1. The Bevan Foundation is an independent, charitable think tank that generates new ideas to make Wales fair, prosperous and sustainable. We have recently completed major projects on:
· how growth sectors can support a reduction in poverty;[1]
· how to increase take-up of the voluntary Living Wage;[2]
·
how the economy can benefit all people and places (‘inclusive
growth).[3]
2.
We welcome the Welsh Government’s commitment in its Programme
for Government to achieving prosperity for all. With no
change in poverty amongst people of working age for more than a
decade and forecasts that the position is likely to worsen,
ensuring that people at the bottom of the income spectrum benefit
will be crucial.
3. To achieve the aim of prosperity for all there needs to be a major shift in the Welsh Government’s approach to economic development to ensure that all parts of the economy in all parts of Wales are valued and supported. This will mean addressing all economic sectors, stimulating the least well-off areas, and considering job quality. The Welsh Government also needs a comprehensive, joined-up set of policies to help create an inclusive labour market in order to improve access to employment, encourage progression and enhance the terms and conditions of work. An inclusive economy and an inclusive labour market must run in parallel – there can’t be one without the other.
More jobs
4.
The fundamental challenge in Wales is the lack of jobs. This not
only affects the likelihood of someone being in paid work, it also
affects pay. Analysis of UK data suggests that an increase in the
total number of jobs in a local labour market is more important in
influencing individuals’ wage rates than growth in specific
sectors,[4]
while research from the US has shown that when labour demand picks
up strongly, both pay and hours of work improve.[5]
Action to boost employment in the parts of Wales with the weakest
labour markets is therefore likely to have as much impact on
employment rates and wage levels as action that is focused
specifically on employability and pay.
5. Drawing on recent work with the Joseph Rowntree Foundation,[6] effective ways of increasing employment in disadvantaged areas include:
· Area-based economic development initiatives: such as designating new Enterprise Zones and growth poles at strategic locations.
· Excellent local connectivity: good connections between disadvantaged communities and centres of employment are needed via fast, frequent and affordable public transport.
· Using public procurement: to secure more and better job opportunities for disadvantaged workers, as well as other local benefits.
Better
Jobs
6.
Job quality should be a critical issue for the Welsh Government,
not least because the nature of work exerts an important influence
on individual well-being.[7]
Job quality encompasses many aspects of work, but pay is one of the
most important.
The voluntary Living
Wage
7.
Low pay is endemic, with more than one in four workers not earning
enough to meet their basic needs i.e. less than the voluntary
Living Wage. Low pay occurs in all parts of Wales, affects
men as well as women, and is found in all sectors of the
economy.[8]
The areas with the highest proportion of the workforce paid below
the Living Wage are mostly rural, the group of people most affected
is women working part-time, and the sectors with the highest
proportion of low-paid workers are accommodation and food services,
residential care and wholesale and retail (where more than half the
workforce earn below the voluntary Living Wage rate).[9]
8.
The voluntary Living Wage offers a potential solution for
Wales’ low pay problem.[10]
The benefits for employers include increased productivity, improved
staff recruitment, attendance and retention, and reputational
enhancement, with the impact on wage bills and profits being very
modest although they vary with the size and sector of the
organisation.
9.
The benefits for Wales’ employees include increased income
and reduced dependence on benefits, more time outside work and
increased well-being. The extent of the gains depends on
employees’ working patterns, welfare entitlement and other
household arrangements.
10.
The benefits to the wider economy are increased tax and national
insurance revenues and savings on benefits. Modelling of the impact
on total employment suggests that at worst there is a very small
risk of very limited job loss and at best some increase in
employment. The impact on the headline rate of poverty is likely to
be modest, but the benefits over people’s life-course can be
considerable.
11.
The Living Wage has received support from almost all political
parties, as well as trade unions and other campaigners throughout
Wales. However, Wales has not had the same level of high-profile
country-wide campaigning as in Scotland, nor has there been much
innovation in terms of incentives for employers to become Living
Wage accredited.
12.
There has been some welcome recent progress in increasing the
number of accredited and non-accredited Living Wage employers with
both being at an all-time high. There is much more that could
be done: half of Wales’ local authorities do not yet pay the
Living Wage, no Wales-headquartered employers in the key sectors of
accommodation or retail have committed to pay it, and some local
authorities have no accredited Living Wage employers headquartered
in their areas.
13. A step-up in action is needed if there is to be significant change in the number of Living Wage employers and employees in Wales. We have recommended that the aim should be to reduce the proportion of people in Wales earning less than the Living Wage to the UK average (excluding London) within five years – requiring a cut of about 6,000 people a year. This should be achieved by:
· a robust strategy which mixes ‘quick wins’ such as amongst employers who are ‘natural sympathisers’ with sectoral approaches where low pay is widespread;
· using tactics that work – especially employer-to-employer messages and development of a Living Wage ‘movement’;
· local and Wales-wide policy and legislation to encourage employers to pay the Living Wage; and,
· a dedicated resource to champion and support the Living Wage, which brings together Welsh Government, trade unions, employer representatives and other campaigners.
Other aspects of job quality
14.
Research by the Joseph Rowntree
Foundation on what low-paid employees valued found that after a pay
increase their priorities were work-related training;
contributions to pensions; flexible working; paid breaks, training
and overtime; paid sick leave and help with
childcare.[11]
15. We
welcome the Fair Work Commission although more information about
its remit and impact would be helpful. We also welcome the
Code of Practice on Ethical
Employment in the supply chain, but it will need rigorous
enforcement and support for employers to have full effect.
16. In addition to strengthening these two initiatives, we are urging the Welsh Government to include a commitment to improving job quality in its forthcoming economic strategy, and to:
· Refocus Welsh Government business finance so that a key criterion for support is job quality, and not business size or sector.
· Develop sector strategies for low paid sectors, including those in the foundational economy, to encourage a shift away from low-pay / low-skill business models.
· To develop ways of improving the quality of part-time work in particular.
Supporting people to get into work
17. Having someone in a household in paid work more than halves the risk of being in poverty. We welcome the Welsh Government’s intention to produce a comprehensive, all-age plan to boost employability. The evidence from research by JRF[12] and by Green et al[13] shows that it is vital that the plan:
· is based on job seekers’ needs not criteria such as age or benefit entitlement;
· is based on the proven approach of providing a package of pre-employment training, work placement and a guaranteed job interview;
· enables job advisors to be flexible and responsive to employers’ and job-seekers’ needs;
· offers specialist support and an Intermediate Labour Market programme for those furthest from the labour market;
·
includes personalised careers
information, advice and guidance for adults.
18. The focus
on job entry is not enough on its own to reduce poverty. Working
does not eradicate the risk of poverty, and so a focus on job
retention and progression is a vital complement to employability.
We have therefore recommended that the employability strategy
includes support for progression as well as job entry.
19. Support
for progression will need to take into account progression within
sectors as well as progression across sectors. Within sectors, the
likelihood of moving out of low pay varies: in accommodation and
food, 17.4% of employees left low pay in a year compared with 59.0%
in finance and insurance services. Here, the evidence shows
that creating clear progression pathways, with adequate support and
communication with employees, can help. We have recommended
that a pilot progression programme be developed in health and
social care, both large sectors experiencing recruitment
difficulties in higher-paid roles.
20. Many employees progress in work by moving between sectors. For them, access to tailored, personalised information, advice and guidance, coupled with general investment in workforce development and skills are key.
21. In terms of delivery, the evidence clearly shows that an employability plan should be comprehensive, bringing together all forms of provision (including the Work and Health Programme). It should also involve employers in the design and delivery of provision, and, crucially, it should be developed and delivered at local level to reflect different labour market conditions across Wales and have effective reach into the community.
The role of welfare benefits for people on low incomes
22.
The social security system plays a key role in topping up the
incomes of people in work and on low pay, as well as those who are
unable to work for whatever reason.
23.
For people in work, earnings-related benefits play a vital role in
topping up household incomes. Working and Child Tax credits
are claimed by 161,000 people who are in work while Housing Benefit
is claimed by approximately 72,000 working households. In addition
universal benefits such as child benefit and non-means tested
benefits such as Personal Independence Payment are important to low
income working individuals and families.
24.
Social security benefits are the main source of income where people
are not working. As at November 2016, 11.3% of the population of
working age claimed an out-of-work benefit (216,000 people).
25.
The Joseph Rowntree Foundation has made comprehensive
recommendations to reform the benefits system, including increasing
the work allowance whenever income taxes are cut, returning
the work allowances to their levels in the original design of
Universal Credit and allowing second earners in a household to keep
more of their earnings; and increasing Job Seeker’s Allowance
to reduce the risk of destitution.
[14]
26.
The transition to Universal Credit brings additional challenges,
because ‘conditionality’ will be applied to in-work
claimants, who will be expected to seek additional hours and higher
earnings. This will depend in part on jobs being available and
employers being open to requests for extra hours or changes in job
design.
27. While the bulk of the social security system is not devolved, there are important elements of the welfare system which the Welsh Government does control and which is mostly overlooked. This includes:
· help with council tax
· Discretionary Housing Payments
·
Discretionary Assistance Fund.
28.
In addition, the Welsh Government’s decisions on issues such
as social rents, charges for health care (prescriptions, dental and
optical care), school meals and the availability of childcare
affect the eligibility of households to claim help with
costs.
29. We have previously recommended that the Welsh Government should seek the immediate devolution of Housing Benefit[15] and help with childcare costs,[16] and it should also ensure that the devolved elements of the social security system provide a coherent package of support for those on low incomes.
[1] Economic and Social Research Council project ‘Harnessing Growth Sectors for Poverty Reduction: What Works to Reduce Poverty through Sustainable Employment with Opportunities for Progression’ Grant reference ES/M007111/1. See https://www.bevanfoundation.org/current-projects/will-take-pay-living-wage-wales/
[2] See What will it take to pay the Living Wage in Wales? https://www.bevanfoundation.org/current-projects/will-take-pay-living-wage-wales/
[3] See Towards a Wales without poverty at https://www.bevanfoundation.org/current-projects/towards-wales-without-poverty/
[4] Green, A., Sissons, P. and Lee, N. (2017a) Growth Sectors: Data Analysis on Employment Change, Wages and Poverty. Cardiff: Public Policy Institute for Wales
[5] New Policy Institute (2013) Monitoring poverty and social exclusion in Wales, Joseph Rowntree Foundation https://www.jrf.org.uk/sites/default/files/jrf/migrated/files/poverty-exclusion-wales-summary.pdf
[6] Bevan Foundation and Joseph Rowntree Foundation (2016) Prosperity without Poverty, https://www.bevanfoundation.org/publications/prosperity-without-poverty-framework-action-wales/
[7] Green, A. et al (forthcoming) Harnessing growth sectors for poverty reduction: the role of policy. Public Policy Institute Wales.
[8] Bevan Foundation (2016) Fair Pay: a Living Wage for Wales https://www.bevanfoundation.org/publications/fair-pay-living-wage-wales/
[9] Green, A. et al (2017) Growth Sectors: Data Analysis on Employment Change, Wages and Poverty, http://ppiw.org.uk/files/2017/02/Growth-Sectors.-Data-Analysis-on-Employment-Change-Wages-and-Poverty.pdf
[10] Bevan Foundation (2016) Fair Pay: a Living Wage for Wales https://www.bevanfoundation.org/publications/fair-pay-living-wage-wales/
[11] Joseph Rowntree Foundation (2016) UK Poverty: causes, costs and solutions https://www.jrf.org.uk/report/uk-poverty-causes-costs-and-solutions p. 151
[12] Op. cit.
[13] Green, A. et al (2017) Employment Entry in Growth Sectors, http://ppiw.org.uk/files/2017/04/ESRC-Evidence-Review-Paper-Employment-Entry.pdf
[14] Joseph Rowntree Foundation (2016) UK Poverty: causes, costs and solutions https://www.jrf.org.uk/report/uk-poverty-causes-costs-and-solutions
[15] Bevan Foundation (2016) Making Welfare Work for Wales, https://www.bevanfoundation.org/publications/making-welfare-wales-benefits-people-working-age-devolved/
[16] Bevan Foundation and Joseph Rowntree Foundation (2016) Prosperity without Poverty, https://www.bevanfoundation.org/publications/prosperity-without-poverty-framework-action-wales/