The true value of the foundational economy is not realised.
The rapid advancement of automation, artificial intelligence (AI) and data science has led to widespread discussion about what the future world of work will look like.
However, while job displacement and retraining are issues that leaders need to have in mind, this kind of crystal ball gazing around the future of work may distract us from understanding and addressing the more immediate challenges that many of us face.
Right now, employers are struggling to attract workers for vital roles, particularly in the often overlooked foundational economy, which provides essential goods and services to households such as health, social care and emergency services, along with education and childcare, retail, transport, energy, and utilities.
Although its component parts may seem somewhat disparate, the foundational economy directly provides jobs to more than 40% of the UK workforce, many of which are difficult to be automated.
While successive governments have discussed long-term plans for health, education and care services, demographic changes mean that demand is already outstripping supply.
For instance, at the end of 2022 it was estimated that there were 165,000 vacancies in social care in the UK (up 52% year-on-year) and the turnover rate was close to 31%. Similarly, in early childhood education and care turnover rates are estimated to be around 28% in the private sector. For leaders in the foundational economy, this presents a far more pressing issue than worrying about hypothetical scenarios for the future of work.
Part of the reason for high staff turnover and vacancies is that such roles continue to be low paid and undervalued. Median hourly wages in elder care are around £11 per hour and in early childhood education and care around £10 per hour, which is some way short of the UK median of £14.72.
Many workers only receive pay rises when the minimum wage goes up each April, and some report being paid the minimum wage for most of their careers (despite years of service and on-the-job training).
We need to make careers in frontline health, education and social care more attractive now if we are to avoid a worsening crisis of poor quality work and patchy services.
The conventional economic explanation for low pay is that such jobs are ‘low skilled’ and ‘low productivity’ — but the economic value of the foundational economy is significant.
According to the ONS, health and education alone account for around 6% of Gross Value Added (GVA) for England overall, and around 8% of all employment. The social and economic contributions that high quality universal services make to families, communities, and local economies are also substantial. For instance, they allow parents to go to work, they help prepare children for school, and allow older people to live with support, care and dignity.
The International Labour Organisation predicts that human health and social care is also one of the few growth industries that can continue to create jobs that are inherently low carbon. Expanding and investing in health and social care could also reduce the burden of unpaid care that falls mostly on women.
Clearly, growth in ‘frontier sectors’ such as life sciences, digital technology, and advanced manufacturing will be important to deliver the high skill/high wage jobs that underpin the future prosperity of the UK.
But at the same time we need to make careers in frontline health, education and social care more attractive if we are to avoid a worsening crisis of poor quality work and patchy services.
A greater recognition of the social and economic value of foundational economy jobs should also begin with a ‘bundle’ of progressive human resource management practices, such as good working conditions, employee voice, and long-term training and career progression routes.
Better funding for universal basic services, along with a real living wage for workers, would help to tackle some of these short-term problems, while also providing a platform for a more equitable distribution of earnings in the future.
One example of this in practice is in Germany, where recent reforms have seen more money pumped into frontline services while also providing pay increases of 18% for entry-level social care staff and 22% for fully qualified care staff. This, combined with support for long-term training and career development, will promote workforce quality and sustainability, and aim to reduce the recurring costs of high staff turnover.
High profile pay disputes in the UK have also highlighted the problem of sluggish wage growth within the health and education sectors, but early childhood education and care and elder care services are often funded from local authority budgets which have been squeezed significantly since 2010.
While individual local authorities have attempted to model good practice through their own commissioning and procurement practices, coordinated reforms are needed to raise the status and social valuation of the caring profession. And this would send a powerful signal that jobs in the foundational economy are valuable to society as well as to the economy.