Low pay is rapidly rising up the public policy agenda, with all the main parties seeking to ‘own’ the living standards debate ahead of the general election. The chancellor says he is committed to an above-inflation increase in the minimum wage – and ministers have been naming and shaming firms that fail to pay the current rate.
More than one in five British employees is defined as low-paid – a proportion that has not improved in 20 years. And this is not just a private sector issue, either. Local government workers in particular depend heavily on in-work benefits for survival. Half a million are on pay levels that fall far short of Living Wage standards. The latest National Joint Council settlement does little to change things.
The situation is still more stark for around a quarter of a million homecare employees, most of them female, outsourced and often on zero-hours contracts. This critically important workforce – lauded as unsung heroes by politicians – subsists on sub-minimum wage levels, with travel times between care visits going unpaid.
The human and social costs are all too evident, not least for the frail and elderly people who depend on social care services. But there is a direct economic cost too.
Breadline level wages impact on the public finances in myriad ways. Most obviously in relation to the shortfall in tax receipts that has compounded George Osborne’s deficit problems. But also when it comes to the prospects for recovery.
As the Resolution Foundation argues, the Office for Budget Responsibility’s projections for consumption-led growth rely on improved earnings. Without them, debt-to-income ratios look set to rise beyond pre-crisis levels.
So what can be done to boost the pay – and purchasing power – of the worst off workers in our society?
The hands of public sector employers are tied to a greater extent than their private sector counterparts; not least by a local government settlement that CIPFA estimates will cut 6% of councils’ spending power.
But there is still scope for action. Giving the Low Pay Commission some teeth would help enforce pay progression across the most problematic sectors. And some leadership from the Treasury when it comes to honouring low-pay commitments would send a message about the value of our most vital public servants.
Funding an enhanced minimum wage for the lowest NJC grades would be a worthwhile start.
