By Heather Stewart
New research indicates that more than 20% of British employees are earning less than a living wage
Workers on the bottom rung of the earnings ladder received a leg up on Saturday, as the national minimum wage increased from £5.98 to £6.08. But new research shows that as many as 5 million people higher up the scale are barely earning enough to make ends meet.
Thinktank the Resolution Foundation has looked at workers up and down the country earning less than a “living wage”. It found that more than one in five employees falls into this group, echoing recent work by the TUC, which uncovered what it called a “livelihood crisis” among the growing swathe of the workforce stuck in low-paid jobs.
In London, there is an official “living wage” endorsed by the mayor, Boris Johnson, and currently set at £8.30 an hour. It’s intended to be the least amount required to pay for what most people consider to be basic necessities and a “minimum acceptable quality of life”.
Loughborough University’s Centre for Research in Social Policy, considered the authority on the issue, calculates that outside the capital, you need £7.20 an hour.
Using official earnings figures, Resolution finds that in some parts of the country, almost a quarter of the workforce are taking home less than this. They range across a wide range of sectors, from sales, where 60% of workers earn less than the living wage, to personal services such as hairdressers and childminders (33%).
“It brings to life just how pervasive low pay is in modern Britain,” says Resolution’s chief executive, Gavin Kelly. “Many people on higher incomes would assume it only exists on the fringes, not the mainstream.”
Instead of being a short-term result of the recession of 2008-09 and the lacklustre recovery, Kelly sees the increasing problem of low pay as being the result of a long period when the fruits of economic expansion failed to feed through to those at the bottom of the pile. “It shows you what it looks like after a long period of growth, and it makes you raise questions about the nature of that growth and who it benefited,” he says.
Nicola Smith, head of economics and social affairs development at the TUC, says structural changes, such as the decline of the manufacturing sector, have hollowed out the skilled-jobs sector that once made up a large proportion of the workforce, resulting in a polarisation between high-paying “knowledge economy” jobs, monopolised by graduates, and a “long tail” of lower-skilled workers struggling to get by.
“Over the past decade, there’s been a loss of about 1.5m jobs in manufacturing,” she says. Meanwhile, a long period of rapid expansion in highly paid industries such as banking, and the increasing prevalence of share awards and bonus payments, helped earnings at the top of the scale to race away from the rest.
Recent research by the TUC showed that the erosion of living standards for lower-paid workers is a very long-term phenomenon: while incomes for the top 10% of earners doubled in real terms between 1978 and 2008, they increased by just 27% for the bottom tenth.
Smith says the government must also think about ways to encourage key sectors, such as the sciences and creative industries, which employ relatively large numbers of more skilled workers. “It’s the challenge of creating better quality jobs,” she says.