Gap between high- and low-paid jobs in UK is growing despite signs of economic recovery, according to new report
Britain’s nascent economic recovery shows no sign of halting its slide towards a “two-tier” workforce, in which millions of people are stuck in low-paid, part-time jobs, a major report will suggest this week.
The study by the independent Resolution Foundation, entitled Low Pay Britain 2013, will highlight fears that the return to growth and higher employment is masking an ever-wider divide between people in low-skilled work and those in an upper tier of more stable, skilled, managerial and professional jobs.
The report comes as the three main political parties wrestle with ways to address the gulf between declining real wages for millions and the increasing cost of living, as they plan for the 2015 general election.
Labour will put its support for a “living wage” – higher than the minimum wage and judged as necessary for a decent standard of living – at the heart of its next election manifesto, citing it as one measure to help ease what it calls a crisis of living standards.
Low pay (defined as two-thirds of gross hourly median pay, £7.44 an hour in 2012) is becoming more prevalent among the young, the report says, and the trend seems to be continuing even as the economy improves.
Today more than one in three people aged 16-30 (2.4 million) are low-paid, compared with one in five in the 1970s (1.7 million at that time).
Most worryingly, the foundation suggests that the economic upturn does not appear to be triggering a fall in the proportion of new employees (those entering or re-entering work) whose jobs are part-time or temporary.
In 2013, more than one in three (37%) new employees are entering part-time work, and one in three (32%) are taking temporary work. This compares with 35% and 27% respectively in 2007, before the economic crisis.
In 2007, the median hourly wage for a new employee stood at almost £8.50; it has now fallen to just below £8. Women continue to be hit harder than men. Of the five million low-paid British workers, three million are women and two million are men. By contrast the incomes of people in professional and managerial roles have surged ahead and the proportion of national income that goes on wages, as opposed to profit, dividends and capital, has shrunk from 65% in 1973 to 53% now.
Research by One Society found that if the minimum wage had increased at the same rate as the pay of FTSE 100 directors since its introduction in 1999, it would now be about £19 an hour, rather than its current rate of £7.45 for people outside London and £8.55 for those in the capital.
The shadow chief secretary to the Treasury, Rachel Reeves, who will give a speech this week coinciding with the report’s launch, said: “If the recovery continues, there are signs that it will be a recovery that is not for the many but for the few at the top. We need action to make sure we have a more broadly based economy.”
Matthew Whittaker, senior economist at the Resolution Foundation, said: “Jobs growth is welcome news and hailed by many as a sign of economic recovery. But this may conceal a worrying scenario in which the two-tier workforce we have seen developing becomes an established feature on the landscape.
“This is a jobs market where many workers are stuck in low-paid, low-skilled jobs, overwhelmingly in the service economy and often part-time or temporary. Younger workers, women and those living outside London are most at risk.
“It’s too soon to say if this scenario is inevitable, but early evidence shows that economic recovery may not be enough to avert it. The economies of other OECD [Organisation for Economic Co-operation and Development] countries face many of the same labour market pressures as Britain, yet often perform much better on low pay – we risk looking complacent in comparison.”
In 1975, part-time workers made up just 30% of the low-paid population (1.1 million). Today that figure has almost doubled to 58% (2.9 million). The share of low-paid workers in temporary jobs has increased from 8% (390,000) in 2000 to 13% (670,000) in 2012. In 2007, part-time workers made up 55% of the low-paid (2.8 million people), and temporary workers 11% (570,000 people).
Whole sectors of the British economy are now dominated by low-paying jobs. In hotels and restaurants 68% of workers now earn less than the living wage. In retail the figure is 39%. In 2007 the figures were 59% and 33% respectively.
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