Austerity and the Covid-19 Crisis: The impact of welfare reform on employment rights

In my new book, I argue that austerity is about more than public expenditure cuts. It reflects a particular model of capitalism integral to neoliberalism comprising a class strategy focusing on the redistribution of income and power away from the working class and in favour of the rich. Mark Blyth, making a similar point, states that austerity ‘is not just the price of saving the banks but the price that the banks want someone else to pay’. This price being the massive cuts in public expenditure and wholesale attacks on public services and welfare.

Austerity, welfare reform and industrial relations

Although austerity was imposed on us with the election of the Coalition government in 2010, it has its origins with the Thatcher-led governments (and then New Labour). This ‘growth model’ comprised three key elements.

First, a shift towards greater disciplining of workers and claimants has taken place. Downgrading employment rights and attacking trade union organisation is a key element to this. Deregulation of so-called ‘labour markets’, labour flexibility, capital mobility and global finance are key sources of wage stagnation and insecure work. In the UK, there are an estimated 3.7 million people (one in nine of the workforce) experiencing insecurity at work as of 2017/18, and this number has risen sharply (by 13%) in the last two years.

Second, the welfare reform agenda and Universal Credit (UC) involve a stricter conditionality and work-first regime as a way of moving people into work – often into jobs which are low-paid and insecure. UC, launched in 2013, is the major Conservative government welfare reform launched on the back of ‘making work pay’. The stated aim of UC was to ‘simplify’ the benefit system as it merged a number of different benefits into one benefit. UC also involves an in-work benefit (work allowance) to replace working tax credits. Access to both in-work and out of work elements of UC are subject to demanding work search and progression requirements.

This has been facilitated by Jobcentres using employment services to funnel welfare claimants into low-paid sectors. The use of, or threat of, sanctions as a disciplinary measure has driven the transition from welfare to work, as claimants either have nowhere to go but to comply or try their luck in the black economy or margins of the informal economy. Work-first policies undermine wage bargaining and reinforce insecure work. This is intended to have the double effect of undercutting wage demands but to serve the low-wage economy with ‘compliant’ labour.

Third, welfare cuts are inextricably linked to the shrinkage of the social state in relation to all its four main roles: as a source of income support; as a provider of free or subsidised public services; as a direct employer; and as a defence against marketisation of society.

Universal Credit, insecure work and the Covid crisis

Chapter 6 in my book presents the initial findings of a study I was involved with for Sheffield TUC relating to their Sheffield Needs a Pay Rise Campaign (SNAP). SNAP was established by Sheffield TUC following a Resolution Foundation report which showed that the City of Sheffield has the largest proportion of its workforce paid below the Living Wage Foundation’s (LWF) living wage. The campaign’s aim is to mobilise and unionise marginalised and insecure workers, many whom are also claiming benefits. The final report was launched in July 2020. One aspect of this study was to focus on the relationship between UC and low-paid and precarious work.

This study found strong evidence of work/welfare ‘cycling’, in particular where claimants were under pressure to accep jobs in non-union organised workplaces. This history is important, in order to contextualise their vulnerability in terms of dealing with bullying and oppressive working conditions, and the general precariousness of negotiating the conditionality of the welfare system. An example of this is the social care sector (one of the SNAP case studies) which has been severely impacted by the Covid crisis. It is important to state that the care sector before Covid, as highlighted by IER studies, was under intense pressure in terms of underfunding, the increase in use of zero-hours contracts and staff shortages. Another IER report on the social care sector suggests that the operation of UC ’”may require benefit claimants to accept job offers for a few hours a week or face disqualification’.

One key component of poor working conditions relates to staffing levels in care homes, with statutory minimum staffing ratios frequently being treated as maximums:

For instance, at full capacity, say, twenty residents, on a night you would only have two people running the site. That’s hourly bed-turns, making sure the residents are able to go to the toilet if they need to go to the toilet and also that they receive water, so especially on warmer nights they have to be watered, with a lot of medication that’s then given on a four-hourly basis, one-hourly basis, depending on the medication, and a lot of paperwork that needs filling in. – GMB Official

The Covid crisis has worsened conditions in the social care sector in Sheffield as confirmed by reports from the relevant trade unions (GMB and Unison) who have voiced concerns regarding staff health risks and the lack of PPE.

Those in work claiming UC also face conditionality to increase working hours and earnings. In the supermarket sector an USDAW Official (representing retail workers) explained how the extreme flexibility required by employers meant that staff would frequently lose eligibility for particular benefits by being made to work an extra hour, more or less, which would take them over or under the various qualifying thresholds for different benefits, including tax credits (and UC Work Allowance). The government has implemented cuts to the UC work allowance which are in fact wage cuts.

The increase in the number of workers claiming UC across all sectors, but especially in lower-paid insecure jobs, has posed dilemmas for trade unions. SNAP found that Child Poverty Action Group (CPAG) and USDAW had undertaken a national survey of union members, which found that most were worse off claiming UC but also over half of survey respondents said they didn’t understand their UC awards, perhaps reflecting the extra complications of working and claiming UC.

The SNAP findings reveal abuse of claimants and workers which are not atypical. A study of Amazon in Wales found that many workers are coming from the welfare system, as the employment services (the Department for Work and Pensions) funnel claimants into low-paid and precarious work – or ‘compulsion into precarity’. Driving down wages and benefits are ‘two sides to the same coin’ in the pursuit of austerity.

The government’s schemes to mitigate the impact of the Covid-19 lockdown (such as the Job Retention Scheme (JRS), Statutory Sick Pay and Self Employment Scheme) are criticised for having too many gaps, with those not eligible having to claim UC. The IER estimates that nearly 11 million workers could face destitution, not eligible to be placed in the schemes and therefore vulnerable to unemployment. This has led to unprecedented numbers (2.5-3 million and growing) having to apply for UC. This is a potentially disastrous fall in income as UC is less than 27% of the National Minimum Wage for over-25s, assuming a 40-hour week.

At the time of writing there is no evidence that the Conservative government will abolish the five weeks’ wait for UC or write off the advance loans, or axe the two-child tax credit and the benefit cap – the latter two ‘penalties’ which, from the first day of implementation, have had major detrimental impacts on the incomes of families with children. Furthermore, the government refuses to increase the incomes of those on ‘legacy’ benefits such as Employment Support Allowance (ESA) – meaning that disabled people are particularly vulnerable in the crisis.

Conclusion – towards a different approach

In his UN report on poverty in the UK following his visit in 2019, Philip Alston (UN Rapporteur) commented that “no single program embodies the combination of the benefits reforms and the promotion of austerity programs more than Universal Credit”. This also applies to the government’s latest measures (25 September) which are woefully inadequate to address the employment crisis and the rapidly disappearing safety net. In the short term, the TUC and New Economics Foundation call for raising the basic level of UC and legacy benefits to £260 a week, representing 80% of the National Living Wage (the minimum rate for adults over 25), or 47% of total average weekly earnings, which is seen as a reasonable replacement rate. The TUC is also calling for the implementation of a job guarantee scheme for the newly unemployed and the Institute of Employment Studies is proposing the development of back to work services for the unemployed in terms of intensive support, counselling and training.

In the longer term, a newly revamped social security system based on principles of social justice and that genuinely combats poverty and inequality is required to replace UC. The TUC along with the PCS, UNITE and unemployed and welfare rights organisations have developed the Welfare Charter, which provides a framework for enhancing the social and employment rights of people claiming benefits. This will be closely aligned to an economic recovery plan such as the Green New Deal which must involve genuine social dialogue and involvement of the trade unions along with businesses and the government.

The government is using Covid, as well as Brexit, to attack workers’ rights. The Covid crisis raises big challenges as experienced by the SNAP campaign: national trade union policies have to be backed up and supplemented by action at the local/regional level. SNAP (and the local labour movement) has successfully crowdfunded to continue paying the salary of an organiser. Trade unions such as the bakers’ union (BFAWU – the Bakers Food and Allied Workers Union) have been closely involved with supporting the campaign, given the increased involvement of fast-food workers. Recently, the campaign pressured a fast-food outlet to pay unpaid wages whilst the business had undergone a takeover.

But the trade unions can and should do more. This means the mobilisation of trade unions and community organisations – ideally through the local TUCs to strengthen the link between trade unions and precarious workers. This could involve putting pressure on devolved authorities as well as local authorities to promote trade unions.

Regional TUCs can establish joint trade union casualisation committees at the local level with the sole purpose of engaging with insecurity. The campaigns which Unite Community along with Disabled People Against the Cuts (DPAC) have led around UC have been successful but need more trade union support. Trade unions need to consider different ways of organising and being more inclusive in their organisations, particularly at the local level. Discriminated and under-represented groups such as women, young people and BAMEs need to be targeted by trade unions (via existing social networks) in order to sell the importance of trade unions as swords of justice (for example Yorks and Humberside Regional TUC have established a Young Activist Network).