Inequality and in-work poverty: The new priorities for HR?

Blog posts

4 Aug 2021

Duncan BrownDr Duncan Brown, Principal Associate

A British Standards Institute stakeholder roundtable I attended last week representing IES described ‘excessive inequality’, alongside global warming, as ‘one of the major challenges of our time’. The aim of the roundtable was to consider ‘how organisations can improve their positive impact in reducing income and wealth inequality’ and the role of standards in improving organisation practice.

So just what are these problems, why are they important for organisations, and how can HR functions and employers help in addressing them?

Poverty and Inequality: What?

By international standards, the OECD finds that the UK has a high level of income and wealth inequality relative to other countries (the sixth highest amongst its membership). Rates of working poverty according to the IPPR have grown steadily over the past 25 years, from 13% to a new high of 17% in working households before the arrival of the pandemic in 2019.  The Living Wage Foundation’s latest analysis of the Labour Force Survey (LFS) and Family Resource Survey (FRS) found that 3.7m people earn less than their real Living Wage rates. 

Employers are increasingly recognising these issues. According to a new study from the Social Market Foundation, 39% of employers in London admit that half or more of their workforce is directly affected by poverty. And more than half of firms of all sizes surveyed agreed that workforce poverty ‘should be a concern’ for London businesses. 76% of London children that lived in poverty were in working families – up from 68% five years ago.

Poverty and Inequality: Why?

‘Doing the right thing’, ‘the reputation of the business community’ and ‘improving the quality of employees’ were the three most frequently mentioned motivations for these London employers that wanted to help to address poverty.

Their own performance and productivity is also being impacted, as poverty affects the health and wellbeing of their workers (26% of them) and increases the amount of sick leave (24%). But more broadly it also demoralises their whole workforce (25%).

Poverty and Inequality: How to address it

Interestingly, at the BSI roundtable there was much less shared agreement evident on the solutions to growing inequality and rates of poverty, in areas such as: the relative emphasis on state and employer actions; and the balance between voluntary initiatives - such as adopting a BSI standard– versus legislative action, such as a new right to flexible working.

The CIPD’s Charles Cotton highlights ‘three simple, low-cost things employers can do’ in order to address poverty and poor financial wellbeing:

  • ‘Pay a fair, secure and liveable wage’. Providing pay and career progression for all and especially low paid employees is also critical to address poverty pay and the UK’s stalling rates of social mobility.

IES’s work on progression for low paid workers highlights many innovative examples of how companies such as Corbin and King and Scandic hotels have addressed labour shortages and boosted productivity through such policies.

  • Introduce a financial wellbeing policy. The latest CIPD 2021 Reward Management Survey found that 12% of organisations have introduced such policies because of the pandemic, taking the total to around half of more than 400 participants. The components of such policies range from financial education and healthy eating regimes to employee assistance programmes and mental health apps.
  • Increase and improve investments in employee training and development. IES’s Director Tony Wilson told the BBC last weekend that, ‘The answer (to rising unemployment) is not extending furlough, but re-skilling people to take up the record number of new vacancies being advertised.’

IES has perhaps done more work in this field during the pandemic that any other aspect of employment, highlighting its importance, for example our work with CIPD on digital learning.

The Future: Just Work, or just work?

I came away from our online roundtable feeling that this is very much the start of a major, sustained movement in the business world and in HR’s focus, rather than a temporary response to the privations and frustrations of Covid-19.

The Social Market Foundation’s conclusion from its research is that, ‘while poverty is not currently the top priority for many businesses, there is an appetite among many firms (large and small) to confront the poverty problem and help improve the situation’.

Epidemiologist Sir Michael Marmot’s conclusion from his latest analysis of health and economic inequality is unequivocally positive: ‘the pandemic must be taken as an opportunity to build back a fairer society.’

We may well be, as this roundtable suggested, at a critical inflection point in business practice and work and employee relations. IES would be pleased to hear your thoughts on this post-Covid employment world and the choices you are making right now, hopefully to create a fairer, more equal and engaging future for people in the UK workplace.

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Any views expressed are those of the author and not necessarily those of the Institute as a whole.