Jobs & productivity: Key to higher pay

Improving the productivity of our country is the route to raising standards of living for everyone in this country ………..Our future prosperity depends on it.”

That was Chancellor George Osborne speaking just days after the election at the CBI’s 50th Anniversary Annual Dinner. He’s also promised his Budget next month will have “a laser-like focus” on living standards.

Getting to grips with our living standards challenge is a priority for business. Companies know they have an important part to play in making sure the benefits of economic growth are felt as widely as possible.

While government has a role in raising living standards too, if business fails to do its bit then it undermines the public’s trust — an essential part of business ‘licence to operate’. It also makes these companies less successful.

That’s why living standards is the subject of a live event the CBI’s trust-in-business campaign, The Great Business Debate, is staging alongside the TUC (Friday 12.6.15).

George Osborne at CBI dinner 2015A YouGov poll for the CBI last year showed only 53 per cent of people believe business makes a positive contribution to society. The TUC’s General Secretary Frances O’Grady and I would agree that figure should be much higher.

But let’s be clear, that comes down to what businesses do, not government. It’s about how we innovate and how we develop people so that the minimum wage, for instance, can rise quicker. So what is it that needs to happen?

Firstly, we need people in work. We have to secure a business environment where it’s easy for firms to create jobs. We’ll do that through maintaining labour-market flexibility and not turning the clock back to more restrictions –‘quick fixes’ have the potential to put this at risk.

“We mustn’t create an in-out labour market that locks some people in to jobs and excludes others”

The TUC says that in some respects labour markets have become too flexible, but on issues like zero hours the point isn’t the contracts themselves but rather the poor practice of a few employers that is rightly being challenged. We mustn’t create an in-out labour market that locks some people in to jobs and excludes others, as we see in many EU countries. We need a vibrant jobs market offering widespread opportunities because the best job security is knowing you can find work when you want it.

Secondly, we must raise productivity. And that means getting more innovative in how we do our jobs and how we train people. This starts with ensuring young people don’t leave school without good qualifications. Then we need to help people develop their skills throughout their lives and move up the skills ladder to what has become the “new middle” of the jobs market.

“The challenge is to raise the value employees can create for themselves and their employer ”

The challenge is to raise the value employees can create for themselves and their employer – getting people working smarter rather than harder – so pay rates can increase and the economy can grow faster. That’s the way to ensure pay per worker can rise without cutting jobs.

What’s vital is that this is a different challenge in each different business. It’s not going to be a fixed formula or something government can lead on. It’s about each firm and its employees rising to the challenge on issues like investment in equipment, skills and management.

There is a role for government of course – providing school and vocational education, new road, rail and air links, incentives for investment in machinery or buildings and supporting the availability of capital.

group of mixed workers

And I want to see more businesses doing more of what the best already are. Investing in new technology which drives innovation, changes work practices and improves company performance. Designing jobs for tomorrow and helping people invest in their skills. And supporting our schools, including with work experience.

Business wants to help build a more prosperous Britain where everyone has the chance to get on in life. That won’t be quick or easy but we must acknowledge and address the real causes.

There’s a lot for all of us to do. As part of The Great Business Debate, I want to hear your opinions, experiences and ideas. Raising living standards matters to us all. So, however you’re involved, CBI member not, join the debate here and on twitter @bizdebate

John Cridland is the CBI’s Director-General


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