If we are working harder, why are we worse off?

For most people in employment – 71%, according to the 2012 British Social Attitudes survey – their job means much to them than money alone. Nevertheless, economists think about employment as a bargain or transaction: the employee provides effort in exchange for reward.

Of course, what we mean by ‘reward’ or ‘effort’ changes over time. The typical factory worker in the early days of the Industrial Revolution spent sixty hours a week in difficult working conditions in exchange for subsistence wages and the opportunity of an early grave due to an industrial accident. As working conditions improved, attendance, physical effort, concentration and discipline – to follow instructions or to keep up with the production line – were the primary constituents of ‘effort’ in most jobs. ‘Reward’ also evolved with the weekly pay packet supplemented by fringe benefits, such as staff canteens and social clubs, as well as occupational pensions.

What about the reward-effort bargain today? Yes, ‘effort’ in some jobs may still be characterised fairly well by prompt and consistent attendance, concentration and execution of duties to (at least) the required standard. However, many employers are looking for more, sometimes a lot more.  They are looking for employees who push themselves and others. They are looking for imagination, inspiration and creativity.  In some cases, they are looking for employees who can use their heart as well as their head, capable of empathising with clients (and managers?).

This is not just about high-end, knowledge-intensive work either. The script for the first episode of the recent documentary series about Greggs the bakers used the phrase ‘going the extra mile’ so often that you could have been forgiven for thinking the programme had been sponsored by E4S. And according to the 2010 European Working Conditions Survey, 30% of UK employees say their job always or often involves them having to hide their feelings (slightly above the EU average), whereas 25% say they often or always get emotionally involved in their work (well below the EU average!).

And ‘reward’ is also changing and expanding. Salary, bonus, fringe benefits and pension are still there but, in some businesses, stock options will be important. Subsidised gym membership is likely to be more common now than a sports club with handsome grounds. For many employees, an element of choice about how, where and when work is carried out may be as important as the level of salary. People are forward-looking to varying extents and so prospects for future progression enter the mix. Nor should we forget the intrinsic value of the job and its purpose. Ever since the time of Adam Smith, economists have known that some people will pay (through a lower salary) for the opportunity to work in highly desired jobs.

It may therefore be no surprise that the most recent CIPD Megatrends report, Are we working harder than ever? finds that the proportion of employees who think they have to work very hard is on an upwards trend. This is not because working hours have increased. Rather it seems to reflect a feeling that work has become more intense and demanding, with increased workloads and the pressure of deadlines and targets. UK employees are also more likely than employees in most European countries to feel they are being pushed (or pulled) in multiple directions – by managers, customers, machines or targets.

The recession will have had some effect. Job cuts may have increased the workload for the remaining staff.  Employees worried about job security may have put in extra effort to protect themselves from the axe.  However, the evidence suggests this is not the complete – or even the main – explanation. A combination of technological change and a more demanding society have permitted more intensive work as well as creating the demand for it. Computerised systems, email and smartphones help fill gaps in the working day. They enable rapid – even instant – response. And as customers and service users, that is what we expect and demand.

Employers can make a difference. Increased demands on employees do not always lead to dissatisfaction, burnout and stress. Where employees are strongly motivated and engaged, the results can be beneficial – asking for more, with the right support, enables employees to deliver more. But if employees are not engaged, if they are not given any feeling of control about their job, or if they think they lack support, the report shows very clearly the costs in terms of work performance, turnover, sickness absence and ill health.

This perceived increase in the intensity of work coincides with a period when the measured productivity of each hour worked has fallen and this is a large part of why average earnings have failed to keep pace with inflation. Now, from the employees’ perspective, their effort has not dropped off – indeed, for many, the pressure is more intense – yet the real value of reward has fallen. But the employer sees declining productivity, less value produced each hour paid for, and hence there isn’t the scope to increase wages as much as they might like to.

We need to remember that productivity depends on more than sheer effort. It also depends on the tools employees have to work with.  Business investment has fallen since 2008. Employer expenditure on training has also fallen although, as explained in a recent blog, we can’t be sure this has negatively affected outcomes.

To illustrate this, think of a call centre. In a recession, less people want to buy PVC windows and doors.  Employees are still making the calls but making less sales. Indeed, to try and maintain revenue, management increases call targets and reduces the time between calls. So now work is a more intense experience. And possibly a more stressful one because tough times mean the company does not invest in the latest software and databases – or in training employees how to use them - so more calls break down unexpectedly and more cold calls are made to dead people.

So what should employers do? Well, the number one cause of excessive pressure and stress is workload, which is firmly within line management’s control. Cause number two is poorly managed change, which can be just as stressful for those charged with implementing it as it is to those who feel it is being done to them. Where extra demands have to be made, employees should (where possible) be given a degree of autonomy in how the work is done, and they should always feel they have support from their managers and colleagues. One specific finding was that many employers say they have Employee Assistance Programmes (EAPs) to help employees manage stressful situations – yet less than 10% of employees regard these as a source of support. It seems many employees are not aware of these programmes or do not think they are suitable for dealing with work pressures (possibly because of concerns about confidentiality).

There may also be a need in many organisations to look at work pressures as an employee productivity issue, rather than as a health and safety issue. Careful attention to job design and training (employees as well as managers) might reduce the need for stress management training and occupational health interventions.

Public policy might also benefit from a similar shift of mindset. Given the cost to the NHS and the welfare system of severe stress-related illness, there may well be a high payoff from interventions that improve the quality of line management and support companies in implementing change. Working out what these interventions might be is a rather more difficult task, but one well worth attempting.  

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