The Labour Party has always been the party supporting working people, and will always do so. But we do need to rethink how employment works, as we no longer have the need for those vast employers of the past. Gone are the days of industries employing 20,000 30,000 people. Smaller businesses have become the norm, which has led to a huge pool of people with skills who are no longer able to find employment that utilises those skills.
New technology has changed the whole employment market in the same way as the Industrial Revolution changed it in the 19th century. The mechanisation of agriculture and of industries such as cloth production caused massive changes from labour-intensive production to a few workers and a lot of machinery. That machinery required a huge workforce to manufacture the parts and construct the whole. The mechanisation of transport meant we needed vast steelworks, loco works, vehicle construction plants and more to satisfy the ever-increasing demand for boats, trains, buses and cars.
But there is no longer a market for many of the products which were produced in massive factories in the UK. Either they are made more cheaply elsewhere or they are simply no longer required, having been superseded by new products, for example, as the humble typewriter has been replaced by computers, tablets and even smart-phones.
Expecting every person to be in full employment or working for someone else throughout their life is now unrealistic. Many people no longer work for others but are self-employed, often providing small scale or niche market products or services. According to the government's own Business Statistics, (PDF file) as of 2014, there were 5.2 million businesses in the UK, of which more than 99% are small- or medium-sized businesses employing fewer than 249 people. A more surprising figure though is that 5.0 million (96%) were micro-businesses employing 9 people or less. Micro-businesses accounted for 33% of employment and 19% of gross business turnover in 2014. These figures show the huge change in the way in which people are employed in the 21st century, and there is nothing to suggest that the percentage of micro-business employment will not continue to increase.
The service industries accounted for 73% of businesses, 79% of employment and 70% of turnover whilst the manufacturing sector accounted for only 5% of businesses, 10% of employment and 16% of turnover.
The Report on Small Firms, 2010-2015 (PDF) , by the Prime Minister’s Advisor on Enterprise, Lord Young, published in February 2015 stated,
"In 2013 there were 2.9 million homebased businesses; an increase of nearly half a million since 2010. They contribute £300 billion to the economy."These figures also indicate the flaws in the government's Tax Credit changes. They simply do not seem to understand that they are no longer dealing with employment within large-scale industrial employers! It is this change that needs taking into account by government, instead of sticking to a model of employment more suited to the 1900s than the 2000's.
Sole traders and self-employed people actually get very little in the way of support from the state benefits system despite paying Income Tax and National Insurance contributions like people in "traditional" employment. There is no provision for sickness or injury benefit or unemployment benefit for self-employed people. The only provisions are through private insurance policies, so self-employed people pay into the state system and have to pay extra privately to have any safety net and many simply cannot afford to do this. Tax Credits and Housing Benefits are available to self-employed people on low incomes, but the forthcoming changes to these benefits mean that many will fall outside of the support system provided by Tax Credits and Housing Benefits and will struggle to remain in business and earn enough to provide a level of income commensurate with their housing and living costs.
It is not good enough that the Chancellor of the Exchequer says that the shortfall will be made up for by the new National Living Wage.
"From April 2016, the government will introduce a new mandatory National Living Wage (NLW) for workers aged 25 and above, initially set at £7.20 – a rise of 70p relative to the current National Minimum Wage (NMW) rate, and 50p above the increase coming into force in October. That’s a £1,200 per annum increase in earnings for a full-time worker or the current NMW.
"The adult NMW rate is currently £6.50. It will increase to £6.70 from October 2015. From April 2016 the premium will come into effect on top of the NMW, taking the National Living Wage to £7.20. The NMW will continue to apply for those aged 21+, with the premium added on top for more experienced workers taking the total hourly rate to the National Living Wage."The National Living Wage, like the National Minimum Wage, simply does not, and cannot, apply to self-employed people! There are also concerns that by introducing a new National Living Wage that there will be an increase in job losses and a decrease in working hours, which is counter-productive to the government's stated (but unrealistic) aim of getting everyone into work!
"It will give a pay rise to six million workers but is expected to cost 60,000 jobs and reduce hours worked by four million a week, according to the Office for Budget Responsibility."In practical terms, what will happen as the Tax Credits cuts slice into people's incomes, is that there will be less to spend on non-essential buying. The priority of many will have to be paying for housing and food, followed by transport and clothing. Many of those 5 million micro-businesses will be hit by the downturn in their sales which, combined with the National Living Wage, will result in many of them ceasing trading. Those people running micro-businesses and those whom they currently employ will be unemployed, which will simply reduce further their disposable income, that downward spiral leading to mass unemployment and severe hardship for many families. That's austerity in action!
What we need is a radical rethinking of the way in which living is funded, in how employment is created, in how taxes and national insurance are paid, and how the whole benefits syetm is configured. We need to understand that an economy can only grow and that businesses can only prosper and create more employment if people have sufficient income beyond the essential level needed to cover housing, food, transport costs. We need to consider if a Citizen's Wage as proposed by The Green Party is a viable option. We also need to address the costs that we are faced with - it is no use just tackling unemployment or wage rates without addressing the cost of housing - whether for sale or rent, the cost of transport - whether by public transport or private vehicle, and the cost of energy - whether gas, electricity, or renewable sources. If all these remain high it means that no matter what the National Living Wage is set to there will always be a shortfall and less disposable income to help grow the economy through the myriad of small and micro-businesses this country currently has.
Creating a sustainable economy capable of creating growth and maintaining incomes depends on a whole integrated package, so that the majority of people in this country benefit instead of just the few at the top of the economic system. It is not going to happen under a government that slashes welfare benefits and laughs whilst people suffer.
