Inclusive Job Growth: Companies, Sectors and Places

Putting Jobs First

The UK aspires to inclusive economic growth – growth which makes everyone better off – but is on a path of ‘immiserising growth’ – growth with a fall in living standards (Chart 1). The Good Economy (TGE) believes that the route to inclusive growth is through inclusive job growth: “sustainable job creation that leads to a more equitable distribution of good job opportunities, both socially and geographically” (OECD). Good job creation brings earnings quality, job security and work fulfilment, and the financial wherewithal for improving everyone’s well-being.

Chart 1: Britain lags behind on Social and Regional Inclusion

Source: OECD Regions at a Glance 2016. Poverty Rate defined as percentage of population living in poverty after taxes and transfers. Regional Productivity Disparity defined by GINI Coefficient of inequality of GDP per capita across TL3 regions

The Good Economy Job Ratings

To work as a shared goal, inclusive growth must be reliably measured. TGE believes that measuring inclusive job growth is the right place to start. This is why we invested over a year in developing “The Good Economy Job Ratings”, a unique three-in-one methodology for assessing inclusive job growth performance by company, sector and place. This integrated approach makes good job creation relevant to government, businesses, investors and communities.

Our Insight paper “The Contribution of FTSE Companies to Inclusive Job Growth in Britain” describes the methodology and the 2017 results at length. This blog is an abridged version of the paper.

• The Sector Ratings (Chart 2) show that the UK economy tilts toward high-growth but low-inclusion consumer services and business support services. Failure to re-balance the UK economy has resulted in low productivity and low good job creation. The Industrial Strategy Sector Deals must now propel these private sector ‘bubbles’ ‘rightwards and upwards’. The Ratings can be used to help guide policy and assess the Strategy’s impact.
• The Place Ratings (Chart 3) show where inclusive job growth is most needed. Many areas of Britain face dismal low growth-inclusion job futures with huge political and economic risk. The Government’s Place Deals and Devolution should aim to turn this around. Impact investors should be signposted to these ‘cold spots’ where the social returns are highest.

Chart 2: Inclusive Job Growth Performance by Industry Sector

Chart 3: Inclusive Job Growth Performance by Place

The Company Ratings (Chart 4) assess the inclusive job growth performance of 150 FTSE 350 companies (the full rankings are available here). As big employers and top investment holdings, the social and financial performance of these companies matter, so what happens in the City has implications for inclusive job growth throughout the country. The overall performance of these large companies is disappointing. Annual job growth averaged 0.35% over the past three years, compared to 1.8% for all businesses with more than 50 employees. Positive job creation was led by companies in low-pay sectors, retail and food and beverage services. Only 20% of companies are Voluntary Living Wage Employers. Positively, 45% have head offices outside London and the South East. In researching the Ratings, we found that merger and acquisition activity was a key factor in corporate growth but typically resulted in job losses – suggesting that competition policy can shape inclusive job growth? Ideally, the Ratings should be used as ‘conversation-starters’: how can individual companies contribute more to inclusive job growth? Companies themselves can use the Ratings introspectively, comparing their own performance today with yesterday and tomorrow.

Chart 4: Top 10 and Bottom 10 Companies in the Good Economy Job Ratings, 2017
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A Social Action Agenda

Inclusive job growth is the biggest challenge facing the UK after Brexit. It should therefore be the basis of a new social contract. We propose this social action agenda:

1. Make inclusive job growth an overarching goal of economic policy, including the Industrial Strategy and its Sector/Place Deals.

2. Build on emerging corporate and investor interest in the UN Sustainable Development Goals (SDGs) to encourage greater focus on how companies contribute to SDG 8 – Decent Work and Economic Growth and SDG 10 – Reducing Inequalities Within and Between Countries. Establish “SDG Employer” accreditation systems (c.f. Voluntary Living Wage Employer) with reporting on SDGs 8 and 10 a basic requirement for full SDG accreditation status.

3. Encourage large companies to get engaged in place-based initiatives that can lead to more inclusive job growth – the development of sector clusters, ‘Made in Britain’ supply chains and social enterprise programmes to help those in social need enter the workplace.

4. Create a great backbone of SME dynamism that will drive entrepreneurship and grassroots innovation. Start-up and scale-up programmes, backed by public and private finance, should evolve as a central plank of inclusive job growth strategy.

5. Coordinate how Sector Deals evolve with the objective of accelerating innovation diffusion between sectors, particularly high and low value manufacturing where linkages can drive inclusive job growth. The lessons of past knowledge economy strategy and the “ICT Revolution” are that innovation will accelerate growth when producer and user sectors move forward at roughly the same pace.

6. Promote the creation of ‘inclusive workplaces’ across business and the public sector. Decent pay, engagement, ‘voice’ and diversity have been shown to increase labour and workplace productivity. Inclusive workplaces are the building blocks of the Inclusive Economy. This is a real ‘win-win’ route to inclusive job growth and there is plenty of expertise available.

7. Company workforce reporting needs a revamp. Although human capital investment is now a major driver of corporate growth and competitiveness, it is hardly covered at all in annual reports. This is ‘need to know’ information for investors and shareholders, as well as other stakeholders, such as workers, suppliers and communities. Company reports should speak to all stakeholders and cover financial and social performance. Transparent reporting is essential given the job risks that arise from poor company performance and liquidation. It is absolutely vital to inclusive job growth policies.

We launched our Ratings at the House of St Barnabas on 27 February, 2018. Liam Byrne, Chair of the APPG on Inclusive Growth attended along with representatives from the Government’s Inclusive Economy Unit, CBI, TUC, PLSA, Financial Reporting Council, ShareAction, Living Wage Foundation, CLASS, Carnegie UK Trust, Antz, SSE and L&G.

The round table confirmed that Inclusive Job Growth is a cross-cutting agenda relevant to companies, investors, trade bodies, regulatory bodies, and advocacy and action groups.  We are exploring establishing an “Inclusive Job Growth Forum” to provide a platform for convening, sharing knowledge and building partnerships around specific actions.  We welcome your feedback on our work and the idea of a Forum.

The Good Economy (TGE) is a social advisory firm focused on the role of business and finance in building a Good Economy:  an economy that works for everyone. TGE provides research, strategy consultancy and impact measurement and management services to a broad range of clients. 

The Good Economy Insight Paper “The Contribution of FTSE Companies to Inclusive Job Growth in Britain” is available to download from The Good Economy website.