One in four low paid workers escaped low pay over the last decade

Part-time roles, having a sales job and working in hospitality reduce the chances of getting on at work

One in four workers who were low paid a decade ago – and who have remained in employment for most of the subsequent decade – went on to completely escape and move onto higher pay, according to a new report published today (Tuesday) by independent think-tank the Resolution Foundation.

Of the remaining three-quarters of workers who were low paid a decade ago, the clear majority cycled between low and higher pay over the course of the decade. Just 12 per cent of those who stayed in employment were stuck in low pay in each and every year of the decade.

Escape Plan, written by the Resolution Foundation for the Social Mobility and Child Poverty Commission, used official data sets to track low paid workers over the course of the last decade in order to determine how far up the earnings ladder they climbed and the factors that helped or hindered their pay progression.

Escaping low pay provides a large premium for workers. The report shows that ‘escapers’ saw their wages grow by on average 7.5 per cent a year in real terms over the course of the decade – bringing their pay up to around the level of typical workers. Those unable to escape low pay saw their wages grow half as fast (at 3.6% a year in real terms).

The report identifies several factors that are positively associated with escaping low pay, such as having or obtaining a degree, having a positive outlook for the future and working for a large employer (1000+ employees). The fact that bigger firms pay more, have HR functions to assist with career development and offer greater opportunities for internal promotion helps to explain their positive association with pay progression, says the Resolution Foundation.

But Escape Plan also pin-points a number of barriers to pay progression – even after all other factors are taken account of – such as being disabled, a single parent, an older worker and the number of years spent working part-time. The strong negative link between working part-time and escaping low pay will be big a concern for the UK’s 6.8 million part-time employees, over three-quarters of whom are women.

Interviews conducted by the Resolution Foundation with part-time workers revealed that they felt they were offered fewer opportunities to progress than full-time staff.

Having a sales job and working in the hospitality sector are also identified as barriers to pay progression. Hospitality-linked industries such as pubs, takeaways, restaurants and catering were found to have particularly poor escape rates, with fewer than one in five workers in any of these sub-sectors able to escape low pay.

However, even in sectors like hospitality, employers can implement effective and fair progression policies to help staff move up, says the Resolution Foundation. In a series of interviews with managers the think-tank found how a specialist retail store promoted pay progression by operating a ‘progression book’ with staff from their first day at work that set out the competencies expected for pay rises and the time scales for achieving this. A hospitality chain had made pay progression part of their recruitment strategy by advertising the number of managers who had started at the bottom.

Vidhya Alakeson, Deputy Chief Executive at the Resolution Foundation, said:

“Britain has a long-standing low pay problem, with over a fifth of the workforce in poorly paid jobs. But the limited opportunities for escaping low pay is just as big a concern as it has huge consequences for people’s life chances.

“While relatively few workers are permanently trapped in low pay, just one in four are able to completely escape. More permanent escape routes are needed for the huge number of workers who move onto higher wages but fail to stay at that level.

“Some groups clearly find it more of a challenge than others to rise up the pay ladder. Breaking down the barriers to promotion faced by disabled people, single parents, part-time and older workers is crucial to reducing the share of low pay across the workforce.

“We know that even in sectors dominated by low pay it is possible for staff, assisted by employers, to progress their career and earn more. But for this to happen we need more employers to take the issue seriously and have effective plans to promote pay progression.”

The Rt Hon Alan Milburn, Chair of the Social Mobility and Child Poverty Commission, said:

“The majority of Britain’s poorest paid workers never escape the low pay trap.  Too many simply cycle in and out of low paying jobs instead of being able to move up the pay ladder. Any sort of work is better than no work but being in a job does not guarantee a route out of poverty.

“This research provides compelling evidence for employers and government to do more on pay progression.  It is a powerful argument for Britain to become a Living Wage country.”

Ends

• The Resolution Foundation’s report analyses workers who were low paid in 2001, and who were in work for the majority of the subsequent decade with at least three of those years being consecutive. It excludes those workers who were low paid in 2001, but who were out of work for the majority of the years between 2002 and 2011, as well as those who left the workforce altogether (for example retirees and emigrants) during the decade.
• Those who escape low pay are defined as employees who were low paid in 2001 and had moved onto wages above low pay in the final three years of the following decade. Those who are stuck in low pay are defined as employees who were low paid in 2001 and have worked for the majority of the subsequent decade, but who have earned below the low pay threshold in every year they have worked.
• The low pay threshold is defined as two-thirds of median hourly earnings. In 2013 the threshold was £7.69.
• The report uses three datasets – the British Household Panel Survey, Understanding Society and the New Earnings Survey Panel Dataset – to explain the factors behind pay progression. A series of interviews and focus groups were held over July and August 2014 with low paid staff and managers to explore how these issues play out in the workplace. The 12 interviews and 6 focus groups took place in West and East Midlands, the North West and London.
• Embargoed copies of Escape plan: Understanding who progresses from low pay and who gets stuck are available from the press office.
• The report is being launched at an event in Westminster later today. Alan Milburn, Chair of the Social Mobility and Child Poverty Commission, will deliver a keynote speech.

For more information contact:

Rob Holdsworth (Director of Communications) on 020 3372 2959 or 07921 236 972

Natalie Cox (Communications Officer) on 020 3372 2955 or 07983 550 337