Select Committee on European Union Twenty-Second Report


164.  The Green Paper asks what role might law or collective agreements play in promoting access to training and transitions between different contractual forms. We considered this question in relation to what the Green Paper has to say about labour market segmentation and the disadvantages suffered by market "outsiders", including those vulnerable to exploitation or working in the informal economy.[35]

How segmented is the UK labour market?

165.  Several organisations suggested to us that the focus in the Green Paper, on a possible extension of employment rights to all workers, was based on a faulty interpretation of the degree to which people working on non-standard contracts are actually vulnerable or insecure, and might therefore be considered labour market "outsiders". According to Business Europe, for example: "Outsiders are the unemployed. All those legally employed, whether under full-time indefinite contracts, working part-time, under a fixed-term contract, or doing temporary agency work should be considered as insiders." (pp 125-132)

166.  This view is particularly strongly held by employers' organisations in the UK where it is argued that the vast majority of people working on a non-standard basis prefer to do so and should not be thought of as being stuck in an inferior segment of a two-tier or multi-tier labour market. As Susan Anderson of the CBI put it: "We do not consider part-time workers or fixed-term workers or agency temps as somehow outsiders or vulnerable workers or people who need extra levels of protection." (Q 51) The CIPD also cited evidence that temporary workers generally had more positive attitudes to their jobs than permanent employees. (pp 132-137)

167.  Moreover, we heard evidence that within the UK that there was considerable movement from non-standard to standard work contracts. Mr Meager of the IES told us: "In the comparative tables that the European Commission produces, for example, showing the proportion of the workforce that moves between permanent work, temporary work, employee status, self-employed status etc in either direction, the UK is right at the top of the list. It has a very, very mobile workforce so the idea of being trapped in a particular segment of the labour market or in a particular form of work is less of an issue in the UK. Insofar as there is segmentation in the labour market it is much less to do with forms of contractual agreements determined by labour law and much more to do with skills." He later concluded: "If there is an excluded underclass in the workforce in my view it is much more to do with the educational opportunities and skill levels and fiddling around with labour law is not going to make a huge difference to that." (Q 81)

Labour law and the employability challenge

168.  The EEF noted that employability in the face of the increased pressure from globalisation is the greatest challenge facing the UK workforce but that labour law is neither the primary nor most effective means of meeting that challenge. (pp 144-156)

169.  This point was picked up by the Employment Minister, Mr Fitzpatrick, whose comments echoed those of Mr Meager: "I think the numbers we have are the moment without any qualifications, I think I am right in saying, is about five million, and I think the projections are that, within 20 years or so, the number of jobs that will be available for people without skills will be reduced hugely down to a million or less, which is why the drive for education and training is so important. Labour law and the framework of law clearly have a place and a role to play, but if we do not upskill our people, if we do not impress upon people the importance of getting educational qualifications and the ability to demonstrate and maximise their potential, then we can pass whatever laws we want on legislation and labour law." (Q 163)

170.  The DTI response to the Green Paper referred to the Leitch review of skills, which in December 2006 published its final report for the Government on raising UK skills to world class levels Prosperity for all in the global economy—world class skills[36]. Lord Leitch's recommendations, to which ministers are due to respond by autumn 2007, include a call to employers to make a so-called "skills pledge". This amounts to a promise by employers to allow employees without basic or level 2 equivalent skills (i.e. equivalent to 5 GCSE's at A-C grade or comparable vocational standard) to undertake work related training leading to a level 2 qualification.

171.  The skills pledge is intended to help meet what Leitch thinks should be a priority of government skills policy—raising the proportion of UK adults qualified to at least level 2 equivalent from around 70% at present to above 90% by 2020. However, Leitch also recommends that if, by 2010, the contribution of employers to making progress toward meeting the 2020 target for level 2 equivalent skills is deemed insufficient, the government should consult on introducing an individual legal entitlement to workplace training for employees without level 2 equivalent qualifications.

172.  This suggests one possible route via which labour law might be able to address labour market disadvantage. However, although commenting on the Green Paper rather than the Leitch proposal, Business Europe pointed to the experience of countries that have introduced a right to skills training to suggest that this has had little impact on the qualification levels attained by the most disadvantaged. (pp 125-132)

173.  Taking a slightly different tack the TUC's Ms Reed told us that she thought improved employment rights, or at least greater employment stability, would help disadvantaged groups: "We know employers generally do not train short-term workers because they do not see the benefit of that and we believe there would be a benefit to the whole economy if agency workers, including migrant workers, could develop their capabilities more effectively through work place training." (Q 129)

Help for vulnerable workers and migrant workers

174.  We heard that a major problem for many disadvantaged workers was not necessarily a lack of employment rights, but exploitation by the minority of bad employers that flouted labour law and denied people their legal entitlements. As the DTI stated in its comments to the Commission on the Green Paper (pp 85-96): "… it cannot be assumed that any category of workers is vulnerable by definition; a whole range of factors have a bearing on whether or not a worker is vulnerable. The root cause of vulnerability is very often lack of skills. Basic skills (including language skills) are more important than ever for entering the labour market". Individual workers may also become vulnerable for other reasons. For example, people who have suffered from a mental health problem may experience discrimination in the labour market as a result of stigma[37].

175.  Among the people who may be exploited are migrant workers, from elsewhere in the EU, who have entered the UK legally in search of work. A separate issue is the situation of workers, from outside the EU, who are working illegally in the UK. We noted with interest the adoption on 16 May 2007 by the European Commission of two Communications[38],[39] which, inter alia, would require that employers must check, before recruiting an employee from outside the EU, that he or she has a valid residence qualification. Employers who fail to do this, and employ such a person who is illegally staying in the country, would be liable to fines and other sanctions.

176.  The Home Office also launched its Illegal Working Action Plan on 16 May 2007 which will be coordinated through the new Border and Immigration Agency (BIA). Key measures in the plan include a new pilot project to help employers check migrants' identity and right to work, implementation of civil penalties for employers who employ illegal immigrants as a result of negligent recruitment, and a new criminal offence for knowingly employing illegal workers. This is subject to a consultation which ends on 7 August 2007[40]. The Government will also be carrying out a national media and direct mail campaign on illegal working, reminding employers of their responsibilities. The measures are expected to come into force early 2008.

177.  Migrant workers unsure of their entitlements and misinformed by employers were often those most at risk of being exploited. With net migration into the UK from the EU currently at a record high—boosted in large part by the roughly 600,000 central and eastern European migrants that have come here to work at one time or other since EU enlargement in 2004—the issues this raised have gained greater prominence. Indeed during the course of our Inquiry the BBC broadcast[41] an exposé of appalling treatment of Lithuanian immigrants to the UK which, the TUC told us, was a far from isolated example. (Q 128)

178.  Hannah Reed of the TUC told us "Many migrant workers are facing exploitation, being housed in very cramped conditions, having very substantial deductions being taken from their pay packet, which is often in breach not only of the regulations but also of minimum wage laws." (Q 128)

179.  Pressed on whether this reflected a deficiency in enforcement procedures rather than in the law itself, Ms Reed argued that there were genuine gaps in the law but also a lack of enforcement. Although the TUC welcomed the recent establishment of the Gangmasters Licensing Authority this only operates in agriculture, whereas gangmasters, some illegal, were spreading to other parts of the economy.

180.  For the Government's part Mr Fitzpatrick told us that the DTI would soon be completing a consultation on possible measures designed to assist vulnerable agency workers and was funding two pilot exercises to support vulnerable workers and help their employers to comply with employment rights legislation. There was also to be a 50% increase in resources for teams of inspectors enforcing the national minimum wage.

181.  Mr Fitzpatrick said it was essential, however, that the Government acted in a precise way to come down hard on rogue employers rather than impose unnecessary additional regulatory burdens on decent employers: "We want to focus on those who are not playing by the rules because they are not only cheating vulnerable workers but they are undercutting decent companies and preventing them from operating at a better profit level because they are doing the right thing. This is a business protection measure as well as protecting vulnerable people." (Q 167)

182.  In similar vein, the DTI's written evidence argued that an overly regulated labour market might itself result in more people entering the informal/illegal economy and working without enjoying any employment rights. In the terms of the Green Paper this represented another example of how efforts to improve labour market flexibility could reinforce genuine employment security and enhance working conditions. Aside from this the best way for the EU to combat undeclared work, said the DTI, is to co-operate on detecting cases where this was evident and to share best practice on enforcement methods. (pp 85-96)

183.  On May 16 2007, after we had heard evidence from the Minister, the Government launched a consultation document[42] with the aim of creating better enforced and more effective penalties for employers' non-compliance with National Minimum Wage legislation and the Employment Agencies Act. While any measures that result from this consultation will clearly have general application, they should, in particular, help to address the problems of illegal exploitation faced by vulnerable groups.

184.  We have noted the high rate of transitions between different forms of employment and contractual status within the UK labour market. We conclude that whatever market segmentation does exist is explained primarily by social disadvantage, caused by lack of basic skills and qualifications, rather than by barriers created by labour law.

185.  In the UK context, therefore, we recommend that measures to improve employability, rather than modernisation of labour law, should be the main priority of government policy toward the labour market.

186.  We are greatly concerned by evidence of the exploitation in the UK of vulnerable groups, especially migrant workers. We conclude, however, that the appropriate course is to tackle abuse where it occurs and to provide vulnerable and migrant workers with information about their existing legal entitlements.

187.  We welcome the action taken by the Government during our Inquiry to consult on the introduction of measures which would help to strengthen the employment protection in the UK of vulnerable groups of workers by creating better enforced and more effective penalties for employers' non-compliance with National Minimum Wage legislation and the Employment Agencies Act. We will take a close interest in the outcome of this consultation and in the effectiveness of any new measures which result from it.

35   op. cit. pages 9,10 Back

36   HM Treasury report: Prosperity for all in the global economy-world class skills, December 2006. Back

37   House of Lords European Union Committee Report: 73-I "Improving the mental health of the population": can the European Union help?, April 2007 (page 48) Back

38   Commission Communication: Applying the Global Approach to Migration to the Eastern and South-Eastern Regions Neighbouring the European Union COM(2007) 247 final, 16 May 2007 Back

39   Commission Communication: Circular migration and mobility partnerships between the European Union and third countries COM(2007) 248 final, 16 May 2007 Back

40   Home Office: Consultation on the implementation of new powers to prevent illegal migrant working, 16 May 2007 Back

41   BBC News and Newsnight reports-25 April 2007 Back

42   DTI Consultation document: National Minimum Wage and Employment Agency Standards Enforcement, May 2007 Back

previous page contents next page

House of Lords home page Parliament home page House of Commons home page search page enquiries index

© Parliamentary copyright 2007