Cicero Policy Briefer

Issue 14, July 2007

Flexible Futures: Transforming the workplace

By Stephanie Fraser

This month, the Equal Opportunities Commission (EOC) released its report “The future of work: Employers and workplace transformation”, highlighting the development of flexible working arrangements in the UK. The report revealed that the UK lags behind its European counterparts in offering flexible working practices, with only one in five UK firms giving staff chances to work away from the office.

Lamenting this fact, EOC Chair Jenny Watson commented that “flexible working is still too often seen as just a concession for parents and carers, and comes at the cost of poor pay and prospects”. Flexible working is often stigmatised as a way of shirking work rather than a method of working more efficiently, and as such can halt career progression and cut employees out of the loop.

There are signs that this may be changing; the EOC’s call for a growth in flexible working practices has received widespread support from politicians and stakeholders. Ruth Kelly, then Minister for Women, called “creating a flexible working environment…a real win-win situation for both the employer and the employee”, while new deputy Labour leader Harriet Harman has asserted that flexible working should become the norm, stating that “the burden of proof should be on the employer to show why flexible working is not practical”. Moreover, Miles Templeman, Director-General of the Institute of Directors, has said: “Employers have rights too, but we want employers to be responsive, so we need to communicate better the benefits of flexible working.”

A mixed picture emerges from the EOC study. It shows that progress is being made towards a more flexible approach to employment terms and conditions which will promote social inclusion and a more diverse workforce. Employers are starting to operate “harmonised benefits for employees”—allowing staff access to a range of flexible measures, but in an informal manner. This leads to the accommodation of staff needs on an ad hoc basis, rather than through the official establishment of flexible working.

Flexible working, however, is not just about incorporating fluctuating work patterns on a day-to-day basis, but should be adopted as a good method to encourage the population to work to a greater age, by allowing workers past the statutory retirement age to partake in employment to a greater or lesser extent.

The average retirement age for men in the UK currently lies at 64, actually lower than in previous years. Retiring at 64 gives men an average length of 20 years of retired life, a duration difficult to accommodate within a pensions system that is already stretched to breaking point. Furthermore, the working age population is actually predicted to fall by a fifth in Europe by 2020, as the baby boom generation reaches retirement.

This problem was highlighted recently by Work and Pensions Secretary John Hutton in a keynote address to the SMF on the “challenges and opportunities of longer working lives”. Hutton argued that to some degree state pension age should be matched to longevity; however, he also suggested that more complex measures will also be required – including a focus on greater choice and flexibility in work for older people.

Hutton emphasised the need to make sure that older workers don’t get dropped from the labour market. Working longer must pay, and should be incentivised to encourage later retirement. At present this simply isn’t the case. Alongside the scrapping of a mandatory retirement age (as favoured by Hutton), there must be a simplification of surrounding legislation. Currently, many of those reaching retirement age would like to continue work but gradually scale back their hours. This may mean that they would like to take part of their pension to supplement their reduced income. However, in the current system such individuals find that it is very difficult to draw a pension and work for a salary at the same time as accruing benefits on that salary.

Welfare to work schemes must also be changed and should demonstrate to employers the benefits of “upskilling”—or, more crucially, “re-skilling”—older workers. The traditional argument that it is not valuable to train an individual close to retirement age no longer holds water, as recent studies (as quoted by Professor Nicholas Barr of the LSE) estimate that the usefulness of skills is down to between just three and five years.

Ultimately, most people want to work, but they want to do so in a manner that accommodates their other obligations. People also want to be able to choose when and how to retire. All evidence points to the fact that extending flexibility will increase involvement with the labour market. Future policy, therefore, should be altered to reflect this demand for choice.

Stephanie Fraser can be contacted on +44 (0)20 7665 9531 or click here to email.

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