Low pay falls to its lowest level since 1982 but policy makers need to focus on new ‘triple threat’

Published on Jobs, Skills and Pay

Lack of progression, power and gender imbalance mean policy should go beyond a higher minimum wage

Having boosted millions of workers’ pay through the National Living Wage, businesses and government must now look to the new frontiers of low pay, the Resolution Foundation says today (Friday) in its annual flagship Low Pay Britain report.

The report shows that ­­– thanks largely to the National Living Wage (NLW) – the share of employees in low pay fell to 18 per cent in the year to April 2017, the lowest proportion since 1982. The number of low paid employees also fell below five million for the first time in a decade and a half. Planned increases in the NLW are projected to further reduce the prevalence of low pay to 15 per cent by 2020.

However one in six employees across Britain (4.9 million in total) remain in low-paid jobs, including the majority of workers in hotels and restaurants (58 per cent), and almost one in four people in Nottingham (24 per cent) and Sheffield (23 per cent).

The proportion of workers paid less than the voluntary Living Wage – intended to provide an acceptable standard of living – fell to 22 per cent (5.9 million in total) last year.

The Foundation says that this strong progress on boosting the lowest paid workers’ wages is welcome. However, even in 2020 over four million workers are still expected to be low paid.

The report warns that a higher minimum wage cannot solve all low pay challenges and highlights a ‘triple threat’ of new challenges facing low-paid workers:

  • Progression: While ‘shop floor to top floor’ stories are often highlighted for sales assistants in retail, the report notes that just 4 per cent of sales assistants had moved on and up to become supervisors or managers in the same sector five years later. Only one in ten managers had been sales assistants five years earlier. Overall just one in six low-paid employees permanently escaped low pay over the course of the last decade (2006 to 2016).
  • Power: When a small number of firms dominate in a sector or area, this can lead to lower wages or worse terms and conditions as employees have little choice over who to work for. This problem is most acute for low paid workers in the UK. Though comprising a tiny proportion of all firms, companies with 5,000 or more workers employ 28 per cent of all low-paid people. Nearly one in six (16 per cent) low-paid employees work for just 20 firms, a much higher proportion than for high-paid employees (9 per cent).
  • Gender pay gap: 22 per cent of women are low paid, compared to 14 per cent of men. Women are less likely to progress out of low pay, are more likely to switch into other low-paying jobs when they do move, and are more concentrated in a handful of large firms than low-paid men.

These are big challenges but the Foundation argues that the success of the NLW shows that there is public support and political appetite for bold action to tackle low pay.

Conor D’Arcy, Senior Policy Analyst at the Resolution Foundation, said:

“The National Living Wage was the bold policy we needed to kick start a low pay revolution, and it has seen low pay fall to its lowest levels since the early 1980s. But now is not the time for complacency. A higher minimum wage cannot solve all our low pay challenges.

“Workers today too often find themselves stuck on the shop floor with no chance to move up the ladder. Many are employed by one of a handful of big hiring, but low paying, firms in an industry or local area with few other options available. Women remain far more likely to be trapped in low pay than men.

“Tackling these new triple threats is how business and policymakers can build on the success of the National Living Wage.”

Notes to Editors

  • Employees classed as low paid earn less than two-thirds of the median hourly wage, or equivalent to approximately £8.50 today.
  • The National Living Wage is the compulsory minimum wage that all employees aged 25 and over must be paid at or above. It currently stands at £7.83.
  • The Living Wage is a voluntary wage promoted by the Living Wage Foundation designed to provide a minimum acceptable standard of living. In London the current Living Wage is £10.20, while in the rest of the UK it is £8.75.