Wednesday, November 27, 2013

The price we pay for poverty wages is too high


Low pay is not simply a rite of passage that young people go through, the odds of escaping are truly grim

Students protest debts
UK students protest over debt. According to new research, their chances of recovering from low initial pay are poor. Photograph: Pete Riches/Demotix/Corbis

Living on low pay in 2013 is a rough and all too common experience, but being stuck on poverty-pay for a decade or more is tougher still. Yet for all the talk in Westminster about living standards, and the growing recognition that nearly five million workers are paid less than the living wage, there is very little understanding of the fact that many people survive on low pay for years on end. Low pay is too often thought of in terms of a series of snapshots rather than a motion picture.

And this matters. Getting stuck for a decade on a low-wage leads to more insecurity, debt and erosion of hope than a short spell. Unearthing how many people find themselves in this position – and who they are – tells us something important about how the pain of low pay is distributed across society.

This is all the more important when many cling to the complacent view that, yes, there is a lot of low paid work but it overwhelmingly afflicts young people before they go on to earn more (never mind the fact that the earnings of a typical twentysomething have plummeted by more than 12% since 2009). Poverty-pay, according to this argument, is a rite of passage, to be endured then exited. Over a lifetime, things even out.
Except, it turns out, they don't. New research paints a picture of what has happened to a generation of low-paid workers – by tracking them over time it reveals that most got stuck in and around low pay. If we look at the last decade, the great majority – nearly three-quarters – who started off on low pay failed to escape it. More than a quarter (28%) didn't leave low pay at any point; 44% moved in and out of low pay but didn't exit it; only 18% broke free of low pay altogether.

Half of those stuck on low pay are aged between 40 and 60. Women are much more likely to fail to progress than men, as are those in the north-east and Wales compared to those in London. The odds against escape are truly grim for some: just over one in 10 women in elementary occupations like cleaning move out of low pay.

Gloomy findings on mobility nearly always trigger a bout of nostalgia about a bygone era when talent more easily rose to the top, and the shop-floor could lead to the boardroom.

Don't believe it. It certainly hasn't been the case over recent decades. Wage mobility, though low, actually increased in the 2000s, when a higher proportion escaped low pay than in the 1990s and a few more succeeded in making the precarious journey from low to high pay. If we turn further back to the decade following the mid-1970s we see a slightly higher proportion stuck on low pay and fewer exiting it. You will search in vain for a recent golden age when the working-poor had plenty of escape routes.

This immobility comes at a cost. For the affected individuals it is direct and high in terms of wages lost and promotions missed out on. But it is expensive for society too. The sheer scale and persistence of low pay is part of the reason we see such a high proportion of children raised in poverty coming from working families. And this results in a large bill for the taxpayer, too, in the form of tax-credits (most of which go to households in work) and rising housing benefit for the working poor.

How much can be done about this, and how quickly, is a vexed question. There will always be low and high earners and not everyone on low pay is going to escape it. This is just one of the reasons why a strong and steadily rising minimum wage, and decent employment protection, needs to be such an important part of our economy.

On its own this won't suffice. Rectifying familiar inadequacies in the relationship between learning and earning would take us a long way – closing the gaping holes in the transition from education to employment that so many young people fall through, never to properly recover. And for those who make the wrong choices first time around, proper access to second chances is imperative.

But it's too convenient to lay the blame for poor prospects for the low-paid solely at the door of our education system. We also need to consider those employers who've opted for a business model predicated on low pay, low productivity, and high staff turnover – jobs often overseen by weak management, reinforced by a culture of short-termism, and resulting in limited prospects. And on this silence reigns. It's striking (and welcome) that in the name of social mobility all political parties now think it appropriate to challenge, however gently, the practices of elite professions such as banking, the law and journalism to open them up to disadvantaged applicants. Yet there isn't an equivalent interest in prodding mass employing sectors – retail, childcare or social care – to creating genuine opportunities for low paid workers to progress up the ladder.

Societies where it is so hard to earn your way up tend to be divisive places. And they come with a large price tag. It's a price that many feel we can no longer afford.

Guardian