Projects
Low pay
With the closure of the Low Pay Unit in February 2003, the introduction of the National Minimum Wage, and recent Government successes in reducing unemployment, the issue of low pay has received little attention. However, NPI believes it is still a big problem, and one that if ignored, will thwart any attempt to tackle poverty and inequality in Britain.
Two recent projects have dealt with issue of low pay:
- In October 2004,
we published Why worry any more about the low paid?.
The idea for this pamphlet came out of a study in 2003 which assessed the
feasibility of reviving the Low Pay Unit. Although low pay units still
exist in some parts of the country, for example the
Scottish
Low Pay Unit, the London based unit closed in February 2003.
View/download the report - In July 2003, we wrote a paper for
UNISON reviewing the implications of the new tax credits framework for low paid
employees of local government.
View/download the report.
‘Why worry any more about the low paid?’ (October 2004)
Despite the importance the government has attached to employment, pay and conditions at the bottom of the labour market have been largely ignored. However, tackling low pay is critical to tackling poverty, particularly relevant given the government’s pledge to reduce child poverty by a million by 2004, and eradicate it within a generation.
This pamphlet argues that the introduction of the National Minimum Wage and tax credits have not solved the problem of low pay. It explores the extent of low pay and disadvantages faced by low paid workers, and in response, suggests a ‘New Deal for the Low Paid’.
Main findings on the extent and scale of low pay:
- The National Minimum Wage (NMW) is too low to ensure that employees are free of poverty without means-tested support – at £4.85 the NMW falls short of that level even for a single adult working full time.
- An hourly wage rate in the range £6 to £7 per hour is needed if most employees are to escape poverty on the basis of their earnings. Even with the NMW rising by 7% a year (as it has in both 2003 and 2004), it would take five years just to reach the bottom of that range.
- Tax credits treat the symptoms of low pay, namely household poverty, without treating the problem itself. By subsidising the employers of low paid workers, tax credits not only make low pay work economically possible, they create disincentives for employers to do anything about it.
- There are up to seven million low paid workers in the UK (defined as earning less than £6 to £7 an hour). Of these, more than four million are women. Three million are part-time workers, of whom 80% are women.
- Although the largest sector for low pay is the retail and wholesale sector, one quarter of all low paid workers are in public sector jobs, generally in health, education and social work. Many more are employed by private contractors working for the public sector.
The report calls on the Government to launch a ‘New Deal for the Low Paid’ with the aim of ensuring that employers in both the public and private sector take responsibility for improving the pay and conditions of low paid jobs. Key elements include:
- A leading role for the public sector, both as direct employer of many low paid workers and as purchaser of services from firms who employ many more. The scale of public sector employment, especially in deprived areas, will put pressure on private sector employers, who are competing for much of the same labour, to follow suit.
- A stronger enforcement of workplace rights, to help low paid worker who are more vulnerable to infringement of rights, but less well-placed to take action to remedy the situation.
- The Low Pay Commission to continue on the course it set in 2003, increasing the minimum wage faster than earnings, so helping with the extreme end of low pay.
- The Trade Union movement as a whole raising the level of union membership among the low paid, and ensuring that their interests are properly promoted.
A new low pay unit (December 2003)
The London-based Low Pay Unit closed its doors in Spring 2003 following financial difficulties. The Unit was an important organisation that was addressing an important subject. It was well known (including among the low paid), its advice role was well used and it was the only dedicated national low pay research and campaigning NGO. It had some success in that it achieved its goal of a minimum wage.
It was clear to us that the loss of the Unit is something that is widely regretted. In order to establish whether there is any real possibility of re-founding the Unit, we worked with Dr. Tim Bickerstaffe, the Unit’s former research director, to assess the feasibility of replacing it.
Re-founding the Unit also represents an opportunity to take a wider view of the whole subject of low pay and the problems that low paid workers face. The minimum wage is not a living wage, as the government now recognises (through its recent changes to the system of tax credits). Many issues are to do with hours worked and not just the hourly rate (this especially concerns part time workers). Employment protection would also come under the remit of any new Unit.
Some long-standing problems are part of the low pay ‘mainstream’. For example: the gender pay gap remains substantial, and is closely connected to child poverty. Low paid people face many other disadvantages at work, their jobs are often insecure and they typically have no career. Racially discriminatory pay rates still exist and need to be exposed.
Moreover, the centrality of low paid workers to other problems needs to be recognised. Low paid workers are often ‘front line’ service providers (whether direct or support) and efforts to improve and extend such services depend on upgrading the status of such occupations. The European Employment Policy and the provisions of the Lisbon Strategy may provide opportunities here.
Following an extensive consultation, it was clear that whilst the gap left by the LPU was widely felt, there was not enough support for its replacement. In short, low pay simply was not seen as enough of an issue to merit support to run a new unit.
No publication was produced for this project. However, the pamphlet Why worry any more about the low paid? is, at least in part, a response to its findings.