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United Kingdom

29 January 2018

UK: low pay and the necessity of a decent living wage

Several think-tanks have published alarming findings on low pay, even advisory bodies that work for the government. These reports talk of the necessity for an increase of a national living wage beyond the average earnings growth is widely endorsed. The TUC have published a comprehensive position paper that pleads for a wage growth that contributes to a decent income.

In second half of 2017, some alarming findings on low pay were published by different think-tanks. There is evidence that low-paid workers are permanently stuck in low-paid jobs, and social mobility will stall without action. The report ‘Great Escape?’ of the Social Mobility Commission (October 2017), carried out by the Resolution Foundation, explored trends in low pay over recent decades and examined the factors linked to low pay and progression. Low pay is endemic in the UK and there has been little progress in the number of people managing to escape from poorly paid jobs. Just 1 in 6 low-paid workers (17%) managed to permanently escape from low pay in the last decade. A quarter of low-paid workers remained permanently stuck in low pay and nearly half (48%) fluctuated in and out of low pay over the course of the last 10 years.

A report of the Institute for Fiscal Studies, called ‘Living standards, poverty and inequality: 2017’, publishes findings on what can be learnt about changes in income and the persistence of low income by examining data that follows the same people over time. In another report, the Institute explores the intergenerational income persistence. The adult pay gap between those born into wealthier families and those from less well-off parents is widening. Both reports confirm that low-paid workers tend to remain in low pay jobs. The average weekly income of a 42-year-old male in 2012 whose parents where in the top quintile of earners when they were 16 was around £1,300 in today's money, versus £680 for those whose parents where in the bottom quintile of earners, a gap of 88%. A 42-year-old in 2000 from a top quintile income background had an average income of around £1,000 versus a bottom quintile income background of £720, a gap of 47%.

The Low Pay Commission (LPC), an independent body established in 1997, that advises the government about the National Living Wage (NLW) and the National Minimum Wage (NMW), has published research outcomes in its annual Low Pay Commission Report (December 2017). The LPC conducts (and commissions) independently research. The aim is to use the findings to better understand the impact of the NMW and how it might affect the labour market and economy more generally. Importantly, the LPC also sets the non-binding standards for the annual increase of the National Living Wage and other minimum wage rates, based on an inquiry.

Trade union confederation TUC made its response public to the Low Pay Commission inquiry in an extensive paper. The paper ends with a list of TUC targets for 2018 that have to contribute to a decent income. The TUC argues, for instance, that a hourly minimum wage of £10 is both necessary and achievable. 

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