Dozens of academics call for new social rights to be introduced now to avert an economic catastrophe.
The coronavirus has triggered a stock market crash sharper and faster than the global financial crisis. It threatens a depression unless we move aggressively to protect social rights.
Companies with plummeting share prices, or evaporating customers, are prone to individually rational, but socially irrational herd behaviour. Companies lose confidence and fire workers. Workers lose income, and spend less on goods and services. This means companies lose more customers. They fire more workers. This is the sinking spiral of every depression.
It requires social rights – social security, voice at work, job security, state aid – to halt the short term herd behaviour, and spread losses to those who can best bear them. We know our health and emergency workers will do everything to save lives, and – with the right health response – the pandemic can be contained in around three months. But we must also stop the corona crash becoming a depression, with social rights. Here’s ten that we can boost right now, all without primary legislation.
Social security and working time rights
One, every employee already has the right to work at home to avoid any ‘danger’ of the virus at work that is ‘serious and imminent’. Employees who refuse to go to work can be subject to no ‘detriment’: no pay cuts, no dismissal. Employees also have the right to a ‘reasonable amount of time off’ for child care, and to care for parents. But the government should publicise these rights, and ensure pregnant workers and carers suffer no detriment, to protect jobs and lives.
Two, governments should extend these rights to everyone who personally does work, whether their contract says they are ‘self-employed’, an ‘independent contractor’ or an employee. Sham self-employment is a huge problem in the UK, and across the ‘gig economy’, where people lack bargaining power. Employers like Uber or Deliveroo misrepresent worker status, to evade social rights and tax. The Secretary of State can extend the scope of employment rights to everyone by order, and say that this expanded definition of an ‘employee’ goes for all tax and social security rights.
Three, statutory sick pay is the most important social security right now. But in the UK this is only £94.25 a week since March 2019. Instead of the planned rise to £95.85, it should replace people’s full income up to a reasonable cap: Sweden’s cap is around £600 a week. Unemployment insurance and universal credit should rise too, because the economy is only strong if everyone has a fair income.
Four, many employers will ask workers to take holidays if customers dry up. In the UK and every EU country there is a right to at least 28 days or 4 weeks paid holidays. The right to paid holidays – which is a universal human right – gives employers and workers more flexibility, especially in a crisis. The European Social Charter 1961, which the UK has also ratified, requires states to take action for ‘the working week to be progressively reduced to the extent that the increase of productivity and other relevant factors permit’. The Secretary of State should raise the right to paid holidays for more flexibility.
Voice at work
Five, to halt short-term, socially irrational dismissals by firms, workers need a voice at work. Countries with elected work councils, with rights to veto or delay dismissals and rearrange working time, had lower unemployment rises in the global financial crisis. German work councils with trade unions contained mass unemployment in 2007-2009, and are doing it again right now.
By contrast, the UK has minimal dismissal protection (it was cut further in 2012) and had a critical rise in unemployment. The US has virtually no job security rights, and had a catastrophic rise in unemployment. Ironically, the UK and US helped write Germany’s post-WW2 work council law, after Hitler had abolished it (p.31 here). We can create this right now with a new ACAS Code on redundancy procedure.
Six, dismissal decisions begin on company boards. But votes for directors are monopolised by shareholders that are prone to irrational short-termism. We know that workplaces are more innovative, have fewer strikes, and are more productive when workers have the right to vote for directors. Britain is way behind, even though a Conservative Minister for Transport was advocating for workers on railway company boards in 1920, Churchill himself put one on the Port of London Authority (pp.9-13 here), and Oxford University has had worker votes since 1854. At the least, all government subsidies should be conditional on companies changing their constitutions to have a minimum of two elected worker directors. We could do this for all listed companies by updating the UK Corporate Governance Code.
Seven, irrational herd behaviour occurs in stock markets because the decision makers are a tiny group of asset managers, like BlackRock, State Street, or Vanguard. They manage and vote on ‘other people’s money’, and are unaccountable for short term decision-making. In the US, the top 3 combined would be the biggest shareholder in 438 out of the 500 largest companies, and they have around 50 people casting votes that control the economy. They have a record of supporting directors who fire workers en masse.
Their power should be removed, and the people who save for retirement in pension, life insurance and mutual funds should have that voting power, like the Swiss. The Secretary of State can amend our pension laws to ensure at least one half of our trustees are elected, and clarify the FCA Handbook on conflicts of interest to prevent asset managers voting on other people’s money without instructions.
Job security and full employment rights
Eight, we should expressly extend job security rights to everyone from day one. Everyone should have the right to not be unfairly dismissed, or made redundant. At the moment in the UK, this right only kicks in after 2 years. In the US, there is no right at all. The Secretary of State can change it now.
Nine, we should restore the duty on government to say how it will attain ‘full employment’. The UK had this in the Welfare Reform and Work Act 2016, until it expired when Theresa May triggered an early election. Full employment means the right to work ‘at fair wages’ with the hours one needs: not under-employment on zero hours contracts. It means unemployment below 2%. It actually costs the taxpayer nothing because government saying it will do ‘whatever it takes’ is enough to keep confidence up.
State aid and economic rights
Ten, direct wage subsidies, like the Employment Subsidies Act that Thatcher renewed eight times, or like Denmark’s guarantee of 75% of employee wages, put money in people’s pockets and maintain confidence even more effectively than giving businesses £330 billion in guarantees. But people also depend on banks and landlords. Loan repayments to banks, mortgage repayments, and rent payments should all be capable of being cancelled till this crisis is over. Banks crashed the economy, and were bailed out before, and so they must exercise responsibility in this crisis. The government has the power to order this in the Civil Contingencies Act 2004. Nobody must lose their home because of the coronavirus.
With the global financial crisis, its causes, and its culprits in recent memory, we know what works and what does not today. Social rights work: to ensure employers, banks, and government protect everyone from a new corona depression. We could even come out stronger.
- Dr Ewan McGaughey, School of Law, King’s College, London
- Prof Tonia Novitz, University of Bristol Law School
- Prof Lydia Hayes, Kent Law School, University of Kent
- Ms Sandhya Drew, City University Law School
- Ms Carolyn Jones, Director of the Institute for Employment Rights
- Mr Hitesh Dhorajiwala, University College London, Faculty of Laws
- Prof Nicola Countouris, Faculty of Laws, University College London
- Ms Pascale Lorber, Deputy Head of the Law School, University of Leicester
- Prof Adriana Topo, Institute of Advanced Legal Studies
- Ms Natalie Sedacca, University College London, Faculty of Laws
- Prof Diamond Ashiagbor, Kent Law School, University of Kent
- Prof Steve Tombs, Department of Social Policy and Criminology, Open University
- Prof Bridget Anderson, Director of Migration Mobilities Bristol, University of Bristol
- Prof David Whyte, Department of Sociology, Social Policy and Criminology, University of Liverpool
- Dr Katie Bales, University of Bristol Law School
- Prof Jeff Kenner, School of Law, University of Nottingham
- Mr Fotis Vergis, School of Social Sciences, University of Manchester
- Prof Sandra Fredman, Law Faculty, University of Oxford
- Dr Aristea Koukiadaki, School of Social Sciences, University of Manchester
- Dr Andrew Moretta, Research Associate, University of Liverpool
- Dr Inga Thiemann, College of Social Sciences, University of Exeter
- Prof Nicole Busby, School of Law, University of Glasgow
- Prof Simon Deakin, Faculty of Law, University of Cambridge
- Prof Mark Freedland, Law Faculty, University of Oxford
- Prof Amir Paz-Fuchs, Law School, University of Sussex
- Prof Peter Turnbull, School of Management, University of Bristol
- Prof Alan Bogg, University of Bristol Law School
- Dr Rebecca Zahn, Law School, University of Strathclyde
- Prof Colm O’Cinneade, University College London, Faculty of Laws
- Prof Keith Ewing, School of Law, King’s College, London
- Prof Sonia McKay, Faculty of Business, University of Greenwich
- Lord John Hendy QC, Old Square Chambers
- Dr Mauro Pucheta, School of Law, Kingston University
- Prof Bernard Ryan, Law School, University of Leicester
- Dr Panos Kapotas, Faculty of Business and Law, University of Portsmouth
- Prof Joanne Conaghan, University of Bristol Law School
- Prof Virginia Mantouvalou, Faculty of Laws, University College London
- Prof Hugh Collins, Department of Law, London School of Economics
- Ms Natalia Delgado, Law School, University of Southampton
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