Alongside growing economic inequality and the concentration of wealth at the top of society and in certain regions, there is observed, in a number of countries, a growing sense of economic insecurity. Economic insecurity is a lack of confidence and assurance in maintaining an adequate standard of living. A key cause is the increasing vulnerability of a growing portion of the population to economic shocks due to unstable employment, volatile earnings and very limited, if any, savings. To illustrate this, a 2019 survey commissioned by the Royal Society of Arts in the UK found that 36 percent of respondents would struggle to pay an unexpected bill of £100 and 59 percent would struggle to pay one of £500. Side-effects of acute economic insecurity are thought to include anxiety, damage to health and risks to mental health. An increasingly short-term approach to finance is also likely, with a focus on getting from paycheck to paycheck rather than planning for the long term. This potentially exposes people to further financial risk, for example unwise expenditure to dig out of a sudden crisis or resorting to payday lenders whose exorbitant interest rates exacerbate debt and insecurity.
Those suffering from economic insecurity, and the resulting anxiety, do not belong to a single group. But those most likely to suffer from economic insecurity do tend to work in the new gig economy; have zero hours contracts; or are self-employed; with the result that income from week to week is not assured and can fluctuate widely. The gig economy clearly works well for some, unleashing the potential of underused assets (as with AirBnB) or allowing people (students, actors and musicians for example) the chance to pursue longer-term objectives, whilst making money to live on a very flexible basis. But there are many more people, it is contended, who rely on the extra cash they make from the gig economy in their free time to make low wages from their main employment liveable. This carries social and family costs, for example parents always at work.
Most people in employment, however, are still on traditional contracts. Here the problem is not fluctuation of income but the stagnation of wages in the last two decades compared to the cost of food, housing and travel. Other factors have further undermined financial resilience in a section of the population, for example the impact of the financial crisis leading to reduced savings and accumulated debt; the reduction in the collective bargaining power of labour through the decline in unionisation; the automation and the perceived potential automation of jobs further reducing bargaining power; and the relative deregulation of the working environment in some countries allowing market forces greater sway. Broader shifts in the functioning of the global economy have also potentially had an impact, including globalisation and competition from foreign workers, whether working abroad or through migration; the rising use of information technology to make parts of the labour market operate on a “just in time” basis; and the concentration of economic opportunities around global hubs like London, New York and the Bay Area in California.
This Ditchley conference will bring together an eclectic mix of politicians, economists, business leaders, technology leaders, activists and the media to explore the significance of economic insecurity and its potential solutions:
- How real and new is the phenomenon? Has it grown because of structural changes in the way global and national economies work, for example the financialisation of the economy, the rapid rise of international trade with China playing a major role, or increasing automation? Or is it primarily part of the long tail of the global financial crisis and will therefore be corrected over time by global growth?
- To what extent are its causes cultural rather than absolute – increased expectations from individuals of what they should be able to afford and experience? A move away from saving for a rainy day because of expectations that the state should provide a safety net? A side effect of a broader decline in the cohesion of families and of communities which in the past would have provided a personal safety net? Or to what extent is economic insecurity the result of shortcomings in the labour market (inadequate supply of stable full-time jobs, low wages, fewer defined benefit pension plans) and government policies aimed at correcting those shortcomings (failure to create a sufficient number of jobs, too low a minimum wage, insufficient earning supplements, or inadequate disability and retirement benefits)?
- What “collateral damage” – if any – has economic insecurity caused or contributed to? Is it a significant factor in nations’ growing unwillingness to accept immigrants, the increase in hate crimes, public dissatisfaction with free trade pacts, or voters’ attraction to more authoritarian types of leadership?
- What are potential solutions? New forms of community? New responsibilities for employers with the effective recreation of a bundled contract of benefits for all employees? The regulation of the gig economy and the granting of the right to a fixed hours contract to bring the new economy in line with the old? A rebalancing of the rights of labour and capital more broadly, including perhaps encouragement of union membership? New approaches by government to create or expand social insurance programs or other policies that aim directly to counteract the perceived shortcomings of the labour market (and to abandon government policies that have failed to do so)?
- To what extent can lifelong learning and retraining – perhaps through personal learning accounts as being trialled in Singapore and France – help reduce economic insecurity by making workers more adaptable? Can this work in the aggregate as well as individually?
- To what extent is the problem geographic and amenable to solutions that shift economic activity around countries and away from single global hubs such as London, New York and San Francisco?
- If a new safety net is needed, then what form should this take? Should universal basic income or other forms of direct state support be on the cards? Should assistance be linked primarily to work, as is the case with most U.S. economic security programs (Unemployment Insurance, Social Security disability and retirement benefits)? Should tax incentives be a major or even the primary tool?
To what extent can other forms of redistribution of economic capability, for example free or subsidised childcare and health services, reduce economic insecurity?