It’ll take more than a higher minimum wage to tackle Britain’s low pay problems

Published on Jobs, Skills and Pay

As a certain wedding this weekend highlights, some things get more attention than they deserve. When it comes to the world of low pay, all the talk in recent years has been about the National Living Wage.

Now of course, this new higher minimum wage for those aged 25 and over is a big deal, and has already benefited millions of workers. New Resolution Foundation research today shows that it has led to the proportion of low paid workers falling to its lowest level in almost three decades. That’s an achievement worth celebrating.

But there’s a risk that the National Living Wage is all we talk about – with politicians vying for the highest minimum wage possible, while neglecting the other big low pay challenges across Britain that can’t be solved by raising the wage floor. After all, even when the National Living Wage hits its target level in 2020, around four million employees are still expected to be low paid. It’s progress, but far from job done.

So what are the new frontiers of low pay that we need to get to grips with? First is the issue of progression – and creating escape routes out of low pay. There’s nothing wrong with low-paying jobs if they’re a springboard to higher wages. But for many workers the reality is very different – only one in six low-paid workers permanently escaped onto higher wages over the last decade. Our research shows that the popular retail narrative of moving ‘from the shop floor to the top floor’ is actually very uncommon. Just four per cent of sales assistants had climbed the rungs into supervisory or managerial positions five years later. Action is needed to replace some of the springs in the springboard.

The second challenge is power. When big firms merge, public debate rages about what it means for consumers. But less attention is paid to the impact on workers when only a few employers operate within an area or a sector. A handful of dominant firms can lead to lower wages and poorer terms and conditions for employees who have few other employment options. Approximately one in six low-paid employees work in just 20 firms, a much higher level of concentration than for higher-paid workers.

The third challenge is gender. Not only are women more likely to work in low-paying sectors, they are paid less than men in those sectors, and are less likely to escape onto higher wages. Alternative job prospects can often be tough to find, especially for those with childcare responsibilities or who need to work close to their children’s nursery or school.

While a higher minimum wage is not always easy for firms to introduce, from a government’s perspective it’s a powerful tool to help low-paid workers. Tackling these three new challenges is less straightforward. However, some options present themselves. First, employers should be encouraged to offer more senior roles on a part-time or flexible basis to help a broader section of their workforce – particularly women – to progress. Rethinking how jobs are designed – shifting towards more varied and skilled tasks – would offer greater opportunities and represent employers taking the high road.

When it comes to power, it remains early days for the evidence on the role of mega-firms. But lessons could be learned from the reviews of markets carried out by bodies like Ofgem or the Competition and Markets Authority, acting on the part of employees as well as consumers. Like a royal wedding, a rising minimum wage is likely to hog the low pay headlines. But ignoring the other challenges will leave low earners worse off.

This article originally appeared in the i paper