From the TUC

Can devolution generate inclusive growth in the West Midlands?

13 Jun 2017, by in Economics

Last week’s General Election has engulfed Westminster in a wave of chaos and uncertainty. The local and mayoral elections held last month might therefore feel like a distant memory. But some parts of England that now have mayors with devolved powers have been getting to work, with unions at the table.

The devolution agenda is important because in many communities (often, but not always) outside London and the southeast – good, skilled, unionised jobs that pay enough to raise a family have gone. This is why we badly need to rebalance the economy; your life chances should not depend on where you are born.

We are using the opportunity provided by devolution to encourage more balanced, regional economies across the country. For example, the TUC has a co-opted observer seat on the West Midlands Combined Authority (WMCA) Board and reserved places on all its Commissions. This unique set-up came about as a result of Local Enterprise Partnerships (LEPs) and politicians of all stripes recognising that unions have a key role to play in raising productivity in the region.

The West Midlands hasn’t lost all its good quality industrial jobs. But since the labour market recovery began in 2011, 28 per cent of the jobs created in the West Midlands have been insecure; whether due to low-paid self-employment, zero hours contracts, casualisation, or working through an agency. Workers in the region earned almost £900 less per year in 2016 than in 2008.

The West Midlands Combined Authority (WMCA)’s Productivity and Skills Commission is looking into what is holding the region’s economy back, and what might be done about it. I’ve summarised our recommendations to the Commission below (NB: transport, public services, and infrastructure were beyond the scope of the Commission’s call for evidence, so those issues aren’t included here):

  1. Get the metrics right

How can local or national government possibly deliver ‘inclusive growth’ if it isn’t properly measuring social trends in poorer areas? If they only make investment decisions on the basis of (e.g.) Gross Value Added (a local measure of GDP) and other high-level statistics then they risk ‘picking winners’. This might mean that the mayor’s investment budget is concentrated in already successful areas at the expense of generating new growth in poorer parts of the region. The result would be widening inequality and unnecessarily limiting productivity.

The RSA argued that we need to get much better at measuring growth, by taking into account things like:

  • Job quality (e.g security, flexibility and contract types).
  • How are skills used, detailed to the firm- and small town- level.
  • Living standards (e.g. median household savings at neighbourhood, local and city-region level; health and wellbeing; individuals’ sense of agency and belonging).
  • Level of enterprise (e.g. rate of new businesses opening up; share of workforce protected by employment rights).

Measuring these sorts of issues would be a much richer source of evidence to support investment decisions. But we’d also add that a new “Quality GVA” metric should also measure worker voice (e.g. collective bargaining coverage, worker representation on boards).

  1. Invest

Comparing spending across the OECD, government investment in the UK ranks 20 out of the 27 countries for which data are available. Lack of government investment is driving reduced demand, and this is the main drag on UK productivity.

  • The mayor should work with the government to agree a world-class level of central investment, building on the ‘National Productivity Investment Fund’ announced at Autumn Statement 2016.
  • The most pivotal area of investment activity for the West Midlands is HS2. It’s also a great example of the positive social and economic outcomes that can be generated from partnership with trade unions, which can lead the way in employment standards in the UK.
  • The WMCA should follow this principle of partnership on future projects so that the West Midlands becomes not only a world class place to invest and do business, but also a world class place to work. Its reputation as a world class place to work could have a significant impact on business investment and Foreign Direct Investment (FDI).
  1. Create great jobs

People prefer working for an organisation that treats them with respect and values their views and input. It’s rewarding to feel like your skills and knowledge are making a valued contribution, whether you work in a high paid, high productivity sector or in low paying industries. This sort of commitment translates into lower staff turnover rates and lower levels of sickness and absence, which drives up productivity.

  • The WMCA should focus on upgrading jobs in lower skill, lower value sectors of the region’s economy. It should encourage all employers to go beyond the legal minimum on issues like voice at work, fair and decent pay, regular hours, fair treatment and respect, healthy workplaces, and learning and progression.
  • The new mayor should use his profile to champion representation on company boards.
  • The WMCA should work with the government to develop industrial bodies charged with driving up pay and conditions in low-paid sectors.
  • The mayor should use his procurement powers to lead from the front in setting employment standards.

This is a massive task to undertake, but the Midlands can learn from the Welsh Government’s ‘Fair Work Nation’ programme, and kick things off by establishing a ‘Commission on great jobs’.

  • With unions and employers, the Commission should be tasked with enhancing procurement policy and work out how to promote great jobs across the region.
  1. Protect high-productivity jobs

The TUC is keen to work with the WMCA and partners in the region to explore how to create the best possible investment environment for high productivity sectors, like automotive. This is a key priority given the prospect of a ‘hard Brexit’, which could have severe impacts on the automotive supply chain and FDI.

  • The mayor and WMCA should work in partnership with automotive employers and unions in the region to make the strongest possible case for Single Market access.
  • The WMCA should work closely with the Talent Retention Scheme to strengthen its understanding of the potential skills shortages on the horizon, and identify opportunities for partnership. It should also work with unions and employers consider which other industries in the region could benefit from a similar scheme.
  1. Nail the skills agenda

The West Midlands devolution agreement gives the mayor powers over adult skills. However, this is in the context of substantial cuts to Further Education since 2010, which the WMCA should call on the government to reverse. The WMCA should also:

  • Analyse the potential impacts of the loss of the EU European Social Fund, and consider making the case to government for post-Brexit replacement funding.
  • Explore opportunities to redistribute savings recouped by the Department for Education through the Apprenticeship Levy scheme towards adult education.

What should the mayor do with the existing (limited) funds available? We welcome the mayor’s commitment to focus on digital upskilling, but we mustn’t forget that the West Midlands ranks worst in the country for basic numeracy and literacy – so educational support is essential. The WMCA can also use its devolved budget to:

  • Create personal learning accounts and enable low income adults, the unemployed and others to access fully funded retraining courses.
  • Provide an entitlement to face-to-face careers guidance and a new right to a mid-life career review for workers at the age of 50.

Finally, the government-sponsored Union Learning Fund could support skills and learning relating to major infrastructure projects in the region such as HS2. The WMCA should explore opportunities to support union ULF bids on projects like these in 2017-18 and beyond.

Devolution to the West Midlands provides a good opportunity to rebalance the region’s economy away from low skilled, insecure work, creating economic gains through increased productivity and better life chances for residents. Working with the mayor and the WMCA, unions will continue to do what they can to support an inclusive growth agenda, so no community is left behind.