This is our seventh annual report on the prevalence of low pay in Britain. It uses the latest data available (April 2016) to map out the scale of low pay and the groups that are most affected.
- As of April 2016, 5.1m employees (19.3 per cent) are low paid, down from 5.4m (20.7 per cent) last year. This drop is the largest single-year percentage fall since 1977 and has been driven primarily by the introduction of the National Living Wage (NLW) – the higher minimum wage for those aged 25 and over.
- But the number of employees paid less than the voluntary Living Wage – based on how much families need to reach an acceptable standard of living – rose from 6m to 6.2m, or 23 per cent of all employees.
- Our projections indicate that the share of people in low pay will reach 16.2 per cent in 2020, close to the lows of the late 1970s and early 1980s. While representing huge progress, this nonetheless means an estimated 4.3m employees will still be low paid when the NLW is fully rolled out.
- While the rising minimum wage will provide a welcome boost to millions of low earners – 3.7m employees are projected to be paid at the wage floor come 2020 – it will bring challenges too particularly in low-paying industries like retail and hospitality, where 24 per cent and 38 per cent of employees respectively are set to be at the wage floor in 2020.
- To better understand the impact of the NLW on low earners, we held focus groups with people paid at or close to the NLW in August 2017.
- When asked how their pay had changed, few low earners had noticed a sizeable uplift in the past two years.
- The focus groups highlighted a range of non-pay issues: long shifts that were badly planned or only announced at the last minute; a lack of appreciation or recognition from managers; and being expected to be entirely flexible with little concern for your own work-life balance were repeatedly raised as negatives.
- For some, a dearth of chances to move into better-paying roles, either within their current employer or elsewhere, was a disappointment. Opportunities for those with childcare responsibilities to progress were viewed as particularly poor.
- With government due to publish its industrial strategy soon, including a major focus on low-paying but high-employing sectors like retail and hospitality would be an encouraging next step. Incentives for management training would help the low-paid as well as – potentially – productivity. This should be part of a concerted effort to move away from a low-pay, low-skill business model.
- Offering people routes out of zero-hours contracts or highly variable shift patterns after a duration is needed and legislation could be considered as government prepares its response to the Taylor Review.
- Action cannot come solely from government however. With existing skills gaps unlikely to ease in the context of a tight labour market and in the wake of potentially lower EU migration following Brexit, offering more training opportunities makes sense for employers too. Providing more routes to progress – for example by not restricting jobs solely to graduates – would be a straightforward way of doing this.