Fair Pay Fortnight: Monday 24th March- Friday 4th April

Posted on 04 Apr 2014 under Previous Publications, Working with Business

Work and Poverty, closer than they should be


There was a time not that long ago when getting a job was a guaranteed route to a better quality of life.  A young person leaving school could look forward to a start with a local employer leading relatively seamlessly to a car, a mortgage for their own home and decent, independent life with their own family.  The TUC’s ‘Fair Pay Fortnight’ shows that for many workers employment does not provide an escape from financial hardship at all.


Over 5 million workers are currently earning less than a Living Wage (£8.80 per hour in London, £7.65 for the rest of the UK), less than they need to enjoy a pretty basic, but at least decent, standard of living.  The number of people in this position has increased by 9 per cent, or 420,000 workers in the last year.  More than half the children living below the poverty line are in households where at least one adult is working; nearly 200,000 more children of public sector workers will fall into poverty in the life of this parliament due to the continued real time cuts to public sector pay.  Over one in five people in the UK, some 13 million, are now officially in poverty, living on less than 60 per cent of median earnings. 


Working people are over £2000 worse off than they were in 2010 as average earnings have declined by 8 per cent in real terms.  In only one month since 2009 have earnings matched inflation, with energy prices, rent and food all outstripping average inflation rates, contributing to the worst, most prolonged period of wage squeeze since Queen Victoria was on the throne.


Waged poverty is a terrible indictment of any modern economy.  Sustained poverty has a devastating long-term and self-perpetuating impact on individuals, their families and on communities and the economy as a whole.  It is well evidenced that people living in impoverished conditions are more likely to suffer chronic health challenges, including an increased propensity to mental health problems, suffer low birth rates, poorer educational attainment and are much more prone to pedlars of high cost finance, legal and illegal, compounding the financial exclusion they endure.


Right now, in 2014 Britain there are working families having to make a choice between keeping the car or having a family holiday.  Low paid workers are having to choose between them or their kids having a meal or keeping the heating on.  Workers on increasingly casual, precarious contracts are having to juggle two or three, even four, jobs just to get enough to keep the wolf from the door.  This aren’t the indicators of a modern, progressive society.


Perhaps this downward pressure on incomes and the cost of living crisis working people are enduring might be easier to bear if the pain was being evenly shared across the board.  Unfortunately, not only are more workers struggling to make ends meet, but those at the top end of the earnings scale continue to enjoy pay rises and tax cuts, pulling ever further away from the rest of us as growing pay inequality stretches the gap between the richest and the rest.


Raising wages wouldn’t just be good for workers; it would be good for the economy too. The government currently allocates billions paid out through in-work benefits to top up the wages of the worst paying employers.  It is right that there is an income safety net below which no-one should fall, but it’s not right that the tax-payer plugs the gap left by private sector employers who pay poverty wages.  Analysis by the Resolution Foundation and IPPR shows that paying everyone at least a living wage would increase the revenue in the exchequer by £3.6bn a year.  Even taking off the increased public sector pay bill, there would still be a net gain of over £2bn, money that could be recycled into supporting public service under immense strain from the current government’s austerity measures.


One of the reasons the business community supports a living wage is the increased pound in the pocket of working people.  Give low paid workers an increase in pay and they spend large proportions of it locally; give already generously paid CEOs a mega-bonus and it makes no difference to the local economy at all.


It is no surprise that the decline in pay and growing inequality are linked to deregulation in the labour market.  Whether it is the growing prevalence of precarious work, in the form of temporary employment or zero hours contracts, the changes to employment law that make it easier for employers to sack workers and harder for workers to challenge unfair dismissal, or the decline in collective organisation and representation, the protection afforded by standing together in a trade union, the shift in power away from worker people and toward employers is clearly associated with the growth in the working poor.


In the budget Chancellor George Osborne made much of the economic recovery in the UK.  Regrettably, the vast majority of families are not sharing in that recovery.  Economic growth should mean social progress, it should mean less people living in poverty, not more; it should mean more workers earning at least a living wage not less; it should see a reduction in income inequality, not ever greater wealth concentrated in fewer and fewer pockets.


That’s why ‘Britain Needs a Pay Rise’.  To secure that and to help deliver a fairer labour market for the future we need stronger unions with more workers covered by collective bargaining arrangements and new, modern wage setting machinery for those low paying sectors not benefitting from union coverage.  Without real change poverty and inequality can only continue to grow and that can’t be good for anyone.


Kevin Rowan

Head of Organisation and Services