Low wages (combined with the increasing cost of living and inadequate benefits, as well as precarious jobs, as explored below) are contributing to an increasing problem of in-work poverty in the UK. The link between hard work and a good quality of life (the social contract) has broken down. IPPR found earlier this year that, while unemployment has fallen, in-work poverty has been rising since 2004. Levels were highest in London, Wales and the North of England, reaching a new high of 17% of working households before the start of the pandemic, and while single parents and large families were most at risk (with 42% of families with three or more children in poverty, up more than two-thirds in the last decade), even families with one full-time and one part-time earner were at greater risk of poverty (up from 5% to 10% over the same period). A more recent IPPR report noted that, while pre-pandemic rates of unemployment were at a 45-year low, almost 40% of employees have seen their hourly pay fall in real terms since the 2007/08 financial crisis, and a majority have seen less than 2% real terms increase per year over that period. The Archbishop of York called earlier this year for a basic wage, arguing that we need to “reset our compass”.
Unemployment also affects some groups more than others, despite historically low levels overall. The employment rate for disabled people was 54% in 2020, compared to 82% for non-disabled people. ONS figures for 2019/20 show that unemployment was highest for people from a Pakistani (9%) or Black (9%) ethnic background, and lowest for people from a White (4%), Indian (4%), or Chinese (5%) ethnic background. The gender gap in unemployment is small (4.4% for women and 4.7% for men). The move towards a net zero economy will put many jobs in carbon-intensive sectors (especially but not only in the energy sector) at risk over the coming years.
The COVID pandemic has both highlighted and exacerbated issues of poverty pay and unemployment. The Resolution Foundation pointed out that, while the pandemic has affected the youngest and oldest workers most, the furlough scheme has meant that incomes fell most in lockdown for those in their late 40s. A recent IPPR report noted that people on the lowest wages were most likely to lose their job or be furloughed, and that most of those who have lost their job because of the pandemic might lack the skills and training needed to obtain one of the newly created roles.
The Trades Union Congress has pointed out the disproportionate impact of COVID-related job losses on ethnic minorities, estimating that the overall BAME unemployment rate rose from 5.8% to 9.5% from 2019 to 2020, compared to an increase from 3.4% to 4.5% for white workers, and suggesting that structural racism in the UK’s labour market was to blame.
Analysis by the Guardian has found that young black workers have been hit disproportionately hard during the pandemic, with more than 40% unemployed, three times worse than white workers of the same age.
In a report on DWP Employment Support, Parliament’s Public Accounts Committee said it was concerned that the Department for Work and Pensions “does not know why” unemployment for young black people increased by more than half to 41.6 per cent over the course of 2020, while unemployment among young white people grew just 2 percentage points to 12.4 per cent over the same period.
The Institute for Fiscal Studies has found that Bangladeshi and Pakistani men were four times more likely to work in sectors shut down by COVID than White British men. Another IFS paper on ethnic minorities and social mobility (not specifically in the context of COVID) found that employment disadvantage of minority ethnic groups persists in generations born or raised in the UK, despite improvements in their educational attainment, supporting claims of structural discrimination in the labour market, which echoes the findings of a report by the Runnymede Trust.
Increasing numbers of people are on insecure contracts, including zero-hours contracts, bogus self-employment and the gig economy. IPPR notes that the use of insecure contracts has risen dramatically over the last decade, with 5.5 million people now estimated to be in insecure work such as temporary work, ‘bogus’ self-employment, non-standard contracts, agency and ‘gig’ work, or on zero-hours contracts.
The use of zero-hours contracts has grown hugely in recent years, and the ONS estimates that more than 960,000 people are on them, up from just 168,000 in 2010. The FT noted that 10% of 16-to-24-year-old workers were on zero-hours contracts in 2020, up from 6% in 2013. Women are more likely to be on zero-hours contracts than men, partly because women are more likely to work in sectors where such contracts are more prevalent, and partly because often the only alternative to a fixed 9-5 contract is a zero-hours contract.
Another IPPR report estimates that of those in insecure work, 2.5 million workers are underemployed in the UK. Two-thirds of zero-hours workers want jobs with guaranteed hours, according to a 2017 poll. Those in insecure work often don’t know what hours they will work (causing chaos with arrangements like childcare) or whether they will be able to pay their next bills. Their work can suddenly dry up when the business sees demand dip.
Insecure work is also bad for the economy, with clear evidence that decent work leads to better economic outcomes (see OECD research, but more research is needed). The TUC notes that insecure work is concentrated in occupations like caring and leisure, and has found that 67% of insecure workers say they receive nothing when off sick compared with 7% of secure workers who reported receiving nothing when off sick, noting that inadequate employment protections compel insecure workers to continue working throughout the pandemic.
A report published by the TUC and Race on the Agenda in June found that ethnic minority women were almost twice as likely to be on zero-hours contracts as white men (4.5% compared to 2.5%), and that about one in six zero-hours contract workers are BAME, though BAME workers make up only one in nine workers overall.
COVID has also led to some companies using fire and rehire tactics against workers, in which employees are either threatened with the loss of their job if they do not sign up to new terms and conditions of employment, or are made redundant and forced to reapply for roles with new terms and conditions. There is no specific legislation to outlaw fire and rehire, but there have been calls from anti-poverty charities as well as MPs from across the political spectrum for the government to ban it.
Equal pay for equal work is a long way from being realised. TUC figures show that disabled workers earn 20% less per hour than non-disabled workers. ONS figures show that the ethnicity pay gap is 2.3%, although this hides a much more complex picture, while they estimate that the gender pay gap among all employees in the UK is 15.5% (and this is being exacerbated by the pandemic). The Fawcett Society has analysed the intersectional pay gaps for women of colour, finding that women of colour consistently earn less per hour than White British men, with pay gaps ranging from 10% for Indian women to 28% for Pakistani women.
Meanwhile, levels of executive pay remain high, despite having fallen slightly during the pandemic. The High Pay Centre’s 2021 survey has found that the bosses of FTSE 100 companies are paid more in a year than many people earn in a lifetime (the average figure of £2.69m is 86 times the £31,000 that an ordinary worker earns in a year). The highest FTSE pay ratio was at building materials group CRH, whose Chief Executive’s pay package was more than 200 times the median employee salary.
Working conditions and allowances remain inadequate for many workers. For example, the shared parental leave policy is suffering from low take-up due to its poor design. In many households, both adults need to work to avoid falling into poverty, but are prevented from doing so due to a lack of flexible working provisions; IPPR found that 64% of working women are unable to vary their working hours and 25% find it difficult to take an hour or two of leave at short notice. The Resolution Foundation has argued that statutory sick pay (which is worth £96 a week) is “woefully inadequate”, that the minimum earnings threshold of £120 a week excludes too many people, and that this has led to many people failing to self-isolate during the COVID pandemic because doing so would cause unmanageable financial hardship. Meanwhile, there are many examples of workers having to endure unacceptable working conditions for employers such as Amazon.
Equal opportunities for jobs and promotions are a distant prospect. Class is one factor; TUC analysis of data from the Higher Education Statistics Agency shows that graduates with parents in ‘professional and routine’ jobs are more than twice as likely as working-class graduates to start on a high salary, no matter what degree level they attain. Race and gender are also important. For example, the Fawcett Society’s review of the pay and progression of women of colour found, among other things, that ethnic minority candidates had to send 60% more job applications to receive as many calls back as White British people, that ethnic minority graduates are significantly less likely to obtain employment six months post-graduation compared to white graduates, and that one third of women of colour report being unfairly passed over for or denied a promotion at work. Disabled people also suffer from a lack of equal opportunities in the workplace; Disability Rights UK found that only eight percent of workplaces have special procedures to attract job applications from disabled people.
Trade union membership in Britain has more than halved since 1979, with millions now working in insecure work rather than in secure, unionised jobs. Union membership has declined in parallel with the reduction in size of many traditional industries that were highly unionised, such as steel, coal, printing, and the docks. However, the right to unionisation has also been eroded in various ways by successive governments, through for example the dismantling of sectoral collective bargaining, the introduction of employment tribunal fees and the 2016 Trade Union Act that introduced a 50% turnout requirement for strike ballots, further restraints on picketing, and a requirement that union members’ contributions to political funds can only be made on an ‘opt-in’ basis.
Small businesses (which account for 48% of private sector jobs) do not operate on a level playing field with their larger competitors, especially those that operate internationally. Smaller businesses were also particularly impacted by the pandemic, with many reporting significant falls in revenue and several industry sectors experiencing notably worse outcomes on measures such as redundancies, trading status, and turnover (IPPR noted that small firms are more concentrated in sectors affected by lockdowns than large firms). The lack of fair competition with larger companies manifests itself in a variety of ways:
- Access to finance (bank lending to small businesses shrank significantly after the 2008 financial crisis, although it has picked up since then, in large part driven by government loan schemes, and the Federation of Small Businesses reports that many small business are choosing to accept slower growth rather than seeking external finance)
- Fair competition with monopolistic companies, with the increasing number of ‘winner-takes-all’ markets (for example in high-tech industries) driving many small companies out of business
- Taxes and regulations, for example with large global companies able to use loopholes in international tax rules to minimise their corporation tax bills
- Payments from large customers, whereby many small companies are forced out of business due to cashflow shortages caused by late payments from customers (such as supermarkets) who provide a very high proportion of their revenue, as well as having their margins squeezed by customers who are able to use their market dominance to negotiate aggressively on price
- Access to support and advice, with significant gaps in provision for small firms and the self-employed, as outlined by the Federation of Small Businesses
- Distribution of the costs of transition to net zero (which, as the FSB points out, has not yet been looked at in detail by government)
Public attitudes to the wide range of issues outlined above are varied and often contradictory. For example, the British Social Attitudes survey in 2017 found that a majority of the public believe that employers should be responsible for paying wages that cover the cost of living, and support a national minimum wage increase and wage top-ups for low-earning single parents and working couples without children. Polling in May 2020 also found that two-thirds of Britons value 'low-skilled' workers more since the pandemic. However, the recent Unequal Britain report by King’s College London found that, while 47% of Britons say that discrimination helps explain why black people have lower earnings, 13% think that this is a result of black people lacking motivation or willpower, and people are more likely to think that job losses caused by the crisis are the result of personal failure than chance. The research also found that the public are divided on whether the government’s support for workers and businesses during the pandemic strengthens the case for more intervention in the economy in the future: 45% believe it does, while 36% believe it should just be a one-off, and attitudes are hugely affected by existing political views and age.