Introduction
1.
This response draws
primarily on the findings from a research project funded by the
Economic and Social Research Council (ESRC) on ‘Harnessing
Growth Sectors for Poverty Reduction: What Works to Reduce Poverty
through Sustainable Employment with Opportunities for
Progression’ (grant reference: ES/M007111/1). The project
involved analysis of secondary data sources, international evidence
reviews relating to employment entry, progression and job quality;
case studies and workshops with stakeholders (led by the Bevan
Foundation) to help inform and test policy messages.
Which sectors have highest rates of low pay and in-work poverty?
2.
Low pay and
poverty are related but distinct. Low pay relates to
individual earnings in the labour market, poverty is determined by
incomes at a household level.
3.
Low-pay is a
problem across the economy, but most of the low paid are in a few
large sectors. The sectors with the highest
rates of low-pay are Accommodation and Food Services (59.1%),
Residential Care (40.0%) and Wholesale and Retail (39.1%). Almost
half of those in low paid work in these three sectors[1].
Employment projections suggest that some
of the greatest employment growth over the medium-term will be in
low-paid occupations in sectors such as accommodation & food
services and in care.
4.
In-work poverty
also exists in all sectors. However the risk of
poverty is much higher in some sectors than others. After housing
costs, 36.5% of workers in Accommodation and Food were in poverty,
21.9% in Residential Care, 21.1% in Admin and Support Services, and
20.1% in Wholesale and Retail.[2]
5.
Because poverty
depends on household income, rather than individual earnings, the
number of workers in a family plays an important role in
mediating the relationship between low pay and poverty. At the
household level the risk of poverty reflects both the combinations
of individuals’ labour market experiences and family
characteristics. There is an association between employment in some
low-paid sectors and an increased risk of household poverty.
6.
Individual
characteristics matter for both poverty and low-pay.
Factors such as sex, age and qualifications influence the
likelihood of low-pay and poverty.
7.
There is a
‘sector effect’ of being in low pay, in poverty and
escaping low pay which is independent of
the individual characteristics of workers in different sectors.
This is significant as it demonstrates the importance of the
structural characteristics of the labour market. Controlling for
individual characteristics the highest probabilities of low pay are
in accommodation and food services, residential care, wholesale and
retail, and agriculture, forestry and fishing.
8.
Local growth
matters for individual wage increases. Employment growth at a local
level has a positive effect on individuals’ wage
growth. This underlines the importance of the level of the
overall demand for labour locally for poverty reduction.
Local employment growth is more important than employment
growth in specific sectors in influencing individuals’ wage
growth.
9. The existence of specific ‘sectoral effects’ in determining patterns of low pay/in-work poverty once other individual and household factors have been taken into account, suggests that a sectoral approach is a useful way to target low pay and in-work poverty. Such a focus resonates with how the economy operates in practice and the current policy focus on key sectors. Yet the fact that it is the aggregate level of local labour demand change which is the key determining factor in wage increase indicates that a sector policy needs to be considered in a broader local ecosystem perspective and needs to be sensitive to place-specific factors.
Policy needs to consider retention and progression in employment as well as job entry
10. Active labour market policy has
focused on getting people into work, but there is increasing
recognition that sustainable employment and career progression
matter if the prospects of people on low incomes are to be
improved. Social care and hospitality are examples of sectors that
have low barriers to entry but are characterised by low pay and
limited opportunity for progression.[3]
Policies focused on these sectors need to focus on progression in
work as well as job entry.
11. Even though a sizeable
proportion of low-paid workers experience limited pay growth (as
measured by increases in pay rates), generally progression has
received limited attention as a focus for employment policy.
However, this is changing with the introduction of Universal
Credit, which includes a progression dimension. The UK Futures
Programme which was run by the UK Commission for Employment and
Skills (UKCES) also explored initiatives to enhance progression in
two sectors characterised by low pay: retail and hospitality.
12. An international evidence
review[4]
revealed relatively little evidence relating to initiatives
targeting progression (that have been robustly assessed). The most
robust evaluation studies come largely from the US. The US evidence
is primarily from localised targeted initiatives which target entry
into good quality employment opportunities, which are more likely
to offer chances for career advancement. These are often designed
as a ‘dual customer’ approach, which involves
tackling the needs and objectives of employers and employees
through the same programme. These studies demonstrate that
initiatives can be designed to support worker retention and
progression.
13. The US evidence points to a
potential benefit of a sector-focused approach to
progression. However, there is insufficient evidence to
identify the ‘best’ sectors to target. In some sectors,
such as hospitality, the context to supporting progression tends to
be more challenging than in other sectors.
14. To develop evidence to inform
initiatives to support progression there is a need to trial
different types of activities. Opportunities to do this include
the introduction of Universal Credit, and the potential for local
projects and pilot activities as part of devolution settlements
with cities and local areas. Sector-focused initiatives appear a
good place to start (e.g. the integration of health and social care
offers opportunities), although they are not the only approach.
Experimentation which includes testing across different sectors and
sub-sectors would provide valuable learning about which approaches
offer most value in tackling low pay.
15. Local provision of careers
advice has an important role to play in raising awareness of
opportunities for workers to move between jobs to increase their
earnings.
16. Issues around the limited
progression for workers on low incomes also highlights the
importance of considering employers’ business models
alongside other elements of employment policy.
Policymakers should put greater emphasis on job quality
17. Tackling low incomes is not
just an issue of supply-side policies to improve skills, etc.;
rather the nature of work available is important for both
earnings and worker well-being. Job quality should be a
critical issue for policymakers. The nature of work exerts an
important influence on individual well-being. Pay and conditions of
employment affect overall household incomes and influence the
likelihood of poverty. Opportunities for career development shape
longer-term earnings. While flexibility and family friendly
employment practices can be an important facilitator of dual
household earning.
18. An international evidence
review on approaches to job quality[5]
in growth sectors emphasises that job quality is the outcome of
a range of influences at different levels. These influences
include national level and other regulations, economic conditions,
the role of institutions such as trade unions, individual employer
practices and the characteristics of individual workers. There are
gendered patterns of job quality, with women in part-time jobs
tending to be amongst the most disadvantaged.
19. While some
aspects of job quality have been the subject of significant policy
consideration and action, such as minimum wages, other
aspects such as job design have seen less attention. There is
limited evidence on programmatic approaches to job quality in
growth sectors. Where there is some evidence at sector level these
studies highlight the importance of staff training, development
activities, the establishment of clear career pathways, as well
the importance of employer business models and job design.
20. Policy initiatives focused on
job quality have tend to focus on seeking ways of linking job
quality for workers with service improvement for employers; using
procurement to improve job quality; encouraging changes in business
models as a precursor to improving job quality; implementing
voluntary living wages and, developing the potential of employer
cooperatives to deliver worker empowerment and job quality.
21. The limited nature of the
available evidence base suggests that there is a need to pilot
and trial different forms of activities aimed at driving
improvements to jobs quality. This includes placing an
importance on linking local economic development policy with
employment and skills policy.
Different stakeholders play important roles
22. Making the economy work for
people on low incomes needs to involve a multiplicity of
stakeholders (including employers, employers’
organisations, trade unions, education and training providers,
careers delivery organisations, local authorities, local economic
development agencies and partnerships, third sector organisations,
etc.)
23. These stakeholders work at different geographical levels. Local stakeholders have an important role to play in working together to develop place-based industrial policy in large employment but low-wage sectors. However, it is crucial not to neglect the critical role of wider national factors in influencing job quality, so emphasising an important role for Government.
[1] Estimates from the Labour Force Survey (LFS), 2009-2014.
[2] Estimates from the Family Resources Survey, 2009-2012.
[3] Green A., Sissons P. and Lee N. (2017) Employment entry in growth sectors, PPIW, Cardiff. http://ppiw.org.uk/files/2017/04/ESRC-Evidence-Review-Paper-Employment-Entry.pdf
[4] Sissons P., Green A. and Lee N. (2017) Supporting progression in growth sectors: a Review of the International Evidence, PPIW, Cardiff. http://ppiw.org.uk/files/2016/10/PPIW-Report-ESRC-Evidence-Review-Paper-Progression.pdf
[5] Sissons P., Green A. and Lee N. (2017) Improving job quality in growth sectors: a review of the international evidence, PPIW, Cardiff. http://ppiw.org.uk/files/2016/11/Improving-Job-Quality-in-Growth-Sectors.pdf