In Conversation with...James Davies

January 2023

In the first episode of our ‘In Conversation with…’ podcast series for 2023, Lucy speaks to James Davies, Partner at Lewis Silkin LLP. James is a leading expert in employment law and speaks widely on issues relating to the future of work. He published his latest report on the future of work, “Eight drivers of change: 2022 and beyond” in November last year.

In this episode, James and Lucy explore the impact generational attitudes, particularly those of younger generations, are having on work and society more broadly and how that will influence the world of work in the years ahead.

Key takeaways from the conversation:

• Generational attitudes and values are having a profound impact on the world of work Generational attitudes, particularly those of younger generations, are impacting employer decision-making around the world. Employers, particularly in the US, must consider their stance on social and political issues as part of their value proposition.

• Shifting generational values will lead to political change Shifting attitudes are predicted to drive significant political change in the UK which could, in turn, dramatically influence the employment landscape, including in areas such as tax, immigration and labour relations.

• Employers must act now to navigate the road ahead To attract and retain the best people, employers will need to look outside traditional demographic and geographic recruitment pools and review their recruitment models. Employers need to recognise the importance of connecting organisational and employee sense of purpose.

• Focus will shift to climate change and growing inequality
  Climate change and inequality are likely to emerge as dominant societal and business critical issues in the years ahead and garner the attention and action they deserve from society, governments and employers.

You can read James’ report here.

In Conversation with…James Davies

Season 3: Episode 1

Lucy Lewis: Hello and welcome to the Future of Work Hub’s ‘In Conversation with…’ podcast. I'm Lucy Lewis, a partner in Lewis Silkin's employment team and in this podcast series I'll be hosting exclusive discussions with innovators, business leaders and thought leaders to explore their perspective on the longer term trends and immediate drivers shaping the world of work. And this is a real treat for me, because in our first podcast of 2023 I'm really delighted to be joined by James Davies.

James is a founder partner of Lewis Silkin's employment team. He's a leading expert in employment law with over 30 years’ experience and he writes and speaks widely both nationally and internationally on issues related to employment law, but also the future of work.

And I invited James onto our podcast at the end of 2021, following a future of work report that he'd published for the Future of Work Hub called “The Eight Drivers of Change”. As we emerged from the pandemic, there was a sense of kind of cautious optimism and James' report at that time considered how the world of work was evolving - how businesses and their people were embracing the newfound flexibilities forced on them by the pandemic. But now we're a year later and towards the end of 2022 the world looked quite different. It felt more volatile, less certain, there was less optimism - that dissolved in the face of increasing geopolitical tensions, so Russia's invasion of Ukraine, we've seen soaring energy costs and inflation, we've obviously got the cost of living crisis.

And to reflect these shifts, at the end of the year, so in November 2022, James published a new report – “Eight Drivers have changed 2022 and beyond” and that considered how key developments and events in the world in the intervening twelve months, alongside other issues, so societal attitudes, advancing technology, the shifting political landscape, how all of those things had significantly altered the world of work and what that means for employers.  When I reflected on our series last year, one of the things that was really evident to me was this feeling that demographic societal disruption has become a really powerful force. It's really driving change in the world of work and James, it was really interesting when I read your report that you also covered this. You talk about this idea of shifting demographics, changing societal values and you say as younger generations replace Baby Boomers in the workplace, their values and priorities will require employers to adapt and that will drive seismic political change in the years ahead. So obviously politicians and employers need to respond to that and that's something I'd really like to chat with you in the time that we've got today - what that means for the future of work, what it means for the future political landscape. But before we get to all of that, welcome back James.

James Davies: Thank you, Lucy. It’s a pleasure to be contributing once again to this podcast series.

Lucy Lewis: Now so much has changed since we spoke on the podcast towards the end of 2021 when you published your first report and I wondered if we could just start by talking to us a little bit about how you came to write that first report and the broad conclusions you arrived at?

James Davies: Back in the summer of 2021, as we’d begun to come out of lockdown, I was reflecting on how the world of work was changing so quickly - remote working, a move from cities to smaller towns and rural areas, changing priorities from workers and job seekers, changing consumer behaviour as we all went online to shop. Covid was a catalyst for some of these changes but equally other factors – technology, demographics, climate change and politics were to me interconnected in driving these changes. At that point in time there was a degree of cautious optimism about the world that we would enter: in the words of Joe Biden, there was a commitment to “build back better”. There is much learned comment on many of the things I cover in these reports, but I think what I've tried to do and which I have struggled to find elsewhere is try to bring these comments together to look holistically at how these various factors are driving change, in the world of work in particular, but in society more generally.

DEVELOPMENTS IMPACTING THE WORLD OF WORK OVER THE LAST 12 MONTHS

Lucy Lewis: And we're now a year on and it would be really interesting to hear what you've seen in that period – you know, what you identify as being the key developments that have impacted the world of work over the last year, the things that you pick up in this new report.

James Davies: Well, the world has changed a lot over the last twelve months hasn’t it and that cautious optimism that I mentioned seems a world away – Russia’s tanks rolled into Ukraine on the 24th of February and this has been a catalyst for much of this but not the only driver. We are experiencing a cost of living crisis caused partly but not only by the war in Ukraine. Political turmoil and uncertainty, particularly in the UK, has added to this uncertainty and to the economic problems faced now.

The economic landscape obviously has had a profound effect on employers as we see the beginnings of an increase in job cuts and unemployment and industrial action at levels not seen for 40 years ravaging the country – problems that are being experienced not only in the UK but throughout the world. Many economies are experiencing skill shortages, though for the UK these are more profound than most. Within 2022 for the first time since records began vacancies exceeding the numbers of unemployed. There are many reasons for the skills shortage which I explore in more detail in the report.

The urgency in tackling climate change has become increasingly obvious over the last year with extreme climate events including record temperatures, droughts and devastating floods touching most parts of the world. As Lucy mentioned in her introduction, conflicting generational attitudes and priorities have added to many a sense of unease and promises to remain a feature of society and the workplace in the years ahead but nonetheless, despite us finding ourselves in a decidedly darker place, many of the changes that I mentioned in my original report remain equally valid today.

THE IMPACT OF SHIFTING GENERATIONAL ATTITUDES ON THE WORLD OF WORK

Lucy Lewis: Thanks James, that’s a really helpful overview and you’re absolutely right because the thing I really would like to talk about is that conflicting generational attitudes, that shifting demographics and how that’s changing the world of work, how that’s increasingly got an influence in society. And before we get on to those impacts, one of the things I'd really be interested to hear your views on is what you see as the similarities and differences between different generations at work – how do you see that playing out in the world of work?

James Davies: Well, it's interesting that you've picked up particularly on this point. It's the factor that came out most to me in preparing these reports. It struck me profoundly and, looking at much of the data, probably surprised me most in writing the report - the impact of these generational attitudes and values that's having on society as a whole and on the world of work.

It's of course the case that people’s priorities change as they get older - life circumstances change. Research is inconsistent on the impact of aging on attitudes generally, but I think it's safe to say that the core liberal progressive international values of the younger generations, including concerns about sustainability and climate change, diversity and inequality will remain with these generations as they continue to be increasingly influential.

It's apparent across all age groups that employees are valuing increasingly flexibility, autonomy, purpose and a sense of belonging but these features are particularly important to the younger generations, to the Millennials and to Generation Z. Repeated studies which I refer to in my report show that, for younger generations, features of work such as a work/life balance, personal development opportunities and mental health and wellness support are often crucial in deciding who they will choose to work for.

Features at both ends of the age range are contributing to the skills shortages we face: amongst the over fifties the so-called ‘Great Resignation’, a phenomena rooted in Covid lockdown is resulting in more and more people reassessing their life priorities and retiring early. Though it is fair to say that we are possibly beginning to see the first signs of the ‘Great Return’ as economic pressures bite. Another interesting cause of the skills shortage is long-term ill-health. The economically inactive, that’s those who are neither in work nor seeking work, for health reasons is at record levels. I think this illustrates the sort of inconnectivity of the various drivers of change - long Covid, obviously coming out of Covid, but also the challenges that the NHS is facing in the UK today through delays in investigation and treatment are no doubt contributing to the high numbers of long-term sick who are unable to contribute to the labour force. And these delays in the NHS are caused by a variety of drivers - by political choices that have been made over the years, by reduced EU migration arising out of Brexit and by demographics, as an aging population increases the demands on the health service.

Amongst younger age groups we're also seeing a rise in the number of those entering tertiary education, so fewer entering the workforce and for these younger generations it’s not so much the Great Resignation, but the pandemic years did result in many changing career rather than leaving the workforce altogether as they reassessed their priorities as I mentioned earlier.

Lucy Lewis: Thanks James and actually that's a really helpful comment because I was going to take you back to those younger generations and the Gen Z and you talked a bit about changes in values and research that might be around those and I'm really interested in how you see that younger generation, the Gen Z and the generations that follow them, how you see them impacting on the world of work?

James Davies: I think that's fascinating - Generation Z, which are those in their mid-20s and younger today, is a cohort that came up as particularly influential from the report and it's interesting to note how the different attitudes ascribed to different generations can stray into the workforce. I think a particularly good example with the younger generations and particularly Generation Z and younger Millennials is the expectation they now have that their employer will make a positive societal impact. As a result of which we see growing willingness of employers to include social and political issues as part of their values proposition - so-called brand activism. I wrote an article about this last year, and this is referred to in my latest report.

Identity politics inevitably stray into the workplace, divisions seem to be coupled with decreased tolerance of others' views these days and this can create friction in the workplace. Friction between colleagues, between employees and the organisation itself and between the organisation and politicians and commentators promoting conflicting values. The situation in the US is particularly interesting with employers under particular pressure from both sides to take stances on issues such as LGBT rights and last year, of course, particularly on abortion rights. And American employers often find themselves stuck between a bit of a rock and a hard place - they have the prevailing expectations of the younger generations, that I've mentioned, becoming increasingly influential on their decision making as Baby Boomers retire and more Millennials assume positions of power and influence. But there are often strong political pressures pushing them in the other direction.

I think trends from across the pond often foretell developments here, but the US can be distinguished from the UK by the donations commonly made to politicians by companies but that's a practice that's severely restricted in the UK and this may contribute to greater pressure the businesses face in the US to take political positions on key issues. However, American multinationals will often expect overseas subsidiaries to follow the values and policies of the US parent so the issues that they're facing, the challenges that they're tackling in the States coming over to be relevant here.

SHIFTING GENERATIONAL VALUES ARE LIKELY TO DRIVE POLITICAL CHANGE

Lucy Lewis: Thanks James and you talked a bit about politics there and I've got a couple of questions about politics having read your report. Before we come to the sort of more general impact that politics have on the world of work, just sticking for a moment with this generational shifts, and you talked about the conflict and employers expected to take a view on certain things, and I wonder what your view is on how this generational shift, how this demographics issue is impacting on politics. Because obviously politics has a big role to play in the future of work. Can you tell us a bit about your thoughts on that?

James Davies: I was really struck by the attitudinal differences across the generations and I'm sure this is going to have a big impact in the future. There's an important survey every year in the UK the ‘British Attitudes Survey’. And that shows that, over the last few years, the UK is becoming more liberal and less authoritarian and more tolerant of immigration and less tolerant of inequality, and these shifts are no doubt driven by the values of the younger generations as they replace the older generations and, I think, will therefore become even more significant in the years ahead.

I was particularly struck looking at the data about the demographics behind the most recent elections in the UK. It's striking that, if you look back at the 2019 UK election, under 25s were three times more likely to vote Labour than Conservative and the 25-34 year olds nearly twice as likely. On the other hand, the over 65s were nearly four times as likely to vote Conservative than Labour. This is a major change in the demographic profile of those voting for the different parties than a year earlier where the difference in voting patterns of the different generations was not nearly as pronounced. And I think in the US also it's interesting looking at the voting patterns by age at the recent mid-terms with a significant imbalance there, with the young in particular voting predominantly Democrat and, perhaps not quite to the same extent, the older generations more likely to vote Republican.

THE ROLE OF GOVERNMENT AND THE IMPACT OF POLITICS ON THE WORK LANDSCAPE

Lucy Lewis: That is interesting, really, you know, when you look at the figures like that it does create quite a picture of the change we can expect to see. But I promised I was going to ask you about politics more generally. So taking a sort of slightly broader picture, you know we've recently seen quite material government intervention - a good example is the furlough scheme during the pandemic. We've seen the political pressure and then action in relation to support with the cost of living crisis and I'm really interested in your thoughts and insights on, more broadly, the role of government in the labour market and the impact that politics is likely to have on the work landscape as we look ahead to the future.

James Davies: Yeah, you mentioned the furlough scheme and I agree that I think that has profoundly and permanently changed expectations of public support. You know you can see that with the government support that was given to help people cope with the exponentially rising energy prices that we saw last year and, moving on from that specific example, I do think that looking at the drivers of change in the world of work which reflect the drivers of change in society as a whole, that politics or what I call in my reports “the role of the state” is often given scant attention when in fact, it's one of the biggest influences of the changing world.

The UK of course has experienced a particularly tumultuous year politically which reached a height in early autumn with the short-lived stay as Prime Minister of Liz Truss, and she had particularly radical ideas about regulation that would have had a really profound impact on the world of work if she had remained in power long enough to see these through. By way of examples of some of the changes she was driving was the step to deregulate workers' rights by reviewing all EU derived employment laws with all those not specifically retained or amended by the end of 2023 falling away. And it now looks as though, whilst that review will continue, the changes are likely to be much less radical than we perhaps foresaw in the days of Liz Truss and indeed, one of her ministers, Jacob Rees-Mogg was even suggesting a bonfire of employment rights to drive growth.

I think political decisions impact on many of the other drivers of change of the world of work. Of course investment in technology and the green economy affect what I call the “what of work”. Migration is influenced quite significantly by political decisions. Globalisation similarly. And, until recently, of course political decisions were being taken about Covid restrictions which had an immediate and significant impact on the workplace. And I think, looking at the UK, it looks increasingly likely according to all the pollsters that within two years we will have a Labour government and, in all likelihood, it will probably be the most left-wing government that the UK has experienced for more than 40 years. I think that promises quite significant changes to the world of work, quite significant changes to employment protection rights. For example, the Labour Party is proposing that unfair dismissal rights will arise from day one of employment rather than the two years employees need to remain in employment to have such protection at the moment. I think there will also be quite significant changes, amongst other things, to trade union laws from a Labour government. A Labour government would probably take a very different stance on the public sector strikes that we're experiencing at the moment, and I would expect to see higher levels of migration and higher taxes on the highest paid as features of a future Labour government.

PREDICTIONS FOR THE YEARS AHEAD

Lucy Lewis: Now you've given us a bit of a clue there because I was going to take you back to the report, because one of the things I think's really interesting in the report is that you make some predictions - you give us your views about the things that are going to significantly shape the world of work in the years ahead. And I don't want to discourage people from reading the report, but I wondered if you’d give us a little bit of a preview on those predictions.

James Davies: So that's right, in my original report I set out eight predictions and I have added eight further predictions to those in my new report and reflected on where we stand with the eight original predictions. These predictions vary from some which are frankly pretty obvious and others which I'm sure are more contentious. Amongst my new predictions one of the most obvious ones is that we are going to experience in the years ahead a combination of increased unemployment but continued skill shortages - skills shortages particularly in the jobs that require in-demand skills which will remain in scarce supply and also in the jobs that have historically been the preserve of low paid migrant workers where the work or the employment terms don't attract local workers. I'm pretty sure that we will see this coexistence of unemployment and skill shortages for the foreseeable future.

Perhaps this is more of a niche prediction for employment lawyers, but it impacts upon employers more generally, is I see quite significant changes in the employment contract. I mean I started my career as an employment lawyer well over thirty years ago advising employers and the employment contracts that were being produced in those days look very similar to the employment contracts that are produced now - quite a lot of dense text. We’ve moved away a little from the legalistic language seen thirty or forty years ago in employment contracts, but they are not very different. But I think the world of communication has moved on dramatically and I think in the years ahead we're not going to see employment contracts based on dense text which are often not read by employees, but they'll probably be based rather on detailed rules, on broader principles of mutuality of obligations and they'll be recorded differently - digitally and embracing visualisation which is used much more commonly these days to communicate. So, I so I foresee over the next few years quite radical changes to the way that employment contracts and policies are recorded and communicated.

Looking back at my predictions twelve months ago I think these actually do remain valid – some were pretty obvious at the time so, repurposing the office with the move to hybrid and remote working and the fact that hybrid and remote working will be here to stay - that remains the case and I don't think that's a great surprise to anybody. Most of the other predictions from a year ago I foresaw a return to the single market – now that's obviously a particularly contentious view and many will think that's far-fetched but I'd like to think it's probably not as far-fetched as it might have seemed a year ago and, whilst both major political parties in the UK reject any return to the single market, I'm convinced that a close relationship, at least along the lines of the single market, it might be called something else, probably within the next 10 years is highly likely.

HOW EMPLOYERS CAN NAVIGATE THE ROAD AHEAD

Lucy Lewis: Thank you, James. Fascinating. The predictions and particularly that last one show how politics can have a view and an impact on all of these things but I guess the question that lots of our listeners will have is, you know, if you had some key insights into, what are the things they should be doing in practice now to prepare for all of this change, what would your advice be?

James Davies: I think, looking at the shorter term, I think there's an interesting exercise in looking ahead 20 years but, looking at the shorter term, I think the immediate challenge for many employers is attracting and retaining the best people notwithstanding the economic challenges. I think that's going to continue to remain a key issue in the years ahead. I think employers need for starters to be looking at their recruitment and to be looking outside the traditional pools geographically and demographically and review how they select people. I think people are going to need more to move away from selection based on experience and qualifications and I think the role of predictive recruitment, where you are seeking to identify recruits based on skills and potential, will become increasingly important. I think the use of technology in recruitment will increase. Although there are lots of challenges, and I've written about that separately.

I think that employers are going to need to invest more in training and development so that they are building people’s skills to meet their needs. Again, from the research that I did in preparing my more recent report I found it particularly revealing that UK employers are spending 28% less on training and development than they were a decade ago and that the average UK employer spend on training and development is around half that of the EU average. I think those are startling statistics and they need to change if we're going to have a competitive growing economy.

I think employers also need to reflect on what employees are looking for and, again, this is driven by the, or at least in part by, the demographic drivers that we've discussed over this podcast. I think employers are going to need to consider how to sort of encourage employee autonomy and flexibility through work design and organisational culture. I think that employers are going to have to work harder to identify how best to connect organisational and employee sense of purpose, building trust, sense of belonging and responding to the employee activism brand values that I mentioned earlier. I think this all leads to the sort of creation of what I call “PREFAB Jobs” – purpose, fair and transparent reward, engagement, flexibility, autonomy and a sense of belonging.

WHAT’S MISSING FROM CURRENT CONVERSATION ABOUT THE FUTURE OF WORK?

Lucy Lewis: Thanks James, I love that idea of PREFAB jobs. That's a great way to finish. I've got one more question and it's a question I'm going to ask all our 2023 podcast guests. The last few years have shone a spotlight on the future of work and we've identified there are loads of opportunities but also a huge amount of challenges that lie ahead and the thing that I'm really interested to hear from you about is - what you think is missing from the current conversation about the future of work? What isn't getting enough attention and why do you think that's important?

James Davies: Two things if I may - I'm not sure if I'm allowed two things but I've got two things.

The first is climate change. This seems to have slipped down the agenda a little over the last year with the pressures that everyone is facing, arising from the cost of living crisis. But I suspect the future is going to see the climate emergency re-emerge as perhaps the most significant driver of change. I suspect that we'll see workplace decisions being taken always with regard to the environmental impact and to an extent we don't see today. The pressure to have regard to the environmental impact of an employer's actions and activities is going to arise not just from employees but from other stakeholders, consumers and investors and I think that climate change is also going to result in many businesses reconsidering where work is done. I think energy costs will join labour costs as a factor in deciding where to put workplaces. Obviously, the optimal conditions for agriculture, many agricultural projects, is shifting and that's going to change where things are grown, going to change farming. Business travel will come under an even greater scrutiny than it does at the moment, and I think the environmental impact of distant supply chains will become an increasing concern, or a factor in the return of supply and manufacturing closer to the home market.

The second thing that I think will get more attention in the years ahead and, again, this is partly driven by the values of the younger generations becoming more significant. I talked a lot about autonomy and flexibility etc. but, for 60% of the workforce who can't work from home and benefit from these new found flexibilities, making ends meet and preserving a sense of dignity are their priorities. And I think inequality is going to be the second thing that's going to be talked about a lot more in the years ahead. As my reports highlighted, inequality has grown significantly in the UK over the last 40 years and I'm sure, as I say, driven by the values of the younger generations a greater degree of attention is going to be paid to this by society, by governments and by employers in the years ahead.

Lucy Lewis: Thank you, James. It’s been a fascinating discussion. As I said at the outset, a real treat for me. If you're listening and you'd like to find out more about James' report, and I'd really encourage you to take a look, you can find at eightdrivers.lewisilkin.com. It's a really comprehensive report but it's possible to dip in and out and look at the predictions particularly if you want, and it's a timely assessment of the key issues and challenges that are impacting on the world of work today but that are going to impact the world of work in the years to come. So yeah, take a look and thank you again James very much indeed.

James Davies: Thank you, Lucy.