Climbing up the ladder – the issue of low pay and how we can help

Peter Bacon of Kennedy Scott (fourth from the left) at the Belina Seminar, where he gave this paper.

With recent changes in policy, the issue of becoming ‘stuck’ in low pay will become an ever higher part of the agenda. The new national living wage will provide many with a welcome lift, but with decreases in working tax credits and changes in eligibility, there will be those who are worse off in work. The roll-out of Universal Credit will also give new impetus to not just remove people from out-of-work benefits but from the benefit system entirely. And new government-funded childcare for three-year-olds will afford many parents the chance to increase hours and progress up the career ladder. For this reason, we are likely to see new initiatives to support people to progress in their careers, and fulfil their potential.

At Kennedy Scott, we welcome this impetus. We have supported tens of thousands of people into work over the last 26 years, but recognise that there is more that we could do to help people not just into that first job, but to build a successful career. This is not the same as retaining high sustainability rates, because we are among the leading providers in this regard, but instead rests on reconstituting our relationships with our customers and employer partners in order to play an integral role in designing career ladders and enabling progression opportunities.

This blog will offer a few reflections on the issue based on what we know – who gets stuck? Why? How do people escape? And, finally, what can we do to help?

Who gets stuck in low-paid work?

Low paid work exists in the gap between the National Minimum Wage (NMW) and the Living Wage, which is probably best determined by the Resolution Foundation. Clearly this terminology will change when the National Living Wage (NLW) is instituted, but it may still be relevant given changes in Working Tax Credits, the exemption of under-25s from the NLW, and a possible shortfall between the NMW and NLW when implemented.

There has been a marked increase in low wage and service jobs over time, contrasting to a similar expansion in high-wage, professional jobs. This has created an hourglass economy, as described by the Work Foundation in their Bottom Ten Million paper of 2011:

Click here to see a graphic on the  hourglass effect.

Overwhelmingly we can see that the ‘stuck’ group is female, comprised of ‘Young Mums’, ‘Low-skilled women juggling health and families’ and ‘low-skilled women not seeking advancement’: together comprising 59% of the low-paid group, but overwhelming the least likely to leave. Often this is because they prize other things rather than just pay, such as flexibility around childcare arrangements or enjoyment of the role. Often these jobs are also characterised by having few natural upward pathways, such as cleaning or care assistant.

In addition, this ‘stuck’ group is generally more prevalent outside of London, due to the greater opportunity to earn higher wages in London, the need to meet higher costs, and the increased opportunity to put together multiple ‘mini’ jobs. The likelihood of being stuck also increases with age.

Click here to see a fuller view of the Tooley Street Research

 

Why is this group stuck on low pay?

 

The reasons are of course as various and complex as the people involved, but there are some broad explanations which have considerable resonance:

  1. Flexibility – though having children in itself is not associated with being stuck, being a lone parent or having young children is. This is likely because those in this situation prize flexibility above other factors. For example, it is true that it is easier to negotiate flexible hours with an existing employer, but not so easy (in a competitive labour market) to ask a new employer to become more flexible before taking up a role.
  2. Disability – data from the Work Programme inform us that although those with health conditions find it harder to find good work, once in place they are more likely to stay in their job than those without health conditions. This is because the marginal value of the job is higher to that person. They are likelier to have been out of work for longer, and thus appreciate the value of the job they now have and the support they receive from the employer. On the flipside, they may also suffer from a lack of confidence in getting a new job. A good degree of job fit, with sensible adjustments, may contribute to someone prizing those factors higher than pay.
  3. Job satisfaction – research demonstrates that job satisfaction is u-shaped, meaning that in our economy those who enjoy their jobs the most are at the very top and the very bottom end of the payscale. This means that the low-paid group, interestingly, includes both the most satisfied and the least satisfied of the workforce. Those in this group are unlikely to seek advancement, perhaps because it is part-time, or they have another higher earner in the family, or they enjoy the company of the people with whom they work or their environment in general.
  4. Gender pay differentials – in some circles this is a controversial point, but nevertheless it should be made. There is a significant pay gap between low-skilled roles in traditionally male occupations (e.g. refuse collection, labourer) and female roles (e.g. cleaning, school dinner supervision). This was evident in the landmark legal case against Birmingham City Council, where 174 former council employees (including Cooks, Cleaners and Care Assistants) demanded compensation because they were not given bonus payments afforded to men doing work graded at the same level, such as road cleaning and refuse collection. For example, almost exclusively male refuse collection staff often received over 150% of their basic pay, because of the bonus scheme, with one refuse collector earning over £50,000 in a year, when women on the same grade received less than £12,000. Citing a breach of equal pay legislation, the Supreme Court awarded in favour of the female plaintiffs in October 2012, ordering the authority to pay our over £756million in compensation.
  5. Under-employment – since the Global Financial Crisis, over 800,000 women have moved into types of work that are low-paid and insecure, including on zero-hours contracts. As a result female under-employment, defined as those who are working part-time but would like full-time hours – has nearly doubled.
  6. The motherhood penalty – the Fawcett Society conducted a survey in which they discovered that 1 in 10 of those returning from maternity leave went back into a more junior role. Furthermore, nearly 1 in 4 returnees from maternity leave felt that their opportunities for promotion were worse, with 53% citing that perceived need to be full-time as their greatest obstacle to progression. 2 in 5 of this group felt that progression chances were hampered by senior staff either believing that mothers would no longer be interested in promotion (22%) or capable (22%)

 

How do people escape?
In general, escapees from low pay fall into the following categories:

  • Well-qualified young people just starting out in their career are very likely to escape. Even high-calibre recent graduates often start on a low salary, or an unpaid internship, in order to gain the experience that sets them on the path to a highly-paid professional career.
  • Those who work in the public sector or workplaces with annual pay increments, although this is a lesser factor due to the shift between public and private sector employment, with 400,000 jobs lost in the former and more than two million gained in the latter. Under-employment is more prevalent in the private sector, and the gender pay gap is around 25%, as opposed to 17% in the public sector. Public sector wage freezes are also likely to diminish the importance of this point, despite its historical relevance.
  • People who make the transition from private to public sector – see above: the public sector generally pays women and those in low-skilled jobs better, but this is not a transition many will make in future.
  • In general, the easiest ways to escape are to move jobs, work more hours, take on additional jobs, establish small self-employment opportunities or work in the grey economy alongside formal work – a CIPD survey showed that low-paid employees are not ‘overly optimistic’ about earning more with their current employer, with only 4% saying that a qualification would help, as opposed to 41% said that moving to a new, higher-paid job would be their best chance, and 30% favoured a second job.

What can we do to help?

With the economy continuing to grow, and employment at record levels, it is as good a time as any to act and to support those in the low-paid group to make progress. From a welfare-to-work perspective, we can start to do this through our everyday activities and also compete for specific pilots to support this group, which I anticipate will come through European Social Funding in London. We can follow the mantra of ‘Any Job – Better Job – Career’ and focus not just on achieving a job start, but support people to build successful careers in which they can progress and achieve the fullest measure of their potential.

At Kennedy Scott, we have already begun to do this through our Circle of Support model, now rolled out nationally through our DWP Specialist Employability Contract. Working with those with severe and complex barriers to work, including those caused by disability, our Caseworkers seek to work with all relevant parties in an individual’s life to provide a personalised, co-ordinated journey, inculcate a shared vision, and share responsibilities. This could include GPs, Health Workers, Care Workers, probation staff, family and friends. When a job is secured, we involve the employer in the Circle of Support – not only to manage the transition into work, but also to discuss progression goals and the steps required to achieve them. Even when our own government-funded role in this Circle is complete, the Circle of Support remains in place to provide a continuous bedrock of help and confidence, and ensure a sustained commitment to progression.

This is an excellent start, but there are other things that we should be looking to do as an industry, such as advocating best practice hiring, management and workforce retention strategies to employers. The exemplar of this approach is the work done by the Timewise Foundation. As part of the roll-out of Universal Credit, they were asked by the DWP to undertake a pilot related to progression. Given we know that it is often by moving jobs that people can progress, it was a key finding that it is critically important to ask employers to deploy ‘flexible hiring practices’ instead of just offering flexibilities to those already employed. They ask employers to consider how jobs could be opened up, and to design job advertisements that clearly show this flexibility.

To this end they have established a Jobs Board (http://www.timewisejobs.co.uk/) where they only advertise flexible jobs. Funnily enough, having attended a seminar about this new approach, I talked to my wife about it. She works three-days a week, and looks after our 2-year-old daughter on Mondays and Wednesdays, and wasn’t especially happy in her job, but didn’t feel able to move because she was really happy with her working hours and the working/parenting balance it afforded her. Having mentioned this website, a propos of very little, we realised that it might be a good idea to have a look at it. She found an exciting, flexible, role at the National Gallery for which she was very well qualified, so she applied. She was offered the job within a fortnight, and is now three weeks into a job that she really enjoys, with even greater flexibility which fits into our lifestyle perfectly. It’s a great initiative, and we need to support it in any way we can.

Generally, commissioned opportunities in this space have focused on skills, but in our view this approach is not a panacea. Qualifications can be useful, particularly in professions where they are the gateway to more senior roles (e.g. Childcare) but this is not universally the case, and qualifications without employer buy-in are rarely useful. A more holistic approach is required, where the full range of factors are looked at, including non-formalised skills. Social capital is critical – it is hard to progress if you are unwilling or unable to express your wishes to progress, or to perform well in job interviews.

We also need to link welfare-to-work provision better with the childcare sector. We are currently working with Belina Consulting to look at ways in which we can work together with Children’s Centres to provide an integrated, seamless service, particularly aimed at lone parents. This will include shared use of facilities, a joint approach to engagement and individualised work experience opportunities. Improving these links further and exploring joint approaches to supporting both unemployed and low-paid individuals could prove very effective, and is a natural response to a world of ever declining budgets. This collaborative approach could make a major contribution to supporting those stuck in low-paid work to progress.

Empowering individuals, arming them with information about how they can raise their pay, is another avenue. There is considerable research available, much of it touched upon in this piece, that clearly shows the steps that people can take in order to increase their pay, for example moving jobs. We need to play our part in increasing public awareness of these factors, and consequently give low-paid individuals greater hope and confidence in their ability to find higher-paid work. Strengthening and promoting high quality information, advice and guidance will also support this goal, giving people the right advice as to the best qualifications to gain and experience to search out in order to achieve progression goals.

For all those with a stake in this, there is also a lobbying role with government, to advocate on behalf of the low-paid and ensure they have the right support and conditions in place to fulfil their potential. Things we should be arguing for include pay transparency (through enforcing section 78 of the 2010 Equality Act), affordable childcare, and the abolition of upfront, onerous employment tribunal fees which prevent some women from seeking legal redress when they discover they are being paid less than male counterparts. Since the introduction of upfront fees for employment tribunals in 2013 there has been an 80% reduction in the number of women pursuing sex discrimination claims. Given the extent of the low-paid issue, this is clearly a step in the wrong direction.

With new reforms, it is clear that the issue of low pay will become an increasingly relevant matter, particularly with cuts in Working Tax Credit entitlements likely to be a significant political issue. It is up to all of us to make sure that we provide great support to those looking to progress, and advocate to both employers and the government on behalf of the low-paid. At Kennedy Scott, we are already starting to think about how we can contribute to this effort, and would welcome the opportunity to work with others who wish to do likewise. If that sounds like you, please get in touch at peter.bacon@kennedyscott.co.uk.

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