Low pay is endemic in the UK and people struggle to escape poorly paid jobs, a new report by the Social Mobility Commission reveals today.
Only one in six low paid workers managed to permanently escape from low pay in the last decade. Meanwhile, a quarter of low paid workers have remained stuck on low pay and nearly half (48 per cent) fluctuated in and out of low pay over the course of the last ten years.
“Britain has an endemic low pay problem. While record numbers of people are in employment, too many jobs are low skill and low paid,” says The Rt Hon Alan Milburn, chair of the Social Mobility Commission.
“Millions of workers – particularly women – are being trapped in low pay with little chance of escape. The consequences for social mobility are dire.”
Low pay, vicious cycle
The ‘Great Escape?’ report, which was carried out by the Resolution Foundation, explores trends in low pay over recent decades and examines the factors linked to low pay and progression. It tracks individuals’ pay over ten years and divides them into three groups:
Stuck – those who are stuck in low pay every year.
Cyclers – those who move out of low pay at some point, but who have not consistently stayed above the low pay threshold by the end of the decade.
Escapers – those who earn above the low pay threshold in each of the last three years, suggesting they have sustained higher pay.
Low pay is defined as hourly earnings below two-thirds of the median hourly wage, excluding tips, commissions or other payments. The low pay threshold is estimated to be £8.25 per hour in 2017.
Women more likely to be low paid
The Great Escape? report found that women are more likely to be low-paid than men and are also far more likely to get stuck in low pay. For women in their early 20s, it’s particularly hard to escape low pay. The report suggests that the lack of good quality, flexible work to fit alongside childcare responsibilities as the most likely barrier for these women.
Long term progress
However, there has been some long-term progress for women, says the report. Excluding those who exit the data over the following decade, the proportion of women getting stuck has fallen from 48 per cent in 1981-91 to 30 per cent in 2006-2016. In contrast, the risk of long-term low pay has increased for men over the same period (from 20 per cent to 25 per cent). The report says this is likely due to the increasing number of men working in low-paid part-time work.
Age is also identified as a factor with older people far less likely to escape low pay than their younger counterparts. The report found that 23 per cent of low paid people aged 25 or under escaped low pay over the following decade, compared to 15 per cent of those aged 46 to 55.
The research also found that in the last decade, low paid workers were mostly likely to escape in Scotland and least likely to escape in the North East.
Stuck in low pay work
The report says that nearly two thirds (64 per cent) of workers who are ‘stuck’ in low pay work part-time, while nearly three quarters (71 per cent) of people who escaped low pay were in full time work.
For those unable to escape the vicious cycle of low pay, the situation carries ‘a severe pay penalty’ says the report. On average, people stuck in the low-pay trap have seen their hourly wages rise by just 40p in real terms over the last decade, compared to a £4.83 pay rise for those who have permanently escaped.
Conor D’Arcy, Senior Policy Analyst at the Resolution Foundation, says: “Britain has one of the highest proportions of low paid work in the developed world. This lack of pay progress can have a huge scarring effect on people’s lifetime living standards.”
“It’s shocking that whilst unemployment figures are at the lowest since 1975, Britain has one of the highest proportions of low paid work in the developed world. With the cost of living higher than it’s ever been, the reality for many is that they are forced to live hand to mouth. As employers we can take active steps to address this,” says Andy Bagnall, director at KPMG UK.
He suggests that employers can start by paying the real living wage and the report does point to how the National Living Wage isn’t solving the problem. While the National Living Wage is reducing the number of people in low paid work – last year saw the biggest fall in 40 years – there will be still around four million low-paid employees in 2020, a figure which the report says serves to highlight the scale of Britain’s low pay challenge.
Milburn says that a new approach is needed to break the vicious cycle where low skills lead to low pay in low quality jobs. This includes welfare policy focussing on moving people from low pay to living pay. Government should also join forces with employers in a new national effort to improve progression and productivity at work,” he suggests.
D’Arcy adds: “Employers need to improve career routes for staff, while government should support them with a welfare system that encourages progression at work.”