This is a low-pay 'recovery' built on the back of the working poor

http://www.theguardian.com/business/2014/apr/27/low-pay-recovery-working-poor

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The economic headlines have been rosy for the coalition in recent weeks. Expect more of the same on Tuesday, when growth figures are widely expected to show the recovery accelerated during the first three months of this year.

We have already heard real pay is growing again – albeit only in average terms. We have also been treated to the more dubious claim, from work and pensions secretary Iain Duncan Smith, that his welfare cuts have revived Britain's "entrepreneurial spirit", rather than forced thousands into low-paid self-employment.

But while Britain's rise up the growth rankings has attracted plenty of attention, its position near the top of a much less appealing record table remains little discussed. Britain is a leader at low pay too.

One in five workers earns less than the living wage – higher than the minimum wage but the figure deemed by campaigners to be the actual bare minimum for getting by. The incidence of low pay in the UK puts it high on a league table of mostly rich countries watched by the Organisation for Economic Co-operation and Development.

That record will be highlighted in a new report from the Joseph Rowntree Foundation this week into improving employees' working lives. As the research says, low pay is just one of many serious issues lurking behind the seemingly positive headlines from Britain's labour market: the charity's research coincides with official statistics due out on zero-hours contracts.

We have low pay, insecure zero-hours jobs and surge in underemployment – where people work fewer hours than they would like. Britain has a growing problem of in-work poverty – a problem more likely to hit the less-qualified, young people, women and ethnic minorities.

This presents a conundrum for politicians, and sits uncomfortably with the widely espoused principle that work is the surest route out of poverty. The reality is that, for many families, work and poverty are not mutually exclusive. In fact, more than half of households in poverty are now ones where someone works.

This sorry development has both moral and economic repercussions.

On the former, there is wide-ranging evidence that many remain trapped in working poverty because they are less likely to be offered training that could help them move up to better-paid roles. They also face more insecurity; this raises the risk that their children in turn go on to suffer in-work poverty, labour market experts say.

Raymond Torres, director of the International Labour Organisation's research department, warns of a "risk of perpetuation" and says in-work poverty and inequality problems in the UK are "significant and growing".

He is far from alone. The government's own social mobility and child poverty commission, chaired by Alan Milburn, has warned the economic recovery is unlikely to halt the trend of the last decade, where "the top part of society prospers and the bottom part stagnates". The former Labour health secretary stresses that many parents simply do not earn enough, as he predicts that the goal of ending child poverty will probably by missed by a "considerable margin".

From an economic perspective, the drawbacks for businesses of low pay are high staff turnover, higher absenteeism, poorer morale and lower productivity. The bigger picture for the UK economy relates to productivity, which is improving more slowly than in other advanced economies. It raises a fundamental question of whether the UK really wants to rely so heavily on low-margin, low-paying industries.

There are no easy answers to this growing in-work poverty problem, as the labour market expert John Philpott points out in his paper for the Joseph Rowntree Foundation. But policymakers and employers can take concrete steps in three areas.

Firstly, those employers that can afford to pay more must pay more. Rising stock markets and resurgent demand has left many companies sitting on cash piles and ramping up executive pay, in the UK and elsewhere, as the ILO points out. The minimum wage provides a floor in the UK, but as the rates of in-work poverty show, it is often insufficient.

To say all companies should pay more is more difficult. For smaller employers on tight margins where labour is the biggest cost – a small care home, say, dependent on work from the squeezed public sector – there is a risk that higher pay could prompt job losses or cuts to working hours.

But here we come to the second area: employers that cannot raise pay can give more to their workers in other ways. This is the focus of Philpott's report. Training offers the chance of progression: even simple ideas like getting employees involved in change could improve working conditions. There are also fringe benefits, such as childcare help and travel allowances. Provision of these has fallen but restoring them could boost morale and the bottom line.

The final area is the urgent need to bring legislation up to date with a changing labour market. In a country known for its light-touch approach, we shouldn't expect big changes. But politicians must recognise in-work poverty is unacceptably high and that they have a role in cutting it. Vows of strict controls on zero-hours contracts by Ed Miliband are to be welcomed. More is also needed to protect the self-employed, who often end up over-dependent on a single client. In sectors where work comes from the public sector, such as adult care, policymakers must count the human cost of shrinking local authority budgets. Apprenticeships must reach more young jobseekers.

But fundamentally, what really needs to change is the misguided view that any job is better than no job. Jobcentres must be measured on the kind of jobs they fill, not just the numbers of unemployed they cut.