An answer to economic stress is staring us in the face – people
Accelerating inclusivity in the labour market could be the key to unlocking our full potential and economic growth.
The UK is experiencing high inflation alongside enormous skills gaps. As a result of the latter we have enormous numbers of vacancies across the economy. There is a desperate need to close these gaps. And the answer is around us: making the most of all our talent.
It sounds too good to be true. And yet, evidence for positive impact on growth, innovation and organisational performance from a more inclusive labour market is compelling.
Study after study from organisations ranging from the OECD to McKinsey, PwC and the Boston Consulting Group has found that diverse and inclusive organisations are positively associated with profit, performance, and innovation. The Chartered Management Institute’s The Everyone Economy, has gathered the evidence and concluded that the economic and social benefits of inclusivity are enormous.
And yet, as an economy, we under-utilise our people just as we over-exploit the natural world. Despite inflationary highs, growth fading away, and anaemic productivity increases, all the talk is focused on interest rates and wage increases. We are here, at least in part however, because for too long we have failed to properly develop our greatest resource- people.
The simple fact is that despite some progress in recent years, the pace of change has been painfully slow, with too many businesses and public services congratulating themselves too quickly, whilst progressing too slowly. Notwithstanding global impacts from Russia’s invasion of Ukraine, the unravelling of global supply chains as China wrestles with Zero Covid policies, and the impacts of fiscal stimulus in the US on global markets, we are under-performing economically.
Industrial strategies have come and gone, as have skills strategies and welfare to work programmes. And yet, inclusivity, despite chiming with both the Government’s economic growth aims and aspirations to ‘level up’ up the UK has been treated as a marginal agenda, little more than an afterthought. Race commissions have appeared and disappeared in a cloud of controversy. Lots of attention has been given to regulatory burden, and the latest political fight over identity. The whole time the desperate need, especially in the post-Brexit environment where skills shortages are an even greater risk, is for policy to drive change rather than chase it.
Despite welcome changes on mandatory gender pay gap reporting, which has created some focus within businesses and public sector organisations, we are left 560,000 female managers shorter than if there were parity. CMI calculates that on current trends that number will increase to more than 800,000 by 2026.
Meanwhile, in businesses and other organisations, progress has also been slow. The deficit we have in creating a truly inclusive workforce lowers organisational productivity and performance. McKinsey found that the businesses with the most diverse leadership teams were 25% more likely to experience above average profitability. CMI found that despite over 80% of managers typically claiming their workplaces were inclusive, far fewer actually did the things we know work. There’s a say-do gap. So 80% of managers report that their organisation doesn’t, or they don’t know if it does, track socio-economic background. And as many older workers, with in-demand skills, have left the workforce during the pandemic, amongst managers that recognised the under-representation in their organisation, only 5% were proactively trying to recruit them.
So we know that inclusivity delivers economic benefits and we know we have yawning gaps in employment - almost 30% percentage point difference between the working age employment rate and the disability employment rate - and representation in management and senior leadership. We also know we have record vacancies and skills gaps, and a disrupted international trade environment. Equally, we know that Government leadership is important to support those businesses and public services, of which there are many, trying to drive change. We know what works in the workplace from tracking data to flexible working to making inclusivity the responsibility of every manager. And we know that policy drives change whether it’s about linking inclusivity to growth, or Government purchasing to rules on diversity and inclusion, or insisting on mandatory pay-gap reporting across a wider range of factors. What exactly is holding us back?
Quite frankly, a strong enough case hasn’t been made. There are even signs of a backlash as many more male than female managers believe the agenda has gone far enough. There has been a collective failure to link inclusivity to a better economy and public services. And so the agenda has become one for the committed few rather than for us all. Now, that has to change. Or we will all pay a hefty economic and social price.
Anthony Painter is Director of Policy, CMI. CMI’s The Everyone Economy is published at http://www.managers.org.uk.
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