Future contractual arrangements

While there is general agreement among commentators about the nature of the work we will be carrying out in the coming decades and the profile of the workforce that will be employed to carry it out, there is considerable disagreement about the types of contract (both legal and psychological) that will be prevalent. For some years now a diverse group of futurologists have gained considerable influence by predicting substantial changes in this area. The most prominent figure in the UK is Charles Handy, who has published a series of books in which he argues that radical change is in store (see Handy 1984, 1989, 1994 and 2001). A broadly similar analysis has been developed by Davidson and Rees Mogg (1997), Rifkin (1995) and Bridges (1995), and more recently by Susan Greenfield (2003a and 2003b). While each of these writers, and others who have advocated the evolu­tion of a similar future for the world of work, justify their conclusion somewhat differ­ently, all predict a switch in the dominant form of work from employment to various forms of self-employment. Moreover, where employment continues, people will be far more likely to work from home (connected to others electronically) and to work for small, highly specialised companies and will neither have nor expect long-term job security.

For Handy the future is one in which portfolio careers will dominate. People will move from employer to employer regularly, often working for two concerns at the same time. There will be periods of self-employment and periods of employment, the con­ventional working life being likened to that of an actor auditioning for work and moving from production to production on stage, screen and television. There will be periods in between assignments when we will be under-employed, and other periods when we have more than enough work on our plates. Davidson and Rees-Mogg (1997, p. 237) prefer the example of film production companies which assemble a group of tal­ented specialists to work on a project, but when it is over ‘the lighting technicians, cameramen, sound engineers and wardrobe specialists will go their separate ways’. Others, including Greenfield (1993, p. 92) go further in arguing that ‘the concept of the “job” as we know it may disappear altogether’ and that ‘firms will perhaps bid for employee time almost on a day-to-day basis’. Insecurity of employment, according to this view, will soon become the norm.

The analysis on which these writers base their predictions is thoughtful and logical and can be persuasive. At root they all argue that greater volatility in the world of employment is inevitable as organisations experience increasing volatility in their product markets. Because employers will no longer operate in markets which are at all stable and pre­dictable, it follows that they will be unable to guarantee any kind of stable employment. For most analysts, increased volatility is seen as being a product of increased competition. Sparrow (2002) uses the term ‘hyper-competition’ to describe a business environment in which lean, highly productive organisations make use of the latest information and communications technologies to sell their goods and services to anyone, anywhere in a fast-evolving, knowledge-based global economy. In such a world, it is argued, no organ­isation can be viable if it burdens itself with large numbers of dependent employees expecting to enjoy lengthy, stable careers. Instead organisations will continually be expanding and retracting, forming and dissolving, and hiring different people, with dif­ferent skill-sets on an ‘as needs’ basis. Greenfield’s conclusion is the same, but for her the change will arise not as a result of increased competition, as she predicts greater cooperation and less competition, but simply because increased technical specialisation will mean that the most efficient and effective enterprises will be those which are small and highly flexible. Rifkin argues that traditional jobs will disappear because technological advances will create a world in which machines do many of the jobs currently performed by people. His future is a world of under-employment in which there are not enough jobs to go round, forcing a large proportion of the workforce either into self-employment or into a working life of short-term employment as and when opportunities arise.

A number of arguments have been advanced in opposition to this radical vision of an employment-free future world of work. Nolan (2004) has led the assault in the UK, drawing on empirical data indicating that in most respects, despite evidence of increased volatility in product markets, traditional, long-term, full-time employment is showing no sign whatever of withering away. Indeed, in some respects the trend is towards greater security, albeit in smaller enterprises. He is contemptuous in his criticisms of those who continue to peddle what he sees as misleading myths:

Scarcely a week passes without a well-paid visionary heralding the demise of paid work and employment or the growing salience in the new economy of the ‘free-worker’. Attention to detail is invariably slight. The great variance in the patterns of work and the consequences of past upheavals in employment are routinely ignored. (Nolan 2004, p. 7)

He goes on to make reference to the real trends that are observable in both the UK and the USA, to many of which we have referred in this and in earlier chapters:

  • employment levels (i.e. the number of traditional jobs) are rising and not falling;
  • the vast majority of workers continue to be employed in permanent jobs;
  • job tenure rates have remained broadly stable for decades;
  • around a third of the workforce has been employed (already) for ten years or more by their current employer;
  • self-employment has not grown appreciably over the past decade;
  • the number of temporary workers has fallen substantially over the past ten years.

While this evidence is very convincing, it is too early to condemn Handy, Rifkin and Greenfield as having been hopelessly wrong in their predictions. It is possible that over the coming few decades they will be proved right. But it is fair to point out that, at least in the case of Handy, the same claims were being made twenty-five years ago about what the world of work would be like today, and in many respects the opposite has turned out to be the case.

One possible reason that the predictions of these futurologists may prove to be inaccurate is their over-reliance on an analysis of what is likely to happen to product markets, ignoring in the process other determinants of employment arrangements such as labour market pressures and the regulatory environment. The evidence suggests that they are right about increasing competition and the need for organisations to become more specialised, flexible and productive, but that they are wrong to ignore other factors in the evolving business environment which serve to push organisations in an opposite direction to that which they would prefer given a free hand. For example, it is very often claimed that in the future, because employers will be unable to guarantee long­term employment, they will instead provide their workers with a capacity for greater ‘employability’. People will be recruited and motivated, not with the promise of job security, but with skills development and work experience which will help them to build successful portfolio careers. This is a logical prediction if it is assumed that employers do not have to compete with one another for relatively scarce skills. However, as we have seen throughout this book, in recent years the trend has been towards tighter labour markets in which people increasingly have a choice about where they work and are willing as well as able to switch employers when they become dissatisfied. It is at least arguable that most would-be workers prefer secure employment to employability and portfolio career-building. If so the organisations that will be most successful in attracting and retaining people will be those which maximise job security by offering employment on a permanent basis.

Moreover, in a world in which the quality of staff increasingly provides the key to achieving competitive advantage, it is probable that employers will prefer to nurture high levels of commitment and discretionary effort from their people, rather than hiring and firing them on an as needs basis. In other words, employers may well conclude that a committed, productive workforce is not compatible with highly flexible organisation structures, and that the former is a better route to establishing competitive advantage than the latter.

The potential influence of regulation also needs to be taken into account. In the UK there is general agreement among employers and the political establishment that the best way of securing high levels of employment over the long term is to minimise labour mar­ket regulation so as to free businesses of costs which make them less competitive inter­nationally. However, much employment regulation now originates at the European level and would not, for the most part, be on UK statute books were it not for Britain’s mem­bership of the European Union. The political establishments of the other larger EU countries have tended to take a different view, believing increased social protection to be necessary as a means of promoting greater security of employment. A perception of insecurity, in their view, tends to reduce people’s willingness to spend and to put their savings in riskier types of investment vehicle. The result is less economic growth and a greater propensity to stagnation and recession (European Commission 2000). The out­come, as we have seen in recent years, has been a plethora of new employment legisla­tion aiming to increase security by making it increasingly hard for employers to hire and fire either cheaply or easily. This creates a situation in which any journey on the part of employers towards much more flexible organisational forms is made harder both to embark on and to complete.

Finally it is necessary to point out that some economists are increasingly questioning the commonly held view that the business environment of the future will necessarily be characterised by greater volatility, at least as far as the western industrialised countries are concerned. Indeed already they observe far greater levels of economic stability pertaining in countries such as the UK and the USA that have moved farthest down the road away from manufacturing and towards the establishment of knowledge-based service industries. Kaletsky (2006), for example, argues strongly that manufacturing activities are the major source of volatility and that exporting these overseas, leaving home-based employees to focus on product design and marketing, actually serves to guarantee greater security of employment in a global economy. He gives the title ‘platform companies’ to organisations like Nokia, Dell and L’Oreal which sell their products internationally, but subcontract the entire manufacturing process to other companies:

Because the manufacture of physical goods is the most volatile and capital-intensive part of the business process, outsourcing [overseas] does not just transfer jobs and factories – platform companies also outsource to China and other developing countries much of the economic volatility that goes with capital investment, inventory cycles and the unionised factory environment. (p. 21)

Could it be therefore that long-term, stable employment, far from being consigned to the dustbin of history, will actually become more common in the future as organisations increasingly outsource the more volatile elements of their operations and concentrate instead on higher-skilled, value-adding activities? Only time will tell, but an analysis of the major current labour market trends is consistent with this possibility.

Source: Torrington Derek, Hall Laura, Taylor Stephen (2008), Human Resource Management, Ft Pr; 7th edition.

One thought on “Future contractual arrangements

  1. zoritoler imol says:

    Hello, you used to write magnificent, but the last several posts have been kinda boring?K I miss your great writings. Past few posts are just a little bit out of track! come on!

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