How finance workers are paying the price for the industry's profit
Professor Gregor Gall looks at how the banking and insurance profession has changed
A job in banking and insurance used to be a most sought-after prize for many working class school leavers. Not only was it a clean and safe white-collar job with long-term employment security, it also offered the prospect of a career and a good pension. But the financial crisis of 2007-08 has put an end to all that for good.
No longer are there widely available secure jobs with career prospects and good pensions for the majority in banking and finance. Indeed, no longer is banking and finance even an inviting prospect for many middle-class university graduates. Today, they prefer to go into the professions of accounting, law and public relations, or work for new, upstart technology companies like those in fintech. Pay, conditions and prospects are much better there, as is the public perception and wider status of those industries.
When bonuses were cut and regulated following political pressure after the financial crash, those disproportionately affected were the lower grade finance workers who relied on bonuses to make their wages up to something close to a reasonable level of income. Those with telephone number bonuses could easily fall back on their basic salaries of hundreds of thousands of pounds. In the meantime, criminal prosecutions against the managers who encouraged reckless activity and their underlings who engaged in reckless activity have been almost non-existent.
The consequence of this, as I found when researching my new book on employment relations in the post-crash period, is that the banking and insurance sector can no longer be an engine of social mobility from the working class to the middle class. Nor can it be any longer a generator of secure, satisfying employment for the many employed within it.
The reaction of employers in banking, finance and insurance to the financial crisis has been the introduction of massive job cuts, oppressive performance management systems and reduced real value of pay, and an end to decent pensions. In my book, I categorise the experience of employees as: flight, fright, fight and falling-in-line.
For a sector of around one million employees, the numbers leaving banking and insurance through redundancy programmes has been astronomically high. As I calculated, from 2007 to 2017, major insurance company Aviva reduced its workforce in Britain from 21,000 to 15,000, with Barclays bank cutting its British headcount from 103,000 to 71,000. HSBC bank went from 67,000 to 43,000, Lloyds banking from 140,000 to 73,000, Northern Rock bank from 6,500 to 2,500, RBS from 120,000 to 65,000 and Zurich from 10,000 to 4,000.
The impact of this flight has been that those left in those organisations in banking and insurance now have to do more with less. But they do so under very different circumstances. The introduction of oppressive performance management systems means that workers must achieve a growing number of targets to be eligible for pay rises. But no pay rises are guaranteed.
It has not been uncommon for a quarter of workers in a particular company in any one year to receive no pay increase at all, meaning a cut in the real value of their pay. On top of that, the level of unpaid overtime has increased significantly as workers come in early, stay late and work through their breaks to chase often unachievable targets.
Performance management systems also allow companies to manage workers out of the organisation without compensation for what they deem to be under-performance. And if staff in banking, finance and insurance manage to stay the course, no pot of gold awaits them upon retirement anymore. Almost all final salary pension schemes have been ended, replaced by inferior ones without a guaranteed level of decent benefits.
Fire of discontent
No longer do many workers in banking, finance and insurance feel happy in their jobs as the many surveys of union members I’ve analysed show. Many feel abused and under-valued by their employers. On top of this, they also feel despised by the public as they are tarred with the same brush as the bankers that set off the financial crisis in the first place. That bonuses and compensation packages for top level managers and executives in banking, finance and insurance have never experienced the kind of austerity that their underlings have has merely added fuel to this fire of discontent.
The deterioration in the sector’s post-crisis working conditions led to a stampede out the door when (voluntary) redundancy programmes were on offer. And the power of unions in the sector is also on the decline. Most have a partnership approach, which guarantees employee representation a seat at the table with management and is based on the idea that employees and employers have mutual interests (which they often do not).
At the same time, collective bargaining powers have commonly been downgraded and replaced by mere consultation. With redundancy often seen as the more appealing option, union membership has experienced something of a downward spiral. This does little to help them become stronger, which is exactly what they need if they are to increase their memberships.
For those that remain, the combination of flight (redundancies) and fright (oppressive management) has led to much falling in line whereby workers reluctantly submit to management diktat as best they can. It seems there is very little they can do to fight back. Banking will no longer offer a route to social mobility – and the switch to automation will only compound this.