The high cost of low pay

As the minimum wage rises below inflation yet again, Matthew Pennycook examines the cost of low pay.

On Monday the National Minimum Wage (NMW) for people aged 21 and over will rise to £6.19 an hour from its current rate of £6.08. This represents a third consecutive annual fall in the real terms value of the minimum wage, now back to levels last seen in 2003. Put simply, the impact of the NMW is stalling. And while the Low Pay Commission’s cautious 11-pence-an-hour rise may be entirely justified in the current economic climate, it will provide little comfort for those that rely on a minimum wage to get by.

None of this is to denigrate the crucial role of the minimum wage. Since its introduction in 1999 the NMW has had a dramatic effect in reducing extreme low pay, providing around one million low-paid workers with the protection of a legal pay floor and ensuring that they are less badly paid than their counterparts in countries such as Germany and the United States. What’s more, this positive effect has come with little or no negative impact on either employment or working hours.

But while the minimum wage continues to shelter a significant minority of British workers from extreme low pay, it is not (and never has been) set at levels that would reduce the overall levels of low-paid work in Britain. Consequently, as a new report released today by the Resolution Foundation makes strikingly clear, its existence does not alter the fact that 5 million workers in the UK – 1 in 5 employees – paid at or above the legal minimum nevertheless remain in low-paid work. These 5 million people earn below £7.49 an hour (£13,600 a year gross for full-time work) and below the level of a living wage that would provide for “a minimum acceptable quality of life”. For this low-paid army – disproportionately female, part-time, and concentrated in the private sector – the NMW provides a safeguard from extreme low pay but not an escape route from life on a low wage.

Low-paid work is, of course, a feature of labour markets in all advanced economies. Yet low-paid work in Britain is associated with a number of negative attributes not shared by other countries. These include higher pay penalties for part-time work, a greater risk that women will find themselves in low-paid work, and a higher risk of low-paid work in certain low-skilled occupations such as social care and childcare.

And among advanced economies, the UK stands out as having one of the highest incidences of low-paid work. This was not always the case. After falling sharply in the early 1970s the share of low pay in the British labour market has grown steadily over the past three decades.

The growth of low-paid work in Britain has been, in part, the product of the steady rise in inequality experienced by much of the developed world in the final quarter of the 20th century. But policy decisions taken over the past three decades have also contributed to the rise, by eroding those institutions that have done much in other countries to arrest the forces bearing down on pay at the bottom of the labour market.

So policy choices matter. Our reliance on an extensive pool of low-skilled, low-paid labour is not predetermined. It’s not the unfortunate but necessary pre-requisite to a strong labour market. Other advanced economies with lower shares of low-paid work have not suffered lost employment or diminished competitiveness. Britain’s low-pay, low-productivity economic model is not the only option available to us.

And it is a model that we pay a heavy price for tolerating. Economically, Britain’s low-paid labour market has been central to the costly – as much £4bn a year – reliance of many low to middle income households on tax credits and other in-work transfers to support household incomes. Socially, low-paid work has been a factor in the gradual rise in in-work poverty since the mid-1990s and is linked to a range of negative outcomes including poor health, higher levels of workplace related stress, and diminished life chances.

Combating low pay is not easy. Tipping the balance away from employment strategies that rely on low paid, low productivity, poor quality jobs and towards 'high road' employment strategies is an almost herculean task. So it is not surprising that many policymakers have preferred to correct market inequities through remedial redistribution. Yet few, if any, believe that the growth in tax credit support that occurred over the past decade can be repeated in these fiscally straitened times. In the years ahead wages will have to do far more of the heavy lifting needed to sustain living standards. But for too long we have confused the existence of the minimum wage with a strategy to reduce low pay. They are not the same thing. So while valuing the vital protection the minimum wage provides for those at the very bottom, we urgently need to start doing the hard thinking required to deliver an ambitious policy agenda to tackle Britain’s endemic levels of low pay.

Margaret Dobb, the wife of a Nottinghamshire miner, holds up a placard at a strike in 1972. Photograph: Getty Images/Hutton Archive

Matthew Pennycook is MP for Greenwich and Woolwich, and member of the Energy and Climate Change Committee. He is PPS to John Healey. 

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I can’t follow Marie Kondo's advice – even an empty Wotsits packet “sparks joy” in me

I thought I’d give her loopy, OCD theories a go, but when I held up an empty Wotsits bag I was suffused with so many happy memories of the time we’d spent together that I couldn’t bear to throw it away.

I have been brooding lately on the Japanese tidying freak Marie Kondo. (I forgot her name so I typed “Japanese tidying freak” into Google, and it was a great help.) The “Japanese” bit is excusable in this context, and explains a bit, as I gather Japan is more on the case with the whole “being tidy” thing than Britain, but still.

Apart from telling us that we need to take an enormous amount of care, to the point where we perform origami when we fold our underpants, which is pretty much where she lost me, she advises us to throw away anything that does not, when you hold it, “spark joy”. Perhaps I have too much joy in my life. I thought I’d give her loopy, OCD theories a go, but when I held up an empty Wotsits bag I was suffused with so many happy memories of the time we’d spent together that I couldn’t bear to throw it away.

After a while I gave up on this because I was getting a bit too happy with all the memories, so then I thought to myself, about her: “This is someone who isn’t getting laid enough,” and then I decided that was a crude and ungallant thought, and besides, who am I to wag the finger? At least if she invites someone to her bedroom no one is going to run screaming from it, as they would if I invited anyone to my boudoir. (Etym: from the French “bouder”, to sulk. How very apt in my case.) Marie Kondo – should bizarre circumstance ever conspire to bring her to the threshold – would run screaming from the Hovel before she’d even alighted the stairs from the front door.

I contemplate my bedroom. As I write, the cleaning lady is in it. To say that I have to spend half an hour cleaning out empty Wotsits packets, and indeed wotnot, before I let her in there should give you some idea of how shameful it has got. And even then I have to pay her to do so.

A girlfriend who used to be referred to often in these pages, though I think the term should be a rather less flippant one than “girlfriend”, managed to get round my natural messiness problem by inventing a game called “keep or chuck”.

She even made up a theme song for it, to the tune from the old Spiderman TV show. She would show me some object, which was not really rubbish, but usually a book (it may not surprise you to learn that it is the piles of books that cause most of the clutter here), and say, “Keep or chuck?” in the manner of a high-speed game show host. At one point I vacillated and so she then pointed at herself and said, “Keep or chuck?” I got the message.

These days the chances of a woman getting into the bedroom are remote. For one thing, you can’t just walk down the street and whistle for one much as one would hail a cab, although my daughter is often baffled by my ability to attract females, and suspects I have some kind of “mind ray”. Well, if I ever did it’s on the blink now, and not only that – right now, I’m not even particularly bothered that it’s on the blink. Because, for another thing, I would frankly not care to inflict myself upon anyone else at the moment.

It was all a bit of a giggle eight years ago, when I was wheeled out of the family home and left to my own devices. Of course, when I say “a bit of a giggle”, I mean “terrifying and miserable”, but I had rather fewer miles on the clock than I do now, and a man can, I think, get away with a little bit more scampish behaviour, and entertain a few more illusions about the future and his own plausibility as a character, when he is squarely in his mid-forties than when he is approaching, at speed, his middle fifties.

Death has rather a lot to do with it, I suppose. I had not actually seen, or touched, a dead body until I saw, and touched, my own father’s a few weeks ago. That’s what turns an abstract into a concrete reality. You finally put that to one side and gird up your loins – and then bloody David Bowie snuffs it, and you find yourself watching the videos for “Blackstar” and “Lazarus” over and over again, and reach the inescapable conclusion that death is not only incredibly unpleasant, it is also remorseless and very much nearer than you think.

And would you, dear reader, want to be involved with anyone who kept thinking along those lines? I mean, even if he learned how to fold his undercrackers into an upright cylinder, like a napkin at a fancy restaurant, before putting them in his drawer? When he doesn’t even have a drawer?

Nicholas Lezard is a literary critic for the Guardian and also writes for the Independent. He writes the Down and Out in London column for the New Statesman.

This article first appeared in the 05 February 2015 issue of the New Statesman, Putin's war