Getting a bump — How policy can support pay and occupational progression
The Social Mobility Commission published their most recent report into wage mobility in the UK this month. It is a great piece of work that highlights a fundamentally important point; that far too many people on low pay are stuck on low pay, and there are far too few opportunities for progression for workers in the UK.
We touch on this in our productivity report, published last month. Of those on low pay today, 1 in 4 will never progress out of low pay in their working life, while half of workers will fluctuate in and out of low pay work, and 15% will progress into well-paid work for the duration. These statistics are concerning, because there has not been much change in over 20 years.
Life on low pay has improved after the introduction of better terms of employment in the 90s and 00s, and raising the minimum wage to a National Living Wage in 2016. But the realities for many people on low pay, in terms of improving their situation, have not.
This is one of our arguments for why productivity has stagnated. Fewer opportunities for progression in work, reduce many of the incentives to work harder and become more productive. Job satisfaction has suffered and the populist disenfranchisement we see at election time is rooted in the ‘unfair deal’ many low paid workers feel that they receive.
The question though, is what can policy do?
The SMC found young people who move are more likely to receive a pay increase. This is hardly surprising as real wages for young people have declined in recent years, and are therefore low anyway. The problem with pay progression becomes more embedded for an individual once they have a family or go through middle age without advancing out of their occupation or wage level. There is conclusive evidence, that the longer any individual remains in low paid work, the less likely of progression out of low pay.
So, policy should look at targeting middle aged workers, mothers and fathers returning to the labour force after starting a family, or those people looking to retrain and transition into a new career.
I do not have all the answers to the question of how we improve mobility for the above groups. But the CSJs productivity paper goes some way to provide a base position. A lot of the responsibility must be on business to improve the relationship between employers and employees. More time and resource must be spent on staff appraisals, staff training and occupational therapy for those who are physically or mentally stressed at work.
Training of course, is the by word for all things productivity, jobs and growth related. No one can deny that training is important, but there is ample anecdotal evidence of bad investments in staff training and low returns in the long term. Ultimately, policy should do more to support an individuals’ independent financial capacity to train and up-skill, whether they are in-work or out of work. This could be done through either the welfare system, the apprenticeship levy, an individual training account or a reformed Advanced Learner Loan system. The supply side must be invested in, which is why I believe a lot of work needs to be done in both the Higher and Further Education sectors.
Realistically, low paid work has a role to play for transient workers who want flexible hours, students, part time workers who have obligations as a carer or parent, as well as those who are coming out of the criminal justice or education system. We should also be realistic that some jobs are low paid but people generate utility for the social value their job may bring, this would be the case in the charitable sector or some local public sector jobs.
Policy should focus more on ensuring that those people who do want to move up the ladder are allowed to do so, and that they have the resources to help improve the quality of their human capital. The SMC paper is spot on, that too many are being left behind. And we do not need to look far, whether it is political unrest or low productivity growth, to see the long-term effects of this. The aim now is to find a solution.