Number of low-paid workers across Britain hits record high of over five million

The proportion of employees in low-paid work across Britain increased from 21 to 22 per cent last year – to just over five million people – a Resolution Foundation report will reveal later this week.

Low Pay Britain 2014, the Resolution Foundation’s annual audit of low pay across Britain, will find that the number of people earning less than two-thirds of median hourly pay, equivalent to £7.69 an hour, rose to 5.2 million, an increase of 250,000 on the previous year.

The increase in the absolute number in low pay in part reflects the rapid growth in the jobs market, with the number of employees rising by around 340,000 between April 2012 and April 2013. But the research will show that the proportion of employees earning less than £7.69 an hour rose slightly, reversing a small improvement in the previous year.

With the economy recovering the report will send a challenge to employers, government and all political parties to prevent people getting stuck in low pay and help them to move out of in-work poverty.

The report, to be published this Wednesday, will also highlight that:

• The ‘stickiness’ of low paid work is a serious problem. Almost one in four minimum wage employees who have been in work over the last five years have been stuck on the minimum rate for the entire time.

• Women are still far more likely to be low-paid than men. More than one-in-four (27 per cent) female employees earned less than £7.69 an hour last year, compared with 17 per cent of men. This gap has slowly but steadily narrowed over the last three decades. Back in 1983, one-in-three (33 per cent) women were low paid, compared with 8 per cent of men. However, the steady decline in the proportion of women in low paid work halted last year (rising by one percentage point).

• The UK has among the highest proportion of full-time low-paid workers across the OECD. Although the proportion remains higher in the US, employees in Britain are likelier to be low paid than those in other broadly comparable economies like Germany or Australia; twice as likely to be low-paid as workers in Switzerland; and four times as likely as those in Belgium.

Matthew Whittaker, Chief Economist at the Resolution Foundation, said:

“While recent months have brought much welcome news on the number of people moving into employment, the squeeze on real earnings continues. While low pay is likely to be better than no pay at all, it’s troubling that the number of low-paid workers across Britain reached a record high last year.

“Being low paid – and getting stuck there for years on end – creates not only immediate financial pressures, but can permanently affect people’s career prospects. A growing rump of low-paid jobs also presents a financial headache for the government because it fails to boost the tax take and raises the benefits bill for working people.

“All political parties have expressed an ambition to tackle low pay. Yet the proportion of low-paid workers has barely moved in the last 20 years. A focus on raising the minimum wage can certainly help the very lowest paid workers in Britain, but we need a broader low pay strategy in order to lift larger numbers out of working poverty.

“Economic growth alone won’t solve our low pay problem. We need to look more closely at the kind of jobs being created, the industries that are growing and the ability of people to move from one job or sector to the other, if we’re really going to get to grips with low pay in Britain today.”

Ends

1. The Resolution Foundation defines the low pay threshold as less than two-thirds of gross median hourly earnings (excluding overtime).
2. The analysis is based on Annual Survey of Hours and Earnings (ASHE) data held at the ONS’s Virtual Microdata Laboratory and covers Britain only (excluding Northern Ireland).
3. Median pay in the dataset was £11.53 in April 2013, meaning that the low pay threshold was the equivalent of £7.69 an hour. This median figure differs from the published ASHE figure in April 2013 of £11.56, due to differences in coverage.
4. Low Pay Britain 2014 will be published at 00.01hrs Wednesday 29 October. Embargoed copies are available from the press office.