Avoiding a Post-Brexit 'Race to the Bottom'

For forty years, a major stimulus to decent labour standards in Britain has come from its membership of the European Union. Procedurally it has strengthened the political position of our social partners; substantively it has initiated individual rights on, for example, part‐time work, agency work, and parental leave.

No one knows what will be salvaged from the unplanned chaos of Brexit, but if Britain is to avoid falling into a competitive ‘race to the bottom’, it must institute a robust means of implementing and enforcing its own standards.

Why standards matter

Decent labour standards are a prerequisite for perceived justice and social cohesion. Such standards have never, in any country, been achieved through unfettered market forces or by the unconstrained exercise of employer power. In all societies, it has required interventions by the state to regulate the market for labour to a greater or lesser extent.

In the past, Britain has achieved relied on voluntary collective bargaining between employers and trade unions. However, this practice has all but vanished in the private sector and, we argue, there is no chance of its being revived, at least in its traditional form.

The importance of individual rights

Trade unions continue to play an important role in representing workers in their dealings with employers and in advocating for equitable employment, economic and social policies. However, the creation and extension of statutory individual employment is how governments have latterly had the greatest beneficial impact on labour standards.

The most substantial benefits have come from the National Minimum Wage (NMW), whose effectiveness can be built on. Drawing on the experience of both the Low Pay Commission (LPC) and the Living Wage Foundation, the Resolution Foundation has proposed changing the LPC's terms of reference to increase its impact on low pay more generally. It argued that this should be done within the framework of an explicit government policy on low pay with medium‐term targets.

To get over the bluntness of a single NMW when many sectors could afford to pay more, the Resolution Foundation suggested that the LPC should be asked to analyse affordability by sector so that a debate might get underway on higher aspirational, sectoral rates.

The International Labour Organization has found that ‘inclusive’ labour standards that cover employees across a particular sector or labour market are an effective way of reducing income inequality and sustaining economic growth. These are particularly important for protecting the pay and conditions of workers such as migrants, women, younger workers and those in occupations classified as low‐skilled who, for one reason or another, are especially susceptible to mistreatment or being paid below their worth. Inclusive labour standards include multi-employer collective regulation and statutory extension mechanisms that extend standards to all employees, regardless of whether they work in a unionised establishment.

The state has a vital role in protecting good employers from being undercut by employers who seek competitive advantage through poor employment standards. Fear of a ‘race to the bottom’ on labour standards is one reason why a well-enforced National Minimum Wage has commanded such widespread employer support.

Ensuring enforcement

The more that reliance is placed on statutory individual employment rights as a basis for labour standards, the more important enforcement becomes. But Britain has never had a comprehensive or proactive labour inspectorate and has always been culpably lacking in the failure to enforce the awards made on individual rights cases by Employment Tribunals.

Rights are of little value when the remedies are effectively denied to those who need them most. The NMW, with proactive enforcement by HMRC, is a laudable exception to this. Nothing is more likely to erode employer respect for the NMW or other rights than increased levels of non‐compliance and evasion. Thankfully the appointment of Sir David Metcalf to the new role of Director of Labour Market Enforcement in January 2017 has opened the way for something more effective.

Social partnerships

Social partnership at the national level has a good track record in Britain for labour market regulation. It has provided the basis of the Low Pay Commission's independence and success. It has also been fundamental to the largely unacknowledged success of the Advisory Conciliation and Arbitration Service (Acas). This success should not be judged superficially by how well Acas resolves workplace disputes (although its record at that is excellent), but by how far it prevents disputes arising in the first place, by propagating good practice and providing free advice.

This use of social partnership could be extended. The Resolution Foundation’s 2014 report, arising from a committee chaired by Sir George Bain, suggested it as a vehicle for determining aspirational minimum wage rates above the NMW at the sectoral level. It could be used to strengthen superannuation arrangements and training provision.

Growing consumer power

Finally, consumer power is displacing or combining with producer power as a means of improving labour standards. The rise of consumer campaigns and of boycotts associated with evidence of poor labour practices has led to a growing concern of enterprises with corporate social responsibility and maintaining sustainable practices in their supply chains.

There is substantial scope for deepening and extending consumer power with new legal obligations to disclose and to enforce the exercise of due diligence over suppliers and supply chains—both national and international—so that their labour standards can be subjected to inspection.

The newly energised part of the electorate consists of young workers who are currently most vulnerable to bad employment practice. They may not join trade unions, but they will support political action to strengthen labour standards. Britain already has internationally outstanding social partnership institutions in Acas and the LPC. Brexit has provided the opportunity to build on and alongside these to develop more far‐reaching labour standards, and the means for their negotiation, maintenance and enforcement.