thing about being a freelancer is that you can control your own working hours, but this can also be exploited by the employer,” says Raymond Torres.

“We already have zero-hours contracts. This means the employee works when the employer needs manpower. With zero-hours contracts the employer doesn’t have to worry about sacking people. Zero-hours contracts are on the increase in the Netherlands and in the UK.

“This could be both a positive and negative development. The chance to work independently is good for those who want to live and work in rural areas where there aren’t that many jobs, but employers can exploit the system, pay less and offer zero insurance against illness or accidents.”

Shrinking middle classes

A third tendency highlighted by Torres is the rising inequality and the shrinking middle classes. The ILO World Employment and Social Outlook 2015 shows that only 5.7 percent of low-pay workers have permanent jobs. Among middle-income earners the number is 13.7 percent while people on higher wages are far more often in permanent jobs; 64.2 percent are in full-time permanent employment and 12.5 have part-time permanent jobs (see graph).

“People with higher education in higher positions have access to more education and learning and earn more and more, while others experience stagnation. So far the norm has been that people’s incomes have been increasing steadily along with productivity, but that is no longer the case. This is a global phenomenon. We see a tendency of shrinking middle classes. This could lead to more youth unemployment and it can influence social stability.”

One reason for the development we see today, thinks Raymond Torres, is the fact that politics is not keeping pace with the technological development. Therefore politics must change and adapt to the new things that are happening.

“For instance, social benefits like pensions and unemployment benefits are based on a stable labour market with stable jobs, but the social benefit systems should also include freelancers.”

How do you achieve this change when those who should be included are outside of the established systems?

“Both employers and trade unions must adapt. Trade unions are built around employees, but fewer and fewer people are employed, especially in larger companies. This is currently being discussed in the trade union movement.”

Policies for reality

One of the aims ahead of ILO’s centenary is to inspire new policies which are adapted to realty. 

“We hope governments will embrace this new reality and adapt policies accordingly. One suggestion which has been debated is the universal basic income,” says Raymond Torres, who personally is not particularly keen on the idea. He believes a universal basic income can lead to cuts to other social benefits.

But it is not up to him to decide, he says. Policy making at the ILO is built on collective decisions based on the tripartite system. These are not decisions employees can make.

Individual activity accounts

Another possibility which he envisages is to change the entire social security system to create a system where social benefit is organised as a portfolio for the individual. This could include transferable rights which individuals could carry with them regardless of being employed or freelance.

“France has an individual activity account trial going, and the government has decided that it will be introduced from next year. This system could let you transfer rights between different social benefits. If you loose your job, you could spend the money on taking further education or you could postpone your retirement age in order to save money for something else. This can also be a system which irons out inequalities in the social security system, and could be transferable between countries too,” he continues.

One question which has been raised about this system is whether it can include healthcare. Raymond Torres thinks that must be a collective system since the expenses and needs connected with healthcare will vary greatly from person to person, and nobody can predict who will fall ill or have an accident.

The responsibility of multinationals?

Another aim for the centenary is to create international labour standards. This has been considered to be the responsibility of national politicians. Now there is a debate about whether this should also be the responsibility of multinational companies, which could be responsible for health and security throughout the global supply chain, where subcontractors would also carry some responsibility.

Nordic challenges

The ILO is based on the tripartite cooperation where representatives for authorities, employers’ and employee organisations participate. The cooperation between the social partners and the tripartite cooperation is also at the heart of the Nordic model. Even if the role of the state varies somewhat between the different countries, there is a common acceptance that collective negotiations based on high union membership numbers is the basic way in which the labour market should be regulated – especially wage formation, as head of research Kerstin Ahlberg from the University of Stockholm pointed out in her talk on ‘the Nordic perspective on new opportunities and challenges in a changing labour market’ 

“It is generally agreed that the EU must not interfere in the Nordic countries’ collective bargaining system,” she said, and accepted that this attitude had its challenges, for instance when it comes to the issue of a legally binding minimum wage. She also highlighted the challenges surrounding how you include new categories of workers into the collective bargaining system.

“To integrate new categories of both employees and employers is probably a more efficient strategy than keeping them out. It is better to normalise than to marginalise,” she felt.

Moreover: How do you defend and promote collective agreements on a trans-national level?

“Nordic trade unions could play a more active role here, rather than fearing the impact on national agreements. We need to continue to develop a framework for a transnational social dialogue,” Kerstin Ahlberg said.

Major changes to the cooperation between the parties

The fundamental changes to work affects not least the parties themselves. For now we know little for sure about the future of work. This was highlighted by all. Still there are many questions and changes linked to the tendencies we are already seeing.

Anu-Hanna Anttila is head of research at the Finnish Metalworkers’ Union. She talked about the plethora of challenges facing the industry, like digitalisation, robotisation, automation, and industrial internet and 3D printing.

“This is here now,” she said, and underlined that this calls for better skills and that it puts new demands on education when for instance manual work is replaced by computer work. It also means more work machine to machine in addition to face to face, she said.

Anu-Hanna Anttila highlighted the dilemmas which can emerge in the workplace if new workers with high skills levels have locally negotiated wages. What happens then to minimum wages and good collective traditions? If more manual work is replaced by work on computers, what does that mean for wages? Will the new industry worker be paid in a fragmented labour market based on individual tasks like Uber’s drivers are paid for each individual trip?

And how will the changes to working tasks influence manual labourers’ identity? Will they become more individualised and middle class?

These were among the many questions about the future of work presented by Anu-Hanna Anttila. Tero Tuominen from the Federation of Finnish Technology Industries represented the employers, and he clearly underlined the need for considerable reforms. It has already been decided that there will be no more centrally negotiated collective agreements in Finland from next year. Tero Tuominen had clear expectations to the future of work.

“Negotiations about wage and working condition must happen locally in the workplace the tasks and responsibilities are best understood,” he said.

“The wage system should be performance related. Rather than general wage increases, salaries must be set according to how challenging the tasks are, the workers’ skills level and the results produced. Working hours should be regulated to fit customers’ demands and needs. Most of the work must therefore be made when the demand is large, and holidays should be taken during quieter times.

“Wage and reward systems must be used by the companies to attract good workers. The wage systems in the collective agreements can provide the necessary tools for company-specific wage and reward systems.”

Working hours can be regulated in line with many criteria, must meet the needs of both customers and employees, and they must be flexible.

Collective agreements and regulations can still form the basis for local negotiations. They should provide the tools for company-specific systems and allow for flexibility when it comes to the amount of work done. Local negotiations should be at a more individual level.

When jobs disappear and growth falls, all parties must find new ways to address such developments. The discussion initiated by the ILO ahead of the centenary have begun. The aim is to find a completely new platform for how to cooperate over the coming 50 years – if the ILO gets its way.