More than 300,000 workers trapped at minimum wage for at least five years

Britain’s growing minimum wage workforce includes 320,000 people who have been trapped on the lowest rung of the pay ladder for five years or more reveals a new report from the Resolution Foundation.

Minimum Stay shows that 17 per cent of all those currently earning the minimum wage or up to 25p an hour above it, have only ever held jobs at this pay level when they have been employed in the last five years. Over the last 10 years, 140,000 workers (7 per cent of all minimum wage workers) have not earned more than 25 pence above the minimum wage. 90,000 workers have never earned more than 25 pence above the minimum wage in the 13 years since it was introduced in 1999.

The Resolution Foundation report also investigates the profile of those workers. It finds that the overwhelming majority of those who have stayed in minimum wage work are women. Around 62 per cent of all minimum wage workers are women – yet women make up almost three-quarters (73 per cent – 230,000 workers) of those trapped in minimum wage work for the last five years. Among those who have only had minimum wage jobs in the last ten years, almost four in five (79 per cent – 110,000 workers) are women.

The report identifies a growing trend for minimum wage earners to split into two groups – (A) new entrants to the labour market (including the young), many of whom move quickly on to higher pay, and (B) workers who do not escape minimum wage work for an extended period of time. In 2004 the proportion of minimum wage workers who had not escaped minimum wage work in the previous five years was 12 per cent – increasing to 17 per cent by 2012.

The report suggests that the crucial fork in the road for employees may occur in their mid-30s –the chances of remaining trapped in minimum wage work rises for workers after this point. While workers aged between 46 and 55 make up 17 per cent of all workers on the minimum wage, almost a third (30 per cent) of those trapped there for five years are in this age group.

The report’s other findings include:

· Part-time workers are more likely to have remained in minimum wage work. They make up 62 per cent of all minimum wage workers but 77 per cent of those that have remained at the minimum wage for 10 years

· Remaining in the same job or occupation is associated with remaining on the minimum wage. Those who have stayed in the same occupation for a decade account for 79 per cent of those who are stuck, but just 51 per cent of all minimum wage workers

· London’s low wage labour markets appear to be more dynamic or transient. The region contains 9 per cent of all minimum wage workers but only 4 per cent of those who have been trapped on the minimum wage for 5 years.

· The wholesale and retail sector has relatively high levels of employees trapped at minimum wage. 37 per cent of all those trapped work in this sector, though it accounts for only 28 per cent of all minimum wage workers

Alex Hurrell, senior analyst at the Resolution Foundation and co-author of the report said :

“Living on the minimum wage is always hard, but at the very least we would hope that minimum wage work is the first rung on the ladder. For a large group of workers it seems that this is not happening. The reality is a cycle of minimum wage jobs and unemployment, with little progression over time.”

Conor D’Arcy, Resolution Foundation researcher and co-author, said:

“The national minimum wage has succeeded in lifting people out of extreme low pay but beyond that its effects are more mixed. Men, younger workers and those in London appear relatively less likely to have remained on the minimum wage over time, but others – especially women and part-time workers – appear to have been at much higher risk of becoming trapped.”

The Resolution Foundation report uses data from the Annual Survey of Household Earnings and New Earnings Survey Panel Dataset to calculate the number of employees who earn up to the minimum wage and 25p above it (as well as other bands). Remaining trapped in minimum wage work is defined as having never earned more than the minimum wage in the period, including those who may have had spells of unemployment of self-employment.

The report feeds into a major review of the future of the national minimum wage and the Low Pay Commission being hosted by the Resolution Foundation and chaired by Sir George Bain. A broader study on pay progression and low pay will be published by the foundation later this year.

Ends

Notes

1. For the purposes of this paper, minimum wage work was defined as anyone earning below the National Minimum Wage and up to 25p above it, referred to as a 25p band, calculated using the 2012 rate. Results were also calculated for a 5p band and a 50p band.

2. To be included in the sample, an employee needed to be earning within those ranges in 2012 and to have been working in at least one of the five previous years, though there may have been periods when they were not employed.

3. For further summary of research on the National Minimum Wage see Fifteen Years Later: a discussion paper on the future of the UK National Minimum Wage and Low Pay Commission