We need to tackle low pay – but we can’t do it without employers

Blog posts

10 May 2019

Tony Wilson

Tony Wilson, Institute Director

Is there anybody against in-work progression?

I was asked this by Frank Field, when I gave evidence this week for his committee’s inquiry into Universal Credit and progression.  It was a timely question – with Amber Rudd setting out yesterday that supporting working claimants of Universal Credit to progress is one of her top labour market priorities; while the Chancellor hinted last week that the National Living Wage may rise to close to £10 an hour to help address Britain’s low pay problem.

Around five million workers are low paid, and just one in six of those low paid a decade ago have ‘escaped’ low pay.  More than half of all people in poverty live in working households.  One third of employers report that they have staff whose skills are under-utilised, while UK productivity is significantly lower than many of our main competitors.  There is a compelling social, economic and business case to address low pay and poor progression.  So you would think that the answer to Frank’s question would be obvious.  How could anyone disagree?

But as I said in response, when you ask this question of low paid workers or of low paying employers, you get decidedly ambivalent responses.  Many people in low paid work don’t want or know how to progress – while many employers don’t want or know how to offer those opportunities.  So addressing this will require far more than (just) improving the information available to working claimants, or (just) raising the minimum wage.  In our work, we’re coming to the view that we instead need to fundamentally re-imagine our approach to low paying jobs and to life in low paying work.

The session at the Work and Pensions Committee focused almost entirely on how we support low paid workers to progress, so I won’t dwell on this here.  Suffice to say, while the most recent DWP trials found some small positive effects of relatively light-touch work coach support, it also produced some mixed and contradictory findings – with the trials appearing to have no impact on attitudes to progression, no impact on claimants’ wellbeing, and not generating any meaningful findings on what forms of support may work best and for whom.

So I’ll focus instead on the workplace – where there has been far less policy and practical focus.  A breadth of work in recent years has shone a light on the nature of low paid work in the UK – it is often insecure, poor quality, stressful and unrewarding.  It is no surprise that for many people, the prospect of doing more of this (or of earning a little bit more to take on a lot more stress) does not appeal – particularly if, as is the case for many low paid workers, you are working part time and balancing this with family care.  But for many employers, it has suited them just fine to keep labour costs low – contributing to a low price, low paid, low skilled and often low quality economy. 

So what can we do about this?  Stepping back a bit, there are two broad arguments here.  The first, set out well by the Joseph Rowntree Foundation, is that we need to improve the quality and prospects in low paying sectors.  Their work has shown that around a third of workers in poverty are in retail and hospitality, and that these sectors are less productive than a number of other European countries.   A sort-of counter argument, from Centre for Cities, points out that much of the ‘long tail’ of unproductive businesses is smaller firms serving local markets and with inherently poor prospects.  Far better to focus on those firms and industries that are performing well and have the most potential to create higher value, more productive work.

Arguably, we need to do both – to try to make jobs better now, while also making better jobs for the future.  In the here and now, that means trying to find ways to make more low paying jobs into better jobs with better prospects.  And this should not be impossible.  Work for the UK Commission for Employment and Skills earlier this decade identifies a range of key features of good employers in low paying sectors (pdf here) – including their leadership culture, HR and line management approach; having structured career pathways; and designing jobs in a way that works for part time workers.  Looking further afield, work by Zeynep Ton makes a powerful case for how the often ascendant business model in low paying sectors of low costs, low quality and low prices is a choice rather than a necessity – with better quality jobs leading to lower turnover costs, improved staff performance, higher quality products and better customer service.

At IES we’re now taking this a stage further, in work funded by the JPMorgan Chase Foundation.  We’ve been looking across Europe at approaches that good employers in traditionally low paying sectors take.  We’ve set out our first findings here, and there’ll be far more to come in future reports in the coming months.  A great example is Scandic Hotels in Sweden, who have shared with us some of the key features of their approach – including clear internal progression routes, a ‘future leaders programme’ open to all staff, mixed level project teams and cross-training, and a target that half of staff in all new hotels will be existing employees.  In a tight labour market, this makes business sense and is good for workers too.

In the UK there’s also more and more work happening in this space, often led by employers themselves – like the Retail Pioneers programme, involving Tesco, John Lewis and B&Q, supported by the Timewise Foundation; or Good Work for All, being led by Business in the Community. 

Looking ahead, there are four ways that we can build on this.

  • First, we need to pull together the breadth of work in this space.  This means joining up the government’s ‘good work’ and ‘progression in work’ agendas, but also aligning this far better with what employers are doing and researchers/ practitioners (like the excellent Better Work Network and the new Decent Work Centre.

  • Secondly, we need to do more and test more that is working directly with employers – to help them understand how they can reshape the way work is organised, redesign roles, and address unintended biases (including working with small firms, as the CIPD People Skills project did).
  • Thirdly, we need to strengthen the evidence base – while we know a fair bit now about what good firms do, we need to know a lot more about ‘what works’ in achieving change, and the bottom-line impacts that this has on workers and companies.
  • And finally, we need to gear public policy far more around encouraging, incentivising and rewarding good work – for example in Local Industrial Strategies, in business support, and in how we fund and deliver workplace training (including Apprenticeships).

Our Progression in Employment project will (try to) contribute to all of these – drawing together the evidence base, identifying best practices, and developing tools and resources for employers and policy makers.  We’ll be working with many of the organisations and employers that we’ve referenced here – if you want to be involved too, then get in touch.

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