A new report, Rising to the Challenge:A Policy agenda to tackle low pay, by The Work Foundation, Lancaster University, reveals that despite the economic recovery, the UK still lacks an effective strategy for dealing with the challenge of low paid work. The Work Foundation asserts that to have a meaningful impact any low pay strategy must include policies on wages, skills, and productivity in low-wage sectors.

The report authors highlight that low pay now affects 5.1 million employees (21%) of the workforce in the UK and that over a quarter of low-paid workers remained stuck in low pay for over a decade. It goes on to reveal that policies such as the National Minimum Wage (NMW) aren’t a panacea for low pay. The NMW has a minimal impact on low-wage work because the rate remains below the low pay threshold and it has had limited ‘ripple’ effects further up the wage distribution.

The paper, the final report in our Bottom 10 Million programme of research (supported by Barrow Cadbury Trust, Impetus-Private Equity Foundation, The Tudor Trust and Working Links) recommends that the Government sets out a strategic framework for a coordinated low pay strategy which reduces the share of low-wage jobs in the economy. It argues that priority action is required on three fronts: raising wage floors; enabling progression; and facilitating higher wage business models.

 The main recommendations are:

  • The Low Pay Commission (LPC) should be given a wider remit to reduce the proportion of the workforce in low pay (currently at 21%) to a level close to the OECD average (17%)
  • The LPC returning to the “escalator” and seeking to increase the NMW at a faster rate than average earnings over the next few years, given the strength of the recovery
  • Government setting best practice by having its departments and local authorities aiming to become Living Wage employers
  • FTSE companies being required to publish the proportion of staff paid below the Living Wage
  • Expanding the Adult Skills budget to enable the National Careers Service to target skills funding for those in low wage work
  • Building on the work of some Local Enterprise Partnerships, to place greater emphasis within local growth strategies on building employer demand for skills and supporting business to move up the value chain to grow the number of ‘good jobs’
  • Strengthening HR support for SMEs to offer advice and guidance on job design and HR practices to better manage and support low-paid staff
  • Promoting employment rights among contingent workers such as the Government’s proposed ban on zero hours exclusivity clauses and Labour’s recommendation for those working consistent hours to be offered a permanent contract

Commenting on the paper,Kathryn Ray, senior researcher at The Work Foundation, said: “Low pay is a problem for both individuals and for society. Low pay affects 5.1 million employees and has remained at around this rate for the past 20 years. The UK urgently needs a new strategy, one which not only focuses on minimum and living wages but also looks at giving low paid workers the training and support needed to ensure they have a realistic chance at career progression.

“Any strategy for tackling the problems associated with low pay must incorporate industrial and innovation policies targeted on low-pay industries, skills utilisation policies, changes to the organisation of work, and the implementation of progression pathways within the workplace.”