Low-Wage Work in the United Kingdom

2. Low Pay, Labor Market Institutions, and Job Quality in the United Kingdom

CHAPTER 2 Low Pay, Labor Market Institutions, and Job Quality in the United Kingdom Geoff Mason, Ken Mayhew, Matthew Osborne, and Philip Stevens In chapter 1, we identified a high proportion of low-wage workers in the United Kingdom as compared to other European countries. In this chapter, we explore the reasons why this high incidence of low pay has persisted despite the introduction of a national minimum wage (NMW) in 1999. In particular, we investigate the number, composition , and nature of low-paid jobs in the United Kingdom’s economy and outline the economic and institutional context in which employers are operating and in which the wages and working conditions of low-paid jobs have evolved. In the next section, we investigate the extent to which low-wage employment in the United Kingdom is associated with gender, ethnicity , skill levels, and other personal characteristics, paying particular attention to the jobs and sectors covered in chapters 3 through 7. Then we explore the reasons why there are so many low-paid workers in the United Kingdom, focusing on the declining influence of the institutions that have traditionally helped to shore up wages at the bottom end of the labor market; the diverse forms by which workers are encouraged to participate in the workforce even if low-wage employment is all that is available to them; deficiencies in workforce skills and associated employer product strategies that make use of low-skilled, low-paid labor; and the recent impact of immigration on the pay and conditions of workers in low-wage employment. In the following section, we assess trends in job and life quality in low-paid work in the United Kingdom (for example, hours worked, insecurity of employment, maternity leave provision, and sick pay), taking account of the impact of the national minimum wage, the implementation of European Union directives affecting pay and conditions, and other relevant components of legislation in the United Kingdom. We conclude with an assessment of the extent to which individuals in 41 low-paid employment may over time be able to escape such employment and find their way to higher-paying jobs. WHO AND WHERE ARE THE LOW-PAID? In 2005 some 22 percent of employees in the United Kingdom were engaged in low-paid work, according to the Annual Survey of Hours and Earnings (ASHE). For women, the low-paid share of employment was 29 percent, while for men it was 13 percent. Figure 2.1 captures this gender split in more detail while also highlighting the particular problems of part-timers. Thus, for example, male part-timers earn consistently less per hour than women full-timers at all points on the distribution. However, among part-timers there is little differ42 Low-Wage Work in the United Kingdom Figure 2.1 The United Kingdom Earnings Distribution, 2005 Source: Annual Survey of Hours and Earnings (ASHE). Note: The ASHE is an annual survey that is administered through employers and collects data on a sample of 1 percent of employees. Gross Hourly Pay (Pounds) 26.00 24.00 22.00 20.00 18.00 16.00 14.00 12.00 10.00 8.00 6.00 4.00 10 20 30 40 50 60 70 80 90 Percentiles Male Full-Time Male Part-Time Female Full-Time Female Part-Time NMW 2005–2006 Low-Pay Threshold (All Employees) Low-Pay Threshold (Full-Time Only) ence between male and female pay below the seventieth percentile. Some 50 percent of all part-timers earn below the low-pay threshold —defined as two-thirds of the median hourly pay of all employees . This proportion rises to about 57 percent if the threshold is defined in terms of median full-time hourly earnings. For women full-timers, the equivalent proportions are 15 and 25 percent, respectively , depending on the definition of the low-pay threshold, while for male full-timers they are 10 and 20 percent. Low-paid employment is heavily concentrated by sector, with just over half of all low-paid workers found in three sectors: retail, health services, and hotels. Although hotels have the highest incidence of low-paid workers among their employees (59 percent), it is the much larger retail sector that has the largest number of low-paid workers in absolute terms, accounting for just over one-quarter of all the lowpaid workers in the United Kingdom’s economy (table 2.1). Estimates based on...