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2020

ISSN 2632-9611

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Download the full list of working paper abstracts (pdf, 721KB)

WP521: Cut Hours, Not People: No Work, Furlough, Short Hours and Mental Health During the COVID-19 Pandemic in the UK

Brendan Burchell, Senhu Wang, Daiga Kamerāde, Ioulia Bessa and Jill Rubery

The unprecedented shock to the UK economy inflicted by government measures to contain the Coronavirus (COVID-19) risked plunging millions of workers into unemployment as businesses were forced to close or scale back activity. To avoid that cliff edge, and the predictable damage to both workers mental health and to the viability of the closed down businesses, the government also introduced the Coronavirus Job Retention Scheme (CJRS) that allowed for the furloughing of workers. Even so the number of people claiming benefits as unemployed has soared above two million for the first time since 1996 and others have been working significantly reduced working hours. The first and second waves of Understanding Society COVID-19 Study provide an early opportunity to examine how far these changes in employment status, work hours and involvement in furlough job retention scheme are related to the likelihood of having mental health problems, measured by 12-item General Health Questionnaire. Our findings confirm that leaving paid work is significantly related to poorer mental health, even after controlling for the household income and other factors. In contrast having some paid work and/or some continued connection to a job is better for mental health than not having any work at all. Those who remain part-time employed before and during the COVID-19, those who are involved in furlough job retention scheme or transition from full-time to part-time employment are all found to have similar levels of mental health as those who continued to work full-time. Results also show that overall women’s mental health has deteriorated much more than men’s when compared to Wave 9 (2017-2019) of Understanding Society.

Both short working hours and furlough job retention schemes can thus be seen to be effective protective factors against worsening mental health. However, the key issue is now how to move beyond the furlough scheme. A v-shaped bounce back is not on the horizon and many sectors will at most move into partial activity. So, the need to avoid a huge further leap in unemployment is just as vital with all the risk to mental health that that would entail. These findings point to the need to move towards sharing work around more equitably, including introducing a shorter working week for all (except in those sectors under extreme pressure) in order to minimize the risk to mental health and wellbeing if those on furlough are now pushed into unemployment.


WP520: Shareholder Value or Public Purpose? From John Maynard Keynes and Adolf Berle to the Modern Debate

Suzanne J. Konzelmann, Victoria Chick and Marc Fovargue-Davies

The debate about corporate purpose is a recurring one that has re-emerged today. What should be the guiding principles of business: the pursuit of profit or a contribution to public well-being? We trace key elements in this debate in the UK and the US from the interwar years, when John Maynard Keynes and Adolf Berle made important contributions, to the present. Both the earlier and the current debates are centred around whether we see business institutions as strictly private entities, transacting with their suppliers, workers and customers on terms agreed with or imposed upon these groups, or as part of society at large and therefore expected to contribute to what society deems to be its interests. Whether current developments will ultimately produce a shift in corporate purpose akin to the one that followed the Second World War remains to be seen. But the parallels to the interwar debates, and the uncertain economic, political and social environment in which they took place, are striking. Our objective is to see what might be learned from the past to inform the current direction of thought concerning capitalism and corporate purpose.


WP519: Resurrecting the UK Corporate Sector Accounts

Bill Martin

This paper develops what is believed to be a novel method of resurrecting UK national accounts corporate sector data before 1987, the date prior to which fully comprehensive sectoral data are not provided by the Office for National Statistics. A distinction is drawn between the sectors comprising private non-financial corporations (PNFC), on the one hand, and financial corporations, which include some state-controlled enterprises, on the other hand. The resurrected PNFC dataset runs in detail from 1960. A much more limited set of reconstructed data is available for financial corporations. The resurrected data include the savings – broadly speaking, the "retained profits" – and the financial balances – the difference between retained profits and capital spending – of both corporate sectors.

Economists collaborating with the UK Economic Statistics Centre of Excellence describe an exercise of this kind as "especially difficult". My method of reconstruction relies on archived, out-of-date, too frequently unreliable national accounts datasets, the scrutiny of those data to remove mistakes, and a detailed examination of a subset of an otherwise overwhelming number of national accounts revisions confined to those having a material and enduring impact in the historic period before 1987.

This "bottom-up" method of data reconstruction differs from the “top-down” method of resurrecting the accounts of the public, the rest-of-the-world and the “private” sectors, and the separation of the household sector from the aggregate corporate sector, described in a previous paper: Martin (2019). The combination of the two methods, one bottom-up, the other largely top-down, risks the creation of a dustbin into which data inconsistencies are unwittingly poured. A number of robustness tests provides reassurance that the differently derived historic data for sectoral saving make sense. Comparable tests of household and corporate sectors’ financial balance data are not possible, but the hypothesis that different vintages of PNFC financial balance data are isomorphic representations of the same economic variable is not rejected. The combination of the two methods has allowed improvements to be made to the resurrected household sector series that begin in 1946.

Subject to the resolution of outstanding problems with official national accounts data, notably for gross fixed capital formation before 1960, and additional scrutiny and comment, it is the intention to make the complete resurrected sectoral dataset publicly available.


WP518: Labour Laws, Informality, and Development: Comparing India and China

Simon Deakin, Shelley Marshall and Sanjay Pinto

focusing on the world’s two largest labour markets, India and China. A first task in is to define what is meant by informal work. The definitions used by international agencies are not uniform and different countries have distinct approaches. There are numerous dimensions to informality that are not fully captured in statistical data. There is a trend towards formal employment and away from own-account work and self-employment in many regions of the world, particularly in East Asia where the proportion of the labour force in waged employment has doubled over the past three decades. The paper will look more closely at the contrasting cases of India (where formal work has increased recently, but to a very small extent) and China (where a variant of the standard employment contract may be emerging), discuss reasons for the divergence between them, and consider the relationship between formality and developmental outcomes in the two countries.


WP517: Taking a Horse to Water? Prospects for the Japanese Corporate Governance Code

John Buchanan, Dominic Chai and Simon Deakin

In 2014-15 Japan implemented a series of reforms to its corporate governance regime. The principal measures adopted were the country’s first Corporate Governance Code, revisions to its Companies Law, and a Stewardship Code, together with a report (the Itō Review) on corporate competitiveness and incentives for growth. In this paper we analyse the objectives of these reforms and make an assessment of their likely success, drawing on interviews with key actors in Japanese government, finance and industry. We firstly frame our analysis by a consideration of what institutional theory has to say about the relationship between formal and informal norms and practices, and about the feasibility of using regulatory mechanisms of different types to alter embedded routines. We then consider the historical evolution of Japanese corporate governance since the early 20th century and explore the causes of its current embeddedness and apparent resistance to change, noting pressures in the past which in some cases have changed it greatly while in others have had little effect. We then examine the manner in which the current reforms were devised and implemented, their content, and the influences that shaped them. We then discuss the methods used to conduct our primary interview research, which was carried out in 2016-17 with policy makers, corporate managers, investors and other interested parties. We use our interviews to identify how the reforms were formulated and how they have been received. We then present our assessment. We suggest that despite a pattern of embedded institutions resisting regulatory pressures for change in recent years, Japanese corporate governance may now have reached one of its historical turning points. The introduction into Japan of the 'comply or explain' approach, the major innovation that distinguishes this reform exercise, is a significant moment. The existence of a corporate 'compliance machine' of administrative officers below board level, whose role is to interpret regulation and present it in executable form to their boards of directors, improves the Code’s chances of implementation at large, listed companies. The Stewardship Code, meanwhile, has the potential to co-opt institutional investors' interests to the economic reform agenda of the political class. These politicians have shown an unusual degree of commitment to the reform process and continue to give it their strong support. At the same time, there are potential obstacles to unqualified adoption of the Corporate Governance Code, especially for smaller companies that lack administrative resources, and the 2018 revision of the Code has introduced some doctrinaire elements which seem at odds with the realities of governance in most Japanese companies. Moreover, some doubt remains regarding the ability of corporate governance reforms to deliver the kind of economic revival that politicians are seeking, at least in the short to medium term. Thus the question of whether the Corporate Governance Code will bring about lasting change in Japanese corporate practice remains an open one. The Code has clear advantages over previous attempts at reform but we compare this process to the proverbial 'taking a horse to water', because no amount of formal exhortation will succeed if the horse chooses not to drink.


Working paper (Centre for Business Research, University of Cambridge. Online)