Low pay, Living Wage

So here's the first of my weekly (hopefully) blogs about something I've been reading/ thinking about over the week. I'll try to keep them on topical issues, hopefully they're not too much like a school essay (I've just finished uni, so I sometimes can't help it!)

This first one is on low-pay. I was lucky enough to go to a talk by the Resolution Foundation last week (I've only just found time to write about it) and so thought it was a good a place as any to start writing. I'd really appreciate any feedback you had and I hope you enjoy!

Around five million British workers, that’s around 22% of employees, are not paid enough to cover their basic needs, according to the Living Wage Foundation. Women (25% of whom earn less than the Living Wage), part-time workers (43%), and the young (72% of 18-21 year olds) are disproportionately likely to be earning less than the Living Wage which has increased to £9.15 an hour in London.

There are huge sectoral imbalances too, with those working in retail and hospitality, for example, also much more likely to be earning in low-paid jobs. Along with measly pay, these kind of jobs come with a platter of poor T&C’s, insecure contracts, no guarantee of hours, and reduced access to employment tribunals. Yet these low paid, insecure jobs, many of which are self-employed, are what drives the employment figures proclaimed by the Government. To continue to hold these figures aloft misses the crucial facet of the modern employment market, low paid jobs are now a bigger problem in Britain than shortage of work.

Britain continues to stand out as having one of the highest incidences of low paid work in advanced economies,  according to research by the think-tank Resolution Foundation, behind all but 6 countries (the US, South Korea, Israel, Canada, Ireland and Poland in the proportion  of full-time employees earning less than two-thirds of median full-time pay making workers in Britain twice as likely as counterparts in Switzerland (9 per cent) and four times more likely than employees in Belgium (5 per cent) to earn below the low paid threshold. Furthermore, a recent report yesterday by the New Economics Foundation suggested that, in the past year, whilst the poorest 10% of the population have suffered a 15% decline in their income, the richest 10% have seen their earnings rise by 3.9%. It’s little wonder we have growing numbers of people visiting food banks and desperately struggling to afford the absolute basics.

Nor is the issue of low pay purely a problem only for those who are earning less than the Living Wage, for the wages of the low-paid are supplemented with in-work tax credits, which means that our taxes are being used to subsidise the profits of private companies.

What all this amounts to is that poverty is increasingly the preserve of the working; in 2011, 6.1 million people in poverty were in working households (at least one person working) compared with 5.1 million living in workless household; in London 28% of people are living in poverty. Of these, nearly 60% are living in working households. The economic ‘recovery’ has not been matched by a corresponding social recovery. The fact that, since the early 2000’s, pay has failed to keep pace with increases in overall economic outputs is a reflection of a combination of shifts in the British labour market and industrial structure. So, is work still the route out of poverty?

Joseph Rowntree Foundation research suggests that, whilst decent work may still be the best route out of poverty, the rising level of in-work poverty is indicative of a labour market failing to create ‘decent’ jobs. As well as ‘bad’ jobs, in-work poverty is a result of the rising cost of living, a tax and benefit system that doesn’t incentivise work, and a lack of progression from low-paid, low-skilled jobs. This final theme was picked up on in a Resolution Foundation publication on the escape routes from low-pay, which found that, over a 10 year period from 2002-2012, the majority of people failed to escape the low-pay cycle on a permanent basis.

The truth is that none of the big three party’s recent record on income or wealth inequality is anything to shout about. For all their rhetoric we need politicians to actually commit to its reduction, and we need them to support policies that achieve this and we need the next government to make pay progression a priority; the key question in coming years will be whether or not renewed jobs growth  will lead to pay growth that is shared across all workers. That doesn’t mean the hopelessly regressive taxation proposals many have put forward. It means a Living Wage, a proper industrial strategy to create decent jobs, reinstatement of the educational maintenance allowance and the 50p top rate of income tax, a progressive property tax – and a commitment that the net effect of party’s manifesto policies will be to reduce inequality.

The Living Wage will play an important part of this goal, Julia Unwin, Chief Executive at JRF and JRHT, said:

“With the economy recovering from a deep and damaging recession, our research shows higher pay is vital to helping low-earning workers make ends meet. The Living Wage - which recognises the cost of essentials in how it is calculated from JRF research - is an important part of the answer. We will never achieve our full economic potential until we address the high levels of poverty across the UK, so paying a Living Wage is an important first step to getting to grips with the country’s in-work poverty problem.” 

Furthermore, by explicitly focusing on living standards, the Living Wage changes the terms of the debate by looking beyond the minimum wage, which focuses on what the labour market can bear without a significant effect on employment.

Yet, the Living Wage alone is not a panacea; with 44 per cent of people in working poverty living in households where no one is being paid less than the Living Wage, it only provides part (albeit a significant part) of the answer. Nor does the Living Wage guarantee an acceptable standard of living.

The massive variations in family circumstances necessarily mean that no realistic hourly pay rate can ever lift every family to an adequate living standard. In nearly half of working households in poverty, all adults earn more than around £7.40 (the national Living Wage is £7.65) an hour. The amount of work seems to be a crucial factor for in-work poverty; in nearly half of these households only one person works, a further 25% of households in poverty have only part-time workers. This is a more complex problem that requires extensive support to aid second earners, from better access to childcare to enhanced education and training, to reform of the welfare system.

I'm struggling to find a fitting conclusion to this, but the discourse around employment has changed. The political parties struggle to divorce themselves from their addiction to 'employment' figures, but we need to understand that the issue is much deeper than that. And that's why, for all the talk of a 'recovery' most of us are struggling more than ever.

I’m aware this has been quite an abstract blog, with a lot of stats and figures and very obviously lacking in anecdotal evidence about just how much of a struggle life can be on wages below the Living Wage.

If you, or someone you know, is living on less than the minimum wage then I would be honoured to chat and help share your story, because something this important cannot be left unheard, and each and every story matters, so please get in contact. I haven’t included any references but if you want to read the research yourself, or have a look at some of the literature on the subject, then, again, I’d be more than happy to share it with you.