Digital winter of discontent: Reform is not an excuse to degrade workers’ rights

Inflation and recession are firmly gripped and workers are in revolt.

We can thank ourselves for a decade of inflationary and hubristic policy that has bubbled tech-led markets and over-funded technology development at the expense of under-funding our staff.

This winter has seen something of a return to a ‘winter of discontent’: union strikes, spiking food and fuel inflation, falling productivity and recession.

A decade of austerity in public services combined with sluggish wage inflation (among the G7) combined with stretched-work-patterns had left the UK workforce emaciated both emotionally and fiscally.

The pandemic merely acted as a petri dish for that stress to intensify and for discontent to spread.

Wage growth is running at only 50% of inflation.

While inflation will slow eventually, this does not mean the widening cost of living gap is later recouped.

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It is true that rising wages can further entrench and extend inflation as supported by contemporary research from various institutions.

However for over a decade technology and markets have suppressed wage inflation.

We have emerged from the pandemic to a world of accelerated technological adoption, of distributed networks, gig economy, offshoring, remote working and automation.

We see it everywhere in our lives from our mobile devices, faceless check outs and e-commerce to staff-less trains and automated barriers.

The shift is not confined to only blue collar and ‘essential’ jobs but white collar and creative roles also. It is truly universal.

Our time on boards too will have presided on accelerating technology budgets to cover: remote working, cyber risk and also finding operational efficiencies that ultimately have a net effect of reducing the demand for full time employment.

We offer our staff private health plans that help undermine the NHS, just as we invest in private healthcare and push more workers into having mental health issues.

Here our ‘reform’ mindset is driven by profiteering. This is logical in the private sector since invested capital is expected to equate to a return on that capital.

Yet I read and hear often the right refers to the need to ‘reform’ public services, which from their dogmatic peninsula translates into privatisation to allow ‘market forces’ to deliver the fix.

Network Rail is a good working example, our hospital trusts another. 

Lessons learned

If the privatisation of our essential utilities has taught us anything in the last 30 years, aside from the initial gratification of float windfalls and some competition benefits, is that the sum of privatisation rarely equates to the economic or societal value lost by the tax payer.

We only need to walk down our local high streets or see the stress in our essential services to know that something is very broken in the UK – arguably more so than it was in the 1970s.

As boards we often face complex capital decisions and investing in out-of-date technology has been a big (arguably needed) feature of those decisions in recent years.

We should try to remember that technology should empower our colleagues (and customers) not compete with or obsolete them.

Yet financial directors have funded growing technology budgets with lower pay rises.

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In a globalist utopia, ‘technology was assumed to depress future wages’.

Now we have a generation of workers who can earn more by being drivers for Deliveroo or Evri – and speculate they can earn more on crypto.com or Reddit – than sit in an office or call centre, and essential workers using food banks.

To some extent finance has floated serenely above the discontent by paying colleagues well above the average wage.

Recruiter Reed reported the average annual salary in asset management was just over £58,000 whereas other surveys have this closer to over £75,000.

The Reed figure likely reflects lower band roles and the difference belies a huge disparity within asset management firms in terms of pay.

Front office roles on average will be priced well beyond £100,000 and C-level in excess of £1m. In contrast, back office is often well below the quoted average.

Then when we compare our industry back to the national average wage in the UK of £33,000 (full time according to the latest from ONS) we can see that our industry is somewhat detached from the wage gap confronting many UK workers, clients and savers.

That detachment poses particular morale hazards when it comes to stewardship, since we look to our fund managers to maximise return of capital, who in turn put pressure on invested companies to improve operating margins, distribute profit and innovate to generate future growth.

In short the asset management industry is entrenching poor worker rights and corporate intransigence to wage inflation whilst virtue signalling inclusion and sustainability.

The paradox is that better margins and more corporate earnings should benefit workers long-term through their pensions (for future income) but when savings ratios remain low (despite auto enrolment) it is actually hurting workers through lower immediate incomes, which perpetuate a low savings ratio.

Indeed auto enrolment itself may actually depress wage growth.

Despite the voice of our chief technology officers becoming ever more deafening, we should take pause for a moment.

Where our workers are the source of credit in the capital system, and the consumers of our products, then we need to appreciate this paradox.

JB Beckett is an iNED and author of #newfundorder