We need to talk about low pay

11 Dec 13

Much of the focus in debates about low pay has been on younger workers. But many older employees are stuck in low-paid jobs, and making little progress

It is well known that the UK has a serious low pay problem. One in five employees were low paid in 2012, which compares poorly to other similar economies. However, some might not see this as a worry if low pay is merely acting as a first rung for new entrants to the labour market who will go on to progress up the earnings ladder as they gain experience and skills. According to this view, being on low pay is generally a temporary situation, something akin to a painful but inevitable rite of passage.

But this argument doesn’t quite add up. As we know from previous Resolution Foundation research, many of Britain’s low paid workers are not young. In fact almost half (47 per cent) are aged between 31 and 60. So it is clear that many middle-aged people find themselves on low pay during what should be the peak-earning period of their lives. While some may have only temporarily fallen into low pay, this also raises the possibility that some people will have remained in or around low pay for long periods of time, perhaps their whole careers. Either way, for workers in their peak-earning years, low pay is likely to put them at risk of in-work poverty and low living standards.

But little is known about the persistence of low pay and consequently this is an under-developed aspect of the social mobility debate. Therefore our latest report, ‘Starting out or getting stuck?’, set out to shed light for the first time on how many get stuck on low pay for significant periods of time.

What emerges is that in 2012 there were 1.3 million people who had been stuck on low pay for the previous decade. Half of them are aged between 41 and 60, and have therefore spent up to a decade of their peak earning years in low-paying work. For many, low pay is a long-term reality, and crucially is not something that only afflicts people in the early stages of their careers.

Perhaps even more worrying is the fact that the vast majority of low-paid workers, almost three-quarters, were unable to escape over the decade 2002 to 2012. This group is made up of the 1.3 million who remain stuck, plus a further 2.2 million that cycle in and out of low pay. But it is not an entirely gloomy picture. Almost one in five do manage to escape, corresponding to 800,000 individuals. Of these, almost half make really quite significant progress: reaching at least two-thirds of the way up the earnings scale by 2012.

Certain types of jobs appear to provide fewer opportunities for employees to escape low pay. Those who stay working in hospitality, retail or manufacturing are less likely to progress, as are those in care, sales or elementary jobs such as cleaning or manual labour. Those who remain working for very small firms with fewer than 10 employees are also less likely to progress. In contrast, public sector workers are more likely to escape. Of particular concern is that fact that women appear to face additional barriers to pay progression, over and above these other factors.

So as things stand, for many low paid workers progression will require moving out of dead-end jobs. But does it have to be this way? Can we improve pay mobility within these ‘sticky’ industries and occupations, especially for those in very small firms? We see that low paid workers in the public sector were more likely to progress, so are there lessons from the public sector, such as the use of transparent payscales linked to clear career paths that might be successfully transferred to the private sector? And are there policies in specific areas such as childcare and part-time working that could help to ameliorate the additional barriers that women appear to face?

Taking a step back, it is also important to recognise that policies to promote pay progression must be seen in the context of a larger discussion about what scope there is for policy to help the UK shift away from its current low-pay, low-skill equilibrium. Until this can be done, the sheer number of low-paid jobs in the UK labour market will ultimately always limit low-paid workers' opportunities to progress.

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