Becoming a leading Fair Work Nation
As the research illustrates, the nature of fair work is complex and cannot be measured by a single indicator. Becoming a leading Fair Work Nation, therefore, means improving performance across a range of indicators relative to a set of comparator countries. The value of the International Fair Work Nation Framework is that it allows us to measure this concept of leading performance.
At present no country is leading on all indicators. The indicators chosen were drawn from the Fair Work Measurement Framework and reflect data availability and comparability but provide a range of data points relating to all of the dimensions of fair work. Improving performance across all data points will support Scotland’s overall performance in relation to fair work. The research suggests that there are areas of relatively positive performance in the Scottish economy, but that Scotland’s performance could also improve on a number of measures to become a leading Fair Work Nation.
Scottish Ministers committed to be a leading Fair Work Nation by 2025, and should therefore strive to have leading performance across all indicators in the International Fair Work Nation Framework by 2025.
Overarching recommendation: Scotland should strive to have leading performance across all indicators in the International Fair Work Nation Framework by 2025.
In order to achieve the overarching recommendation, it is necessary to:
1) Better understand Scotland’s current performance;
2) Draw on international learnings to support improved performance;
3) Better understand the relationship between current economic and labour market policy of the Scottish Government and fair work outcomes.
Understanding Scotland’s Performance
The research sets out three areas where Scotland has relatively positive performance[13].
| Indicator | Place | Gap to Best Performing Nation |
|---|---|---|
| Permanent Employment Rates | 1st out of 9 | - |
| Youth Unemployment | 2nd out of 9 | 0.9 p.p |
| Work related ill-health and disease | 2nd out of 9 | 1.8 p.p |
Thereafter, Scotland sits mid-table for seven indicators and has poor relative performance on four indicators.
| Indicator | Place | Gap to Best Performing Nation |
|---|---|---|
| Gender Economic Inactivity Gap | 4th out of 9 | 3.1 p.p |
| Gender Pay Gap | 4th out of 9 | 6.6 p.p |
| Work place non-fatal injuries | 5th out of 9 | 11,037 per 100,00 workers |
| Low Pay | 5th out of 8 | 3.1 p.p |
| Trade Union Membership | 5th out of 9 | 62.1 p.p |
| Underemployment | 6thout of 9 | 2.8 p.p |
| Involuntary Part-Time Work | 6thout of 9 | 10 p.p |
| Indicator | Place | Gap to Best Performing Nation |
|---|---|---|
| Disability Employment Gap | 6thout of 8 | 23.2 p.p |
| Involuntary Non-Permanent Work | 7th out of 9 | 25 p.p |
| Collective Bargaining | 7thout of 9 | 59.9 p.p |
| Skills Underutilisation | 8th out of 8 | 20.6 p.p |
When considering Scotland’s current performance it is important to note the following points:
- While Scotland performs well on the headline indictor of permanent employment, Scotland performs relatively poorly on measures of insecurity at work: involuntary non-permanent work (6th out of 8), involuntary part-time work (6th out of 9) and underemployment (6th out of 9).
- The Fair Work Measurement Framework highlights a range of employment gaps including for disability, race, age and gender. Young people, women disabled workers and ethnic minority workers are also more likely to be paid below the Real Living Wage or be in insecure roles like Zero Hours Contracts. Tackling systemic inequality within the labour market is necessary to become a leading Fair Work Nation.
- Scotland performs relatively well at an international level on both youth unemployment and work-related ill-heath and disease but both indicators are worsening in the Fair Work Measurement Framework. This suggests that action may be needed to sustain any relatively positive performance.
- Scotland is performing worst on the measure of skills underutilisation. This area requires significant focus from employers as it relates to how work is designed and organised at the workplace.
- In many of the areas where Scotland is performing poorly there are large gaps between Scotland and the leading Fair Work Nation.
Action 1: The Scottish Government should work with the Fair Work Convention to consider each indicator in the International Fair Work Nation Framework in turn, identifying clear targets for 2025. On indicators where there are significant gaps between Scotland’s performance and that of the leading Fair Work Nation for that indicator, an appropriate and achievable target for 2025 should be set. However, a longer term target to become a leading nation should also be developed, which includes a clear timeframe for when this will be achieved.
International Learning
The Fair Work Convention supports the research report’s strong emphasis on the role of Active Labour Market Policies (ALMP)[14], which may include a range of measures such as workforce training, job search assistance, job creation, addressing skills shortages and inclusion. This is an important focus within the Scottish context as these tend to be devolved areas of competence. It is also an area where spend will increase in future years, due to structural changes in the labour market associated with automation and the need to undergo a Just Transition to a zero carbon economy.
The research[15] notes that the UK ranks among the lowest of OECD countries in terms of its expenditure as a share of its GDP on active employment measures. The researchers did not determine a comparative share of investment on Active Labour Market Policies for Scotland.
Denmark invests significantly in active employment measures, investing £10.9 billion[16] in 2019 on elements like: (i) subsidies to firms for a disability-friendly design of workspaces and adaptions, and (ii) support for job centres across the country in providing services to people with limited working capacity, through various employment initiatives, seminars, networking activities, and online resources.
The research highlights the following points for consideration:
- While government policies often focus on addressing skills shortages through additional training and improving education policy, overqualification and underutilisation of skills is an important challenge that should also be addressed.
- Different types of ALMP measures can support improvements in indicators such as involuntary part-time work and involuntary non-permanent work, worker underemployment, skills underutilisation, and the disability employment gap.
Action 2: The Scottish Government should consider its relative investment in Active Labour Market Policies in comparison with the leading Fair Work Nations and should ensure effective fair work objectives and measures are included in all Active Labour Market Policies.
Action 3: The Scottish Government should focus on drawing lessons from countries that are doing well on fair work indicators and Active Labour Market Policies. Particular focus should be given to:
- Denmark on the disability employment gap.
- Finland, Belgium and Ireland on skills utilisation.
Current economic and labour market policy of the Scottish Government and fair work outcomes
The Scottish Government has undertaken significant work on fair work through the Fair Work Action Plan and through policies like Fair Work First. Yet there are areas which have received significant focus but where measures are not improving within the Fair Work Measurement Framework and/or where Scotland’s relative international performance is weak. There are some key areas where this is the case[17]:
- The disability employment gap is dropping slowly but Scotland has a relatively poor performance compared to comparator countries. The disability pay gap has also widened since 2016.
- Scotland performs poorly on measures of insecurity and the use of Zero Hours Contracts is growing rather than falling, despite the focus on Zero Hours Contracts in Fair Work First.
- Flexible work has received significant focus within Fair Work First and specific funding has been dedicated to promoting flexibility across the labour market. While there have been small increases in the number of workers with access to flexible working, more than three quarters of workers have no access to flexible work.
The researchers note that focusing on eradicating the gender pay gap and increasing gender equality in the labour market is a key element of achieving better fair work outcomes. Three key elements support this:
- The role of employers in promoting pay transparency, flexible working and gender inclusive practice at the workplace.
- The role of government in promoting and facilitating good practice in workplaces and ensuring that women’s skills and labour are sufficiently valued within public services or publicly funded sectors where many women work.
- The role of state funded childcare to support women’s inclusion in the labour market and address in-work poverty.
The Scottish Government has placed a significant focus on gender equality, equal pay and improving childcare. However, it remains the case that more can be done to improve the scale of policy interventions, or the degree to which policy focus is aligned with fair work and positive labour market outcomes.
The research also identifies the importance of both collective bargaining and trade union membership to supporting fair work, and correctly identifies the structural nature of support for collective bargaining which is a feature of many of the best performing nations. Despite limitations in powers in this area, the Scottish Government has committed to improving collective bargaining coverage within the National Performance Framework, yet little tangible progress has been made.
Action 4: The Scottish Government should undertake an evaluation of the effectiveness of Fair Work First in promoting fair work outcomes across the economy.
Action 5: The Scottish Government should seek to strengthen fair work conditionality and the effectiveness of fair work interventions on:
- reducing insecurity (including, but not limited to, reducing the prevalence of Zero Hours Contracts);
- tackling the gender pay gap and supporting diversity and inclusion;
- increasing the use of flexible working arrangements; and
- addressing in-work poverty.
Action 6: The Scottish Government should undertake an evaluation of how current childcare policy supports labour market outcomes for women. This evaluation should then inform work with the Fair Work Convention to strengthen early learning and childcare policy to better support women’s participation in the labour market.
Action 7: The Scottish Government should seek to effectively implement accepted Fair Work Convention recommendations and Fair Work Action Plan commitments on collective bargaining including in social care, construction and early learning and childcare.