We Must Stop the Corona Crash Becoming a Depression, with Ten Social Rights

by | Mar 30, 2020

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About Ewan McGaughey

Dr Ewan McGaughey is a senior lecturer at the School of Law, King's College, London, and a research associate at the Centre for Business Research, University of Cambridge. He specialises in labour law, corporate law, enterprise law, and social and economic rights.

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Dr Ewan McGaughey, “We Must Stop the Corona Crash Becoming a Depression, with Ten Social Rights”, (OxHRH Blog, March 2020), <https://ohrh.law.ox.ac.uk/we-must-stop-the-corona-crash-becoming-a-depression-with-ten-social-rights/>, [Date of access].

The corona virus has triggered a stock market crash sharper and faster than the global financial crisis. It threatens a depression unless we aggressively protect social rights. Companies with plummeting share prices, or evaporating customers, are prone to individually rational, but socially irrational herd behaviour. Companies lose confidence and fire workers. Workers lose income, and spend less on goods and services. This means companies lose more customers. They fire more workers. This is the sinking spiral of every depression. We must stop the corona crash becoming a depression, with social rights. Here’s ten that we can boost right now, all without primary legislation.

Social security and working time rights

One, every employee has the right to work at home to avoid ‘danger’ of the virus at work that is ‘serious and imminent’. Employees who refuse to go to work can be subject to no ‘detriment’: no pay cuts, no dismissal. Employees also have the right to a ‘reasonable amount of time off’ for child care, and to care for parents. But the government should publicise these rights, and ensure pregnant workers and carers suffer no detriment, to protect jobs and lives.

Two, governments should extend these rights to everyone who personally performs work. Sham self-employment is a huge problem in the UK, and across the ‘gig economy’. Employers like Uber or Deliveroo misrepresent worker status, describing their employees as ‘independent contractors’, to evade social rights and tax. The Secretary of State can extend the scope of employment rights to everyone by order, and say this expanded definition of an ‘employee’ goes for all tax and social security rights.

Three, statutory sick pay is only £94.25 a week. It should replace people’s full income up to a reasonable cap: Sweden’s cap is around £600 a week. Unemployment insurance and universal credit should rise too, because the economy is only strong if everyone has a fair income.

Four, many employers will ask workers to take holidays if customers dry up. We have a right to at least 28 days paid holidays. The right to paid holidays – a universal human right – gives employers and workers more flexibility, especially in a crisis. The European Social Charter 1961 requires the UK progressively reduces the working week. We should raise the right to paid holidays for more flexibility.

Voice at work

Five, to halt short-term, socially irrational dismissals by firms, workers need voice at work. Countries with elected work councils, with rights to veto or delay dismissals and rearrange working time, had lower unemployment rises in the global financial crisis. German work councils with trade unions contained mass unemployment in 2007-2009, and are doing it again right now.

The UK has only minimal dismissal protection, and the US virtually none. But we can create the right to work councils now with a new ACAS Code on redundancy procedure.

Six, irrational dismissal decisions begin on company boards. But votes for directors are monopolised by shareholders that are prone to irrational short-termism. Worker directors make companies more innovative, have fewer strikes, and more productive. Indeed, Oxford University has had worker votes since 1854. All government subsidies should require companies change their constitutions to have a minimum of two elected worker directors, and we can extend this to listed companies by updating the UK Corporate Governance Code.

Seven, irrational herd behaviour occurs in stock markets because the decision makers are a tiny group of asset managers, like BlackRock, State Street, or Vanguard. With around 50 people casting votes that control the economy, they support directors who fire workers en masse. Their power should be removed, and the people who save for retirement in pension, life insurance and mutual funds should have that voting power, like the Swiss. The Secretary of State can amend our pension laws to ensure at least one half of our trustees are elected, and clarify the FCA Handbook on conflicts of interest to prevent asset managers voting on other people’s money without instructions.

Job security and full employment rights

Eight, we should extend job security rights to everyone from day one: no unjust dismissals, and halt redundancies for 60 days, like Italy. At the moment in the UK, this right only arises after 2 years. The Secretary of State can change it now.

Nine, we should restore the duty on government to say how it will attain ‘full employment’, like it existed in the Welfare Reform and Work Act 2016 till the 2017 election. Full employment means the right to work ‘at fair wages’ with the hours one needs: not under-employment on zero hours contracts. It means unemployment below 2%. It actually costs the taxpayer nothing because government saying it will do ‘whatever it takes’ is enough to keep confidence up.

State aid and economic rights

Ten, direct wage subsidies, like the Employment Subsidies Act that Thatcher renewed eight times, or like Denmark’s guarantee of 75% of employee wages, put money in people’s pockets and maintain confidence. It is positive that the UK government has done this, but subsidies must be coupled with job security measures above, following International Labour Organization standards on reactions to crisis as a minimum. But also, loan repayments, mortgages, and rent should be cancelled till the crisis is over. Banks crashed the economy, and were bailed out before. Now it’s their turn. The government has the power to order this in the Civil Contingencies Act 2004. Nobody must lose their home because of the corona virus.

With the global financial crisis, its causes, and its culprits in recent memory, we know what works and what does not today. Social rights work: to ensure employers, banks, and government protect everyone from a new corona depression. We could even come out stronger.

Dr Ewan McGaughey, School of Law, King’s College, London

Prof Tonia Novitz, University of Bristol Law School

Prof Lydia Hayes, Kent Law School, University of Kent

Ms Sandhya Drew, City University Law School

Ms Carolyn Jones, Director of the Institute for Employment Rights

Mr Hitesh Dhorajiwala, University College London, Faculty of Laws

Prof Nicola Countouris, University College London, Faculty of Laws

Ms Pascale Lorber, Deputy Head of the Law School, University of Leicester

Prof Adriana Topo, Institute of Advanced Legal Studies

Ms Natalie Sedacca, University College London, Faculty of Laws

Prof Diamond Ashiagbor, Kent Law School, University of Kent

Prof Steve Tombs, Department of Social Policy and Criminology, Open University

Prof Bridget Anderson, Director of Migration Mobilities Bristol, University of Bristol

Prof David Whyte, Department of Sociology, Social Policy and Criminology, University of Liverpool

Dr Katie Bales, University of Bristol Law School

Prof Jeff Kenner, School of Law, University of Nottingham

Mr Fotis Vergis, School of Social Sciences, University of Manchester

Prof Sandra Fredman, Law Faculty, University of Oxford

Dr Aristea Koukiadaki, School of Social Sciences, University of Manchester

Dr Andrew Moretta, Research Associate, University of Liverpool

Dr Inga Thiemann, College of Social Sciences, University of Exeter

Prof Nicole Busby, School of Law, University of Glasgow

Prof Simon Deakin, Faculty of Law, University of Cambridge

Prof Mark Freedland, Law Faculty, University of Oxford

Prof Amir Paz-Fuchs, Law School, University of Sussex

Prof Peter Turnbull, School of Management, University of Bristol

Prof Alan Bogg, University of Bristol Law School

Dr Rebecca Zahn, Law School, University of Strathclyde

Prof Colm O’Cinneade, University College London, Faculty of Laws

Prof Keith Ewing, School of Law, King’s College, London

Prof Sonia McKay, Faculty of Business, University of Greenwich

Lord John Hendy QC, Old Square Chambers

Dr Mauro Pucheta, School of Law, Kingston University

Prof Bernard Ryan, Law School, University of Leicester

Dr Panos Kapotas, Faculty of Business and Law, University of Portsmouth

Prof Joanne Conaghan, University of Bristol Law School

Prof Virginia Mantouvalou, Faculty of Laws, University College London

Prof Hugh Collins, Department of Law, London School of Economics

Ms Natalia Delgado, Law School, University of Southampton

Dr Joe Atkinson, School of Law, University of Sheffield

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