University of Warwick: Increase in the living wage is welcomed, but ‘more needs to be done’ says ReWAGE advisory group

ReWAGE’s recent policy brief Beyond the National Living Wage – Further Proposals for Addressing Low Pay, the group welcomed the government’s decision to increase the living wage, adjust the Universal Credit taper, and its commitment to reduce the qualifying age for the National Living Wage – but says that more needs to be done.

Professor Chris Warhurst, co-chair of ReWAGE and Director of the Institute for Employment Research at Warwick University, explains: “Low pay often arises from and reinforces other forms of labour market disadvantage, and policy to address it can help tackle structural inequalities, grounded in sex, ethnicity, disability, and age. Taking further steps to tackle low pay is good public policy that will lead to greater fairness in the labour market.”

The ReWAGE policy brief puts forward six recommendations for changes in public policy to help the low-paid.

1) Strengthening enforcement of the National Living Wage – while the National Living Wage has proved effective at raising the pay of many low-paid employees there is evidence of a substantial and growing problem of non-payment. The recent appointment of a new Director of Labour Market Enforcement could help to reverse this trend and ensure that all those entitled to the National Living Wage receive it.

2) Promoting the Voluntary Living Wage – a number of voluntary ‘living wages’ have been promoted in recent years, which are higher than the National Living Wage, and which commit employers to paying the rate to all workers aged over 18 and to contract workers who work on their premises, such as cleaners, security guards and catering staff. Adoption of the voluntary Living Wage has been quite widespread amongst employers but there is scope for the UK Government to promote the Voluntary Living Wage by using such tactics as ‘social licensing’, whereby the award of contracts, grants and funding is dependent on payment of the Living Wage. Advocacy by elected politicians at UK-level would scale up this effort and give further impetus to the campaign.

3) Increasing and stabilising working time – many employees work too few hours, performing multiple ‘mini-jobs’ that hamper their earning capacity; and many have unpredictable hours or are hired on zero-hours contracts that make it difficult to plan expenditure, making them more likely to get into debt. Better childcare provision and improved transport would allow employees to access jobs with longer and more stable hours and reduce the market influence of employers. The problems of short and unpredictable hours can also be addressed directly through employment policy, such as removing employer exemption from National Insurance Contributions for the lowest paying employment (to reduce the incentive to create jobs with very short hours) and providing employees with a legal entitlement to minimum hours, enforceable through a statutory procedure.

4) Providing opportunities for pay progression – the issue of employees becoming trapped in low-paid work can be tackled by removing policies that drive people into low-paid work, such as highly conditional benefit provision for those who lose their jobs. Other measures can include investment in skills development, reinforced by the creation of industry-wide career structures based on formal qualifications that allow employees to progress from low-paid to better-paid employment within industries. The apprenticeship levy could be recast as a ‘training levy’ to fund the broader training needs of low-paid workers that fall outside the apprenticeship system and encourage employers to participate in the process of building formal structures of pay progression for low-paid workers.

5) Improving statutory sick pay – many low-paid workers do not have access to employer-provided benefit schemes and are reliant upon Statutory Sick Pay (SSP). Some low-paid workers may not qualify for SSP – even when they do there is a four-day delay before entitlement kicks in. The level of payment is also very low compared with that of other developed economies. The covid pandemic exposed the risks of this situation, with low-paid employees contributing to the spread of infection because they could not afford to take time off work when they had the virus. There is growing pressure on policymakers to reform SSP – recommendations include an increase in the level of SSP, a reduction in the amount of time before SSP can be claimed (from four days to first day of sickness) and extending entitlement to SSP to those who currently do not qualify because they are paid below the Lower Earnings Limit.

6) Introducing industry level pay-setting institutions – low pay is concentrated in specific industries, such as retail, hospitality, cleaning, social care, agriculture, private security, leisure and personal services. By creating industry-level pay setting institutions in low-paid industries it is possible to address the problem of low pay in these specific sectors. Their purpose should be to set a pay structure for the industry, not just a minimum rate, which can form the basis of occupational careers and be integrated with a set of industry-wide training and qualification arrangements. The aim would be to develop a core set of employment conditions that could be easily communicated to, and implemented by, the sector’s employers.

Professor Irena Grugulis (Leeds University), co-Chair of ReWAGE, explained further: “The UK has an enduring low pay problem and a growing problem of in-work poverty, which will only be made worse by the current rise in inflation and cost of living. Many low-paid workers performed essential jobs during the covid pandemic and workers in these occupations had a disproportionate risk of infection as a result.

“Jobs undertaken by women, young workers, those working part-time or on temporary contracts, and jobs in hospitality, retail, leisure, personal services, and business support services are particularly likely to be low paid. There is also evidence of a growing problem of in-work poverty, in which a rising proportion of households with a wage earner fall below the poverty line.”

ReWAGE is an independent expert advisory group modelled on SAGE that is co-chaired by Warwick and Leeds Universities and which focuses on the recovery and renewal of work and employment in the UK as it tackles the economic impact of Covid-19. Core funding is provided by the ESRC. ReWAGE is based in the Institute for Employment Research at Warwick University.

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