One in five earning less than the living wage

The economic downturn has pushed a further 1.4 million employees below the living wage, according to a new report published by independent think tank the Resolution Foundation.

Low Pay Britain 2013 reveals 4.8 million people (20 per cent of all employees) earn less than the amount deemed necessary for a basic standard of living. In 2009 this figure was 3.4 million (14 per cent) and it is worrying that the situation has become worse even though we are no longer in the height of the recession.

In the period covered in the report (April 2012) the living wage was calculated at £7.20 outside London and £8.30 in the capital. However, since then it has increased to £7.45 an hour outside London and £8.55 in the capital.

Women, younger workers aged between 16 and 20 and all those working outside London and the south-east are most at risk of being paid below the threshold.

A quarter of all female employees (25 per cent) earned less than the standard amount in 2012, compared to 15 per cent of male employees. Meanwhile, 77 per cent of staff members aged 20 and under earned less than the basic living wage.

Only 16 per cent in the south-east and London were paid below the threshold, compared to almost 23 per cent in Wales and more than 20 per cent in many other parts of the UK.

In terms of sector, employers paying less were mostly in the hotels and restaurants industry, where two in three employees (67 per cent) are in this position. At the other end of the scale, it is least common in public administration and defence, with just two per cent for each.

Interestingly, the report claims there is a two-tier workforce system emerging in the UK, where the lower tier is increasingly characterised by low-paid, low-skilled work that is often temporary, part-time or on a self-employed basis. 

The initial evidence suggests that early signs of economic recovery, such as the increase in jobs, have done little to slow this trend with rates of part-time or temporary work among new employees – either those starting or returning to work – remaining high. The median hourly wage for a new employee stood at £8.42 in 2009 and this figure is now just under £8.

Matthew Whittaker, senior economist at the Resolution Foundation and author of the report, said real wages have been flat or declining for most of the working population for a number of years and this has led to more people dropping below the level of the living wage. 

“Britain has a sorry story to tell on low pay. Only a handful of our close competitors do worse and the large majority have much lower rates of low pay – sometimes half as much. The challenge for all parties is to find ways of boosting rates of pay, especially for those who earn less, without putting economic growth at risk," he added.

By Joe White