Britain needs a wider ‘good work agenda’ to raise minimum standards at work not just the minimum wage

Britain needs a wider ‘good work agenda’ to raise minimum standards at work not just the minimum wage

Minimum wage rises mean Britain now has one of the highest wage floors in the world but remains an international laggard on wider minimum standards, with minimum wage workers receiving only a tenth of their normal earnings if they fall sick for a week. Raising minimum standards alongside the minimum wage should be the focus of a ‘good work’ strategy for the decade ahead, according to new research published today (Wednesday) by the Resolution Foundation.

Low Pay Britain 2023 – the 35^th report of The Economy 2030 Inquiry, funded by the Nuffield Foundation – examines the progress made on reducing low pay across Britain, and the lack of it on other issues that matter to low earners, from inadequate sick pay and unpredictable hours, to the lack of autonomy and flexibility at work.

The report notes the huge success of the National Living Wage (NLW) in halving levels of low pay: the rise from £6.70 an hour in 2015 to £9.50 an hour in 2022 means that 20.7 per cent of workers were low-paid in 2015, compared to 9 per cent in 2022. Sustained increases mean that only France, New Zealand and Korea have higher minimum wages than the UK, and that Britain is on course to eliminate hourly low pay by the middle of the decade.

But Britain remains behind many of its peers when it comes wider minimum standards at work. Statutory Sick Pay (SSP) is just £109.40 per week, lagging behind the minimum protection levels in almost all other OECD countries. Combined with the three-day waiting period this means a full-time minimum wage worker would receive just £43.76 for a week of sickness, to compensate for lost earnings of £390.

The paucity of SSP is especially damaging for low earners because they are more likely to rely on it. The Foundation notes that four-in-ten private sector employees earning below £20,000 expect to only receive SSP if they are sick for a week, compared to fewer than one-in-ten earning above £50,000.

The Foundation notes that this is part of a wider pattern of lower earners lacking protections or flexibilities that higher earners take for granted.

Low earners are more than twice as likely as high earners quintile to say they have little or no autonomy at work (38 vs 15 per cent); four times as likely to experience volatility in their hours and pay (22 vs 6 per cent).

The majority (56 per cent) of workers earning less than £20,000 say they would expect not to be paid if they unexpectedly missed a day of work due to a family emergency, compared to just one-in-ten (12 per cent) of workers with incomes over £60,000.

Going forwards, the Foundation says that a renewed ‘good work’ agenda should seek to raise minimum standards as well as the minimum wage. Proposals include:

• A higher wage floor: continuing the current pace of NLW rises in the next parliament would see it reach 73 per cent of typical earnings, or £13.12 on current forecasts, by the end of this decade.

• Proper sick pay: an earnings replacement approach, where SSP is paid at 65 per cent (matching typical OECD rates) of a worker’s usual earnings.
• More certainty and control: new rights to a contract reflecting the hours a worker usually works, at least two weeks’ advance notice of shifts, and compensation for late changes.

As with previous minimum wage rises, these changes would make it more expensive for firms to use low-paid labour. The Foundation proposes a widening of the Low Pay Commissions remit to monitor any impact from this ‘good work agenda’ on employment.

The Foundation says that the trade-offs involved need to be part of a wider economic strategy to raise growth and lower inequality, with the benefits concentrated amongst poorer, and the costs amongst richer, households.

Generally lower paying hospitality and leisure jobs comprise a quarter of employment in poorer households, compared to just a tenth among the richest households. Meanwhile richer households spend 35 per cent of their budgets on hospitality and leisure, compared to 23 per cent amongst poorer households.

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

“We should celebrate the progress that Britain has made on tackling low pay thanks to the National Living Wage, while recognising that we have a long way to go on job quality.

“Too many low earners suffer from poor quality work, be it from inadequate sick pay or unacceptable uncertainty about when they will be expected to work.

“Too often work means very different things to lower and higher earners. Not enough of the former enjoy the basics of dignity, respect and security that the latter take for granted.

“That’s why we need a new ‘good work agenda’ that goes beyond a higher minimum wage so that workers see improvements to the quality of their jobs as well as the size of their pay packets.”