DWP’s preparations for changes in the world of work Contents

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1Long-term changes

5.In 2019, the Government published a White Paper which characterised the “Fourth Industrial Revolution” as “new technology […] creating new industries, changing existing ones and transforming the way things are made”.2 “New technology” in the context of debate about the future of work includes automation, a broad term encompassing new technologies which reduce or remove the need for human input. Ways through which automation could affect the world of work include greater adoption of artificial intelligence (AI), robotics, or automated products such as driverless cars, chatbots and drones.3 Our inquiry has focused largely on the impact that this new technology could have on the labour market, including the number and nature of available jobs, and how well prepared DWP is to respond to these changes.

Impact on the number of jobs

6.Discussions about automation have largely centred on the possible impact of the number of jobs, and whether the advent of new technology will lead to mass displacement of workers. The evidence we heard suggests that predicting the impact on the number of jobs is not a straightforward task. The Royal Society for Arts, Manufactures and Commerce (RSA) highlighted that projections about the impact on the number of jobs can vary:

Methodological choices perhaps overstate the variation, but the fact that Oxford University (2013) suggested that 35% of UK jobs were at high risk of automation, whereas the OECD (2016) put it at 10% illustrates this is a challenging area of research.4

7.Anna Thomas, Director of the Institute for the Future of Work, suggested that the effects of the pandemic and the increase in remote working must be considered when estimating the impact on jobs. She said:

Estimates seem to have settled at around 15% to 30% as the proportion of work or tasks with significant potential for automation, but a significant new factor has now been introduced that needs us to think again. That is whether tasks need to be undertaken face to face or whether they can be undertaken remotely. That means that the food, arts, retail and wholesale sectors, which have previously been growth sectors, have taken big hits as the new furlough figures show. These are jobs that require physical proximity to other human beings.5

8.The World Economic Forum (WEF) published a report, The Future of Jobs, in October 2020. It concluded that “the pace of technology adoption is expected to remain unabated and may accelerate in some areas”, and that by 2025, the amount of time spent on work tasks by humans and machines will be equal. In the medium term, the WEF estimates, job destruction is likely to be offset by the creation of new jobs in areas such as the “green economy”, the data and AI sector, engineering, cloud computing and product development: it estimates that 85 million jobs could be lost worldwide by 2025, but that 97 million new jobs could emerge.6 PeoplePlus, an adult training and skills provider, also said that while automation may result in the loss of some jobs, it could create others, such as jobs that involve the maintenance and oversight of automated systems.7

9.Professor Alan Felstead of Cardiff University told us that automation may lead to the transformation, rather than loss, of existing jobs. In written evidence to our inquiry, he argued in favour of a “task-based” approach when assessing the possible effects of automation, which looks at the impact on individual tasks performed by workers instead of jobs in their entirety. He said:

In all our analysis of the Skills and Employment surveys suggest that new technologies will likely transform rather than replace whole occupations. In response to the calls for evidence, to mitigate the consequences from automation, the focus should be on a micro-level understanding of job changes rather than macro-level forecasts of employment trends.8

10.Using this approach, some estimates have concluded that many jobs consist of individual tasks that are hard to automate, suggesting that impact of automation on the number of jobs may be more modest than some estimates. Tasks which may prove difficult to automate include complex problem solving, public speaking and counselling.9 A 2017 report by the McKinsey Global Institute estimated that while 50% of tasks performed by workers could be automated, less than 5% of jobs are fully automatable. It concluded that automation is unlikely to lead to mass displacement of workers:

A surplus of human labor is much less likely to occur than a deficit of human labor, unless automation is deployed widely. However, the nature of work will change. As processes are transformed by the automation of individual activities, people will perform activities that are complementary to the work that machines do (and vice versa). These shifts will change the organization of companies, the structure and bases of competition of industries, and business models.10

Impact on different jobs, sectors and regions

11.As the pandemic has shown, changes to the labour market can hit some sectors harder than others. Projections about the effects of new technology have emphasised that some sectors are particularly likely to undergo change. The RSA said that new technology has already led to job losses in some sectors:

RSA analysis of job changes over the last decade shows that the fastest shrinking professions by net employment change were national government administrators (-109,000, or –43%), retail cashiers and check-out operators (-75,000, or –32%), bank and post office clerks (-65,000, or –43%), sales and retail assistants (-64,000, or –6%) and personal assistants (-55,000, or –23%). Many of these declines are linked to new technologies, such as automated checkouts, online banking and the rise of e-commerce.11

12.The Work Foundation, a think tank, said that sectors which are most likely to feel the effects of automation include transportation, financial services, retail and manufacturing. These effects do not necessarily entail the loss of jobs—in the medical sector, for example, it suggests that “labour enhancing solutions”, such as robots that can assist surgeons during medical procedures, could increase safety and improve the experience of both worker and patient. In other sectors, it says, new technology may replace jobs currently performed by workers, such as transportation, where the rising use of technologies such as blockchain (a system of recording information which can be used as a ledger of transactions) and driverless vehicles could “[decrease] the sector’s reliance on human labour, which can eventually lead to job displacement”.12

13.PricewaterhouseCoopers (PwC) considered the impact on different sectors in a 2018 report, Will robots really steal our jobs?, which found that the proportion of jobs with the potential for automation varies widely between sectors: from 52% in the transportation and storage sector to 8% in the education sector. PwC’s estimates for the share of jobs with potential high automation rates by industry is shown in the graph below.

Figure 1: Sectors with jobs at potential high risk of automation

Source: PricewaterhouseCoopers, Will robots really steal our jobs?, 2018

14.The Office for National Statistics (ONS) said that some types of job are at greater risk of being lost to automation than others: occupations which it categorises as “low skilled or routine”, such as waiting staff roles and shelf-fillers, have the highest probability of automation (72.1% and 71.7%, respectively). “High skilled occupations”, such as medical practitioners and higher education teaching professionals, face the lowest probability of automation (at 18.11% and 20.27%).13

15.ONS data show that some regions have a greater concentration of jobs with a higher probability of automation than others. It found that the areas where jobs are at the lowest risk of automation are concentrated in London and the South East; the more jobs that require highly skilled workers in a particular area, the lower the risk of automation.14 The diagram below shows which areas of England have the highest proportion of jobs at risk of being automated:

Figure 2: Probability of automation by place of work, England 2017

Source: Office for National Statistics - The probability of automation in England: 2011 and 2017

16.The UK2070 Commission, an independent inquiry into regional inequalities in the UK which published its Final Report in 2020, found that “the effects of automation and other forms of structural economic change will not be felt equally across the UK” and that there is a risk that such changes will “repeat the experience of the deindustrialisation of the 1980s which hit some communities far harder than others”. These changes, in turn, are likely to accelerate demand for technological skills in the hardest-hit areas. To combat this, the Commission has called for the introduction of a comprehensive retraining programme aimed at adults with few or no qualifications.15

17.We heard evidence that the pace of technology adoption by employers currently varies between regions. Verity Davidge of Make UK said that companies in London, the North West and the South East of England are more likely to be at an advanced stage of technology adoption, while companies in the East Midlands and Wales are more likely to be in what Make UK describes as the “pre-conceptual phase of doing nothing”.16

Job quality

18.Our inquiry also looked at the potential impact of change on the quality of jobs. Organisations such as the RSA and PwC have argued that automation will not necessarily lead to a decrease in job quality: rather, the RSA said, it could “raise productivity levels, phase out mundane work, boost flagging living standards, and open up the space for more purposeful and human-centric jobs to prevail”.

It gave the following examples of how new technology could lead to improvements:

Algorithms in healthcare could allow entry-level nurses to play a more active role in diagnosis, partially autonomous trucks could lower accident rates for HGV drivers (assuming humans are still behind the wheel), and robots in social care could allow caring staff to spend more time comforting patients and less time lifting them and preparing their meals.17

19.The RSA stressed, however, that realising the benefits of new technology “depends on the choices we make as employers, policymakers, consumers, investors and the wider public”, and that there is still potential for it to do more harm than good. Possible drawbacks include the risk that new technology will put downward pressure on wages and that increased use of surveillance technology in the workplace could lead to an “unhealthy level of monitoring” of workers.18

20.Dr George Zarkadakis of Willis Towers Watson, a risk management and advisory firm, said that automation could lead to the “hollowing out” of jobs, which involves a reduction in the number of “mid-paid” jobs while the number of low and high-paid jobs will either remain the same or increase. This, he said, raises questions about how to ensure that the remaining low-skilled jobs are good quality.19

Precarious forms of work

21.Our inquiry’s call for evidence invited views on whether the legal definition of employment should be changed to ensure that all workers have access to the same rights and protections. At present, some categories of worker do not receive the same statutory rights as employees: these include people on zero hours contracts, agency workers, and workers in the “gig economy”. The Trades Union Congress (TUC) said that following past changes to the labour market, such as recessions, people in low-paid and insecure jobs have often been the first to lose work. It recommends that all workers—including agency and casual workers and people on zero hours contracts—should be granted the same protections as employees.20

22.During the course of our inquiry, the Supreme Court published its judgment in the case of Uber BV and others v Aslam and others. The initial case was brought by drivers who had obtained work through the Uber smartphone app, a digital platform that connects passengers with drivers. They had argued that, during their time working for Uber, they should be treated as “workers” for the purposes of the relevant employment legislation rather than independent, third party contractors, which would mean that they were entitled to rights and protections such as paid leave and the minimum wage. The Supreme Court found in favour of the drivers, noting that “new ways of working organised through digital platforms pose pressing questions about the employment status of the people who do the work involved”.21

23.The Government has committed to introducing an Employment Bill in this Parliament which will “build on existing employment law with measures that protect those in low-paid work and the gig economy”.22 In our First Report of the 2019–21 parliamentary session, DWP’s response to the coronavirus outbreak, we recommended that the Government should bring forward the Bill “at the earliest opportunity”, noting the impact that the pandemic has had on people in precarious and low-paid work.23 That report was published in June 2020, almost one year ago.

24.The Queen’s Speech at the start of the 2021 parliamentary session did not include any reference to the Employment Bill. We wrote to the Secretary of State for Business, Energy and Industrial Strategy, Kwasi Kwarteng MP, following the Queen’s Speech to ask why the Bill was not included and when the Government plans to introduce it.24 In response, the Secretary of State said that the Government intends to “bring forward all [its] measures to protect and enhance workers’ rights as part of the Employment Bill”, but that the Bill will be introduced “when the time is right”, and not while the pandemic continues “to affect the economy and the labour market in sometimes unpredictable ways”.25 Paul Scully MP, the Minister for Small Business, Consumers and Labour Markets, told the House on 8 June that the Government intends to introduce the Bill “when parliamentary time allows”. He also confirmed that the Government intends to create a single body with responsibility for enforcing employment rights and to take action against the practice of “fire and rehire”, where an employer dismisses an employee and offers to rehire them on new and often less favourable terms.

DWP’s preparations for change: the need for a strategy

25.Some witnesses said that the Government should develop a strategy for responding to changes in the world of work. Verity Davidge of Make UK, the manufacturing trade association, told us that measures put in place to address the changes brought about by the pandemic have been “piecemeal”, and that the Government should adopt a longer-term plan.26 Anna Thomas of the Institute for the Future of Work said that automation could present positive opportunities for workers, but that government departments would need to work together to realise these benefits. She recommended that the Government should adopt a “Work 5.0 Strategy” which should set out how different departments should work together to respond to change. Such a strategy, she said, could:

[…] build on the headway the Government have made on social partnership through the pandemic, would make sure that policies on basic levels of protection, which are within the DWP’s remit, or policy activism or support in job skills are aligned with measures to create jobs from BEIS, the Treasury and education policy in the Department for Education. Rather than conflict with each other, which you sometimes see at the moment, a collaborative focused approach on future good work would minimise that. It would maximise the benefits and minimise the disadvantages that we have talked about.27

26.The UK Commission for Employment and Skills (the Commission) was an industry-led publicly funded body which was founded in 2008. Its role was to “offer guidance on skills and employment issues in the UK” to both employers and the Government.28 The Commission also called for the introduction of a long-term strategy in its 2014 report, The Future of Work: Jobs and skills in 2030. While acknowledging that the future is “unknowable”, the Commission recommended that the Government should “develop a coherent and comprehensive long-term strategy for ensuring that the low skilled can respond to the challenge of a radically shifting labour market”.29 The Commission was closed in 2017, and the Government has not yet implemented the Commission’s recommendation that it should develop a strategy for responding to changes in the labour market.

The Department’s response

27.In its written evidence to our inquiry, DWP said that changing technology may lead to the loss of some jobs and the creation of others, referring to ONS figures which suggest that 1.5 million jobs in the UK are at high risk of seeing some of their duties and tasks automated. The Department acknowledged that technology “may affect worker productivity and the nature of tasks they do within existing jobs”. It set out how it intends to help jobseekers adapt to changes in the labour market:

Labour market objectives sit across Departmental boundaries and collective action is required to help jobseekers adapt to the changing world of work. Work is already underway with other government departments to help people into work and to enable DWP to identify and promote growing and high demand sectors to our claimants.

[…]

Officials will continue to work across Government to help identify and remove barriers to recruitment in high demand sectors. This will include bringing together insight and analysis held across Government to identify and monitor growing and high demand sectors. This knowledge will underpin a skills offer that ensures we respond and react to variations across local labour markets.30

28.The Department gave an example of how it has worked with the Department for Health and Social Care (DHSC) to promote roles in adult social care, a sector in which there is continuing demand for workers. DWP said that this work has involved trying to “understand the barriers to recruitment in the sector and to challenge some of the misconceptions of working in the sector”.31

29.We asked the Minister for Employment, Mims Davies MP, about the Department’s preparations for changes to the labour market, including whether she thought the Department had been proactive enough. The Minister said that the pandemic had “allowed [her], alongside BEIS and DfE, to start to work together and to try to be less reactive”.32 She set out some of the work that the Department is doing to respond to possible changes:

Some of the work that I am doing currently is working with DfE around its National Skills Fund, the plans that it has for digital boot camps and how our claimants can be available to be on those particular programmes. DfE is actively working with us and employers to make sure that those programmes fit the needs of the local labour market.

For me, one thing that I am very driven by is understanding a local labour market. That is very important and quite often a frustration for employers. […] That is where DWP, working with BEIS and DfE in pulling all of this together, has a role in shaping what happens next rather than solely being reactive.33

The Government’s AI Strategy

30.In March, the Government announced that it plans to publish a new Strategy later this year which will “unleash the transformational power of Artificial Intelligence”. Announcing the Strategy, the Secretary of State for Digital, Culture, Media and Sport, Oliver Dowden MP, said:

Unleashing the power of AI is a top priority in our plan to be the most pro-tech government ever. The UK is already a world leader in this revolutionary technology and the new AI Strategy will help us seize its full potential - from creating new jobs and improving productivity to tackling climate change and delivering better public services.34

31.The Strategy will focus on economic growth, the development of responsible AI, and “resilience in the face of change” with an emphasis on training, skills and research and development. Work on the Strategy will be led by the Department for Digital, Culture, Media and Sport (DCMS) and the Department for Business, Energy and Industrial Strategy (BEIS). The Secretary of State for Business, Energy and Industrial Strategy said that the Strategy will “accelerate bringing new technologies to market, unlock high-skilled jobs, drive up productivity and cement the UK’s status as a global science superpower”.35

32.While there is a broad consensus that new technology is unlikely to result in mass unemployment, it will lead to the loss of some jobs and the creation of entirely new ones. Some sectors will experience the impact of new technology more profoundly than others, and for some these changes have been accelerated by the pandemic. The retail sector, for example, has already seen the loss of many traditional “high street” roles, but the growth in e-commerce has led to the creation of new jobs.

33.We heard evidence that DWP has not been proactive enough in planning for long-term changes to the world of work, and that it has largely reacted to change instead of planning ahead for a range of different scenarios or developing a long-term strategy. Working with other departments, DWP should develop a strategy for how it intends to respond to long-term changes in the labour market. This should set out how the Department will plan for different possible scenarios. The strategy should include how DWP intends to respond to the impact of new technology on the number of available jobs, the skills needed to perform these jobs, and the differential impact that changes could have between sectors, regions and demographic groups.

34.New technology has the potential to enhance employees’ experience of work; for example, by allowing for greater use of remote working and replacing more mundane tasks. However, there is also a risk that technology could have an adverse impact on workers’ rights and wellbeing. The strategy we have recommended should also set out how the Government will safeguard employees’ rights and wellbeing and ensure that available jobs are of good quality.

35.Responsibility for responding to changes in the world of work does not sit with one department. DWP told us that it works with other government departments to help fill roles in sectors where there is growing demand: for example, with DHSC on filling vacancies in social care, or with BEIS on jobs in the green economy. We want the Department to be proactive in planning ahead. On top of this work, DWP should take a more strategic approach to engaging with other departments—for example DCMS, as the department responsible for digital, and BEIS—to identify sectors which may face increased demand in the future. We also urge the Department to work closely with MHCLG and other Departments on the Levelling Up programme, including on projects like the Towns Fund and Levelling Up Fund, to ensure that areas most exposed to loss of jobs from automation are prioritised for investment in skills and new jobs.

36.We welcome the Government’s announcement that it will publish a new AI Strategy later this year that will focus on economic growth through widespread use of digital technologies and on developing every adult’s digital skills. DWP should work closely with DCMS and BEIS on the development of the Strategy. It should ensure that the Strategy sets out how the Government will respond to the impact of AI on the labour market.

37.The Government has committed to introducing an Employment Bill in this Parliament which will “build on existing employment law with measures that protect those in low-paid work and the gig economy”. In our earlier report on DWP’s response to the coronavirus outbreak, we recommended that the Government should bring forward the Bill as soon as possible. We were therefore disappointed when the Bill was not included in the Queen’s Speech 2021. Given the significant changes in the employment market over the last decade, we believe it is imperative that the definition of employment is updated and clarified to ensure that workers enjoy the legal status that they are entitled to. This is not only key in protecting workers in times of change but also in ensuring access to skills training provided by or in conjunction with employers. We also urge the Department to work with HM Treasury to ensure the definitions of employment for tax purposes are consistent with those for employment law and to end the tax incentives for disguising employment as self-employment. The Government now says simply that the Bill will be introduced “when the time is right”—but it is not at all clear when that might be. We recommend that the Government should, as a matter of urgency, set out a timescale for when it will introduce the Bill. We also recommend that this be published in draft this session to enable pre-legislative scrutiny of the Bill.

Measuring the pace of technology adoption in the UK

38.The evidence we heard about the speed of technology adoption by employers in the UK is mixed. The Minister told us that the UK is “third in the world in terms of the implementation and solutions around AI”.36 According to the Work Foundation, however, the UK only has an average of 91 robots installed per 10,000 employees, compared with 106 robots on average across the EU, and over 360 in Germany.37 The Trades Union Congress has cited data showing that, in 2015, the UK had only 10 robot units per million hours worked, compared to 131 in the United States, 133 in Germany and 167 in Japan.38

39.Anna Thomas, Director of the Institute for the Future of Work, said that it can be difficult to compare the pace of automation in the UK with other countries because of variations in the way data is gathered. However, she suggested that the current slow pace is starting to accelerate:

The indicators that we have, although we need more research and more data, suggests it is slow, although it is picking up.

The CBI did a survey with the LSE that came out in October. That covered a range of technologies, including automation technologies, and it suggested that over 60% of firms adopted new digital technologies and management practices from March to July. Around one-third invested in new digital capabilities, so that does suggest we are at a critical point and it may pick up. It is difficult, on the basis of current data, to compare that with other countries, because the way we gather data varies.39

40.Both Anna Thomas and Professor Alan Felstead told us that there are challenges involved in assessing the impact and pace of automation in the workplace. Professor Felstead said that, without a solid evidence base, predictions about the future are “little more than guesses”. He recommended that the Government should “take a lead in putting in place the necessary data infrastructure” to track the impact of change “on the day-to-day working lives of its citizens”.40 Anna Thomas said that there is a need for real-time data on changes in the world of work. She suggested that this could be addressed by adding questions on technology adoption to existing ONS surveys:

There is very little data in the UK on tech adoption by firms, so there are factors that could make this better. The ONS, for example, could add regular technology survey questions to its existing material, which would be super helpful for academics and others. We also do not have task-based data and are reliant on the US O*NET survey at the moment, the predictions that Alan has referred to. If we had those, we could work out much more closely the relationship between automation and work.41

She added that the ONS could “add a broad question on the adoption of digital technologies to the Annual Business Survey”, with supplementary questions about the purpose of the new technology and whether it replaced any tasks previously performed by humans.42

41.We have heard concerns that there is a lack of real-time data on how quickly employers in the UK are adopting new technology. If DWP is to respond effectively to changes in the world of work, it needs a stronger evidence base about the real-time impact of new technology in the workplace. We recommend that, as a starting point, the ONS should add questions about technology adoption to its Annual Business Survey, as the Institute for the Future of Work has suggested. Possible questions could ask about the purpose of adopting new technology, and whether this has affected the number or nature of tasks performed by humans.

Measuring job quality

42.We heard that the Government should also monitor the impact of technological change on the quality of jobs. Professor Felstead said that, in comparison to similar countries, the UK currently lacks the data infrastructure to assess this impact effectively. He told us that the Skills and Employment Survey, which was last conducted in 2017 and is expected to be re-run in 2022 -2023, has been a helpful source of data of the impact that changes in the workplace are having on workers, as it “covers various aspects of job quality as well as the extent to which computers are used by respondents in their jobs, the sophistication of their use and the prevalence of computerisation in the workplace”.43 The most recent iteration of the Survey was funded in part by the Department for Education (DfE). Professor Felstead has called for the Government to fund the next edition of the Survey, possibly through the DfE again or through departments such as DWP or the Department for Business, Energy and Industrial Strategy (BEIS), and explore how it could be expanded.

43.The Minister told us that although the Government’s work on job quality is led by BEIS, DWP has a “real interest” in this area.44 In response to Matthew Taylor’s Review of Modern Working Practices, published in 2018, the Government adopted a new measure of job quality. This measure includes five components which it believed underpin “good work”: overall worker satisfaction; good pay; participation and progression; wellbeing, safety and security; and voice and autonomy.45

44.The Carnegie UK Trust, a charitable trust with a focus on job quality and good work, has argued that the Government should adopt a new measure of job quality for the post-coronavirus labour market. It has drawn up a framework for measuring “good work”, which consists of the following main components:

• Terms of employment, including the level of job security, minimum guaranteed hours and under-employment;
• Pay and benefits;
• Health, safety and psychosocial wellbeing;
• Job design and the nature of work, including opportunities for progression and sense of purpose;
• Social support and cohesion;
• Voice and representation;
• Work-life balance.46

The Trust recommends that, as part of “a reaffirmed commitment to good work”, the Government should work with the ONS to develop a new measurement framework for job quality following the pandemic.

45.As change leads to the emergence of new jobs and changes to existing ones, the Government must ensure that it is monitoring the impact of change on the quality of jobs, not just the quantity. Studies such as the Skills and Employment Survey have been a useful source of data on job quality in the past. The Government should fund the next round of the Skills and Employment Survey, which is expected to be re-run in 2022–23. The Department for Education has funded the Survey in the past, but the next round could be funded by DWP, or by more than one department. DWP should also consider whether further methods of collecting data on job quality are needed. Working with the Department for Business, Energy and Industrial Strategy, it should also consider whether there is a case for adopting a new framework for measuring job quality or modifying its existing measure.