The coming years will be pivotal for the UK’s labour market. Along with new questions raised by Brexit, the responses to longstanding issues dogging firms and workers alike will be key. When it comes to action points, Britain’s woeful productivity growth since the financial crisis is top of the list but not far below is getting to grips with a decades-long over-reliance on low-paid jobs.
Sometimes overlooked is the extent to which these two issues are connected: a more productive economy is likely to be built upon a more highly-skilled, highly-paid workforce. Answering the question of whether low pay is the first step towards better-paid, better-skilled roles or as high as many employees climb is therefore an essential prerequisite in responding to the productivity challenge, as well as making sure the country works for all earners.
Our analysis tracks initially low-paid employees (earning below two-thirds of median hourly pay) across a decade. Based on their outcomes, we split them into three main groups:
- ‘Stuck’: employees who were in low-paid work in every year they appear in the data.
- ‘Escapers’: those who earn above the low pay threshold in each of the final three years of the decade, suggesting they have made a sustained move onto higher wages.
- ‘Cyclers’: people who fall between the above categories, moving onto higher wages at some point during the decade but not consistently out of low pay by the end of the period
Our analysis finds that for most low-paid workers, poorly-paid positions are not acting as a first rung on the ladder – it is the only rung.
Of all those low paid in 2006, by 2016:
- One in six (17 per cent) were escapers.
- One in four (25 per cent) remained stuck throughout the period.
- Just under half (48 per cent) were cyclers, moving onto higher wages at some point but not sustaining that progress.
- The remaining one in ten employees exited the data, meaning they were not an employee after the initial period.