First wave furloughing pushed two million employees below the minimum wage

Around two million employees were paid less the National Living Wage last April as low-paid workers found themselves at the heart of the crisis and were less likely to have their furloughed wages topped up by their employer, the Resolution Foundation said today (Tuesday) in response to the latest ONS Annual Survey of Hours and Earnings.

The ONS survey – the most authoritative data on employees’ pay and hours – vividly illustrates the scale of the initial lockdown on the labour market, as well as the impact of the Job Retention Scheme in supporting firms and workers through the first lockdown.

While real median hourly pay across the economy fell by 0.9 per cent in the year to April, and the average number of hours paid fell by 1.5 per cent, there were sharp differences across the workforce, reflecting the sectoral nature of the crisis.

In accommodation and food services, for example, 39 per cent of workers were furloughed on reduced pay in April, compared to 11 per cent of all employees.

As a result, low-paid workers were far more likely to be furloughed than the rest of the workforce, and far less likely to have their pay topped up by their employers.

The ONS survey shows that around half of the lowest paid workers (paid £8.72 an hour or less) were furloughed on reduced pay – compared to fewer than one in twenty higher paid workers (paid £15.87 an hour or more).

The combination of low-paid workers being paid at the heart of the crisis, and being less likely to receive top-up pay from their employer when furloughed, pushed two million workers below the legal National Living Wage in April.

Nye Cominetti, Senior Economist at the Resolution Foundation, said:

“Young people and low-paid workers in customer-facing roles, such as hospitality and leisure, were hit hard during the first lockdown, and are likely to be hit hardest again during the coming lockdown too.

“Given the scale of the economic shock facing Britain, today’s data also confirms how much of a living standards lifeline the Job Retention Scheme is for millions of often low-paid staff.

“But furloughing can’t completely shield workers from the effects of the crisis. With many employers unable to top up staff wages, around two million workers were paid less than the legal minimum wage last April.

“That’s still a lot more that they would have received had they lost their jobs altogether, but it’s sobering reminder of just how important our wider social security safety net is – and why it should strengthened, not cut back next April, as the Covid-crisis continues into 2021.”