One revealing way of looking at the UK is through the lens of its distorted labour market. Like a car with a Bentley body and a Ford Anglia engine, it struggles to keep up appearances as an advanced nation, with an economy that is permanently stuck in a low-wage, low-skills gear. The labour shortages that opened up in care homes, warehouses and other essential services during during the pandemic have gone on swelling ever since  – current vacancies stand at nearly 1.1m – initially in the Great Resignation as thousands deserted pittance-paid jobs in retail, hospitality and care; then in a wave of public-sector walkouts, stoked by inflation and a crippling cost of living crisis; and finally an epidemic of work-induced burn-out and long-term illness that has removed a stunning 2.5m, often the lower-paid, from the workforce altogether. In a deep political irony, it is this seized-up commodity labour market that is driving record immigration figures as farmers, restaurateurs and care homes wrestle with brutal post-Brexit realities. Thus do the UK’s dysfunctional employment patterns shape much of its social, economic and political life.

Low pay is a scourge and a national shame. It cripples lives and economies, leading to poverty, inequality and financial insecurity, and often poor physical and mental health. Low wages mean that despite the political rhetoric employment is no longer a sure route out of poverty, often necessitating taxpayer subsidies in the shape of supplementary state benefits. Across a range of sectors it feeds low productivity through poor work outcomes – for the blindingly obvious reason that it’s hard to concentrate on your job, particularly an unfulfilling and prospectless one, if you are depressed, out of breath or worried sick about whether you’ll make it to the end of the month financially. 

Senior executives generally give short shrift to complaints about low pay. ‘I’m running a public company, not a charity’, or, ‘Some jobs are too menial to justify higher pay’, are stock responses. But they betray a dispiriting lack of imagination. There is actually a straightforward way out of the UK’s low-pay bind: pay more. Unfortunately it requires something that we don’t currently have, at least in the necessary quantity, which is competent management. 

This is the message that emerges clearly from The Case for Good Jobs, a new book by academic-turned jobs activist Zeynep Ton. She demonstrates that low pay as practised particularly in the Anglosphere, is not an inevitability but a choice – a choice made by managers who don’t realise there is one, nor the consequences of poverty pay for their workers. She recalls the shock of a senior PayPal (she names names) executive who on a visit to a soup kitchen in a town where the company had a large call centre was told that a substantial proportion of the facility’s users were PayPal employees. As she records, such ingnorance is a far from uncommon phenomenon.

Yet the case for good jobs, she insists, rests not on HR wokery but strictly operational considerations. She sees low pay as both symptom and cause of what she calls the ‘bad jobs’ model, which is based on the plausible but blinkered assumption that the only way to compete on low prices is to minimize input costs, especially labour. ‘The playbook is simple,’ writes Ton. ‘Pay as little as you can, make the job as easy as you can, and hire anyone who is willing to work under those circumstances’. Companies using it accept the concomitant high employee turnover (up to 120 per cent a year), whose high cost is balanced by minimal expenditure on training and (less frequently acknowledged) management competence – which is one important reason why the model is so prevalent. 

Precisely because it is so simple, it can work, up to a point, and for a time – but only because most competitors are using the same bug-ridden cost-minimization model that, unseen by managers, drives a ‘vicious cycle’ of underachievement and poor customer service. Yet the hidden cost of low pay is extremely high. Most companies and managers have no idea how mediocre their operations are. A 2017 HBR article entitled ‘Why Do We Undervalue Competent Management?’ reports that of 12,000 companies surveyed across 30 countries, just one in 10 was excellent or good operationally, against nine in 10 that were mediocre or worse – figures reflected in other measures such as productivity, innovation and growth. Like drivers and poker players, interviewees consistently overestimated their strengths and underestimated their performance weaknesses.

Bluntly, low pay is incompatible with good management. As we should know by now from John Seddon’s work, managing cost drives costs up, not down. Ton shows that that’s particularly the case for labour, because, again unimaginably to most managers, the upside of investing in the front-line is so high. Ask Toyota and Buurtzorg, as well as US retailers such as Costco, Sam’s Club and others that Ton cites. Treating labour as a cost ignores this potential, banishing trust, learning and empowerment and condemning the labour contribution to the barest minimum.

The exceptions, then, operate the opposing front-line and customer-focused ‘good jobs’ model. This, as Ton insists, is a system, in which higher pay is just one element. It must also be front-line and customer-focused because that is the locus of the interactions that determine service quality and customer satisfaction, and dictate the other system elements: an offer that meets customer demands as economically as possible, and training that enables the workforce not only to fulfill but also improve it, thus justifying the higher pay and setting in motion a virtuous cycle to replace the vicious one.

Ton’s first convert was herself. Originally an academic researcher at MIT into operations analytics and science, she was far removed from any real workplace. But when she came to study how the latest management and scheduling software was working in practice, she discovered it was so disconnected from the often chaotic realities of the existing front line that instead of improving performance it made it worse. (Now where have we heard that before?) 

From that experience came her first book, The Good Jobs Strategy, in 2014, which triggered such corporate interest that in 2017 she left her tenured job to co-found the non-profit Good Jobs Institute Of course, Ton would be first to admit that what she is saying is not all new. Seddon, Pfeffer, Hamel, Gallup and indeed all really well managed companies would share her foundational principle that front-line employees ‘aren’t a drag on the bottom line – they are where the bottom line comes from’, and treat them accordingly.

But The Case for Good Jobs is a forceful and timely restatement of a management philosophy that, properly applied, can realistically promise to make companies simultaneously ‘more competitive, more resilient and more humane’. Its urgent relevance to the UK is obvious, for both hard-pressed companies and an economy that without London would be less well off than the US’s poorest state, Mississippi. As Ton has pointed out, a tight market with employees switching jobs for a few pounds extra a week is exactly the time to overhaul employment policies as a system – since you’ll probably have to pay more anyway, make it into a source of competitive advantage rather than reverse. And a push for good jobs policy at national level, starting with the benighted public sector, would be a practical starting point for tackling some of the UK’s deep-seated supply-side issues of productivity, innovation and awful citizen service, as well as serving to mitigate the mounting cost-of-living crisis and address those chronic labour shortages. As ever, if we’re talking supply side, it’s ****ing managment, stupid!