Building an economy that delivers decent living standards for all

15 December 2017

The rise of in-work poverty is the most striking feature of the UK’s changing living standards in recent years. Eight million working age adults and children now live in poverty in working families, compared to only 4.1 million in poverty in working age workless families.  These families have found already tight budgets squeezed even further by falling real wages, rising inflation and the freeze on working age benefits and tax credits.

Part of the reason so many families are struggling is that low pay is endemic in the UK economy. Despite the National Living Wage boosting pay at the bottom, one in five employees, nearly six million people, are low paid – more than many other countries.   Even worse, too many people get stuck on low pay, rather than moving on to better paid jobs as they gain experience. Only one in six low paid workers manages to escape low pay after ten years.

One of the factors underpinning the UK’s low pay problem is poor productivity.  Productivity growth has been very slow since the recession, failing to return to the pre-recession trend as happened after previous economic downturns, and it has actually fallen this year.  Governments can create a pay floor, forcing employers to pay a minimum, but that isn’t the whole solution to in-work poverty or creating inclusive growth. Businesses need to be able to improve pay above this floor, and employees need to be able to improve their skills and move up into better paid jobs. That requires improvements in productivity and much greater action to create more and better jobs across all parts of the UK.

Last month the Government published its Industrial Strategy White Paper. This sets the right goal – ‘creating better, higher-paying jobs in every part of the United Kingdom’. It also gave indications of movement across many of the priorities we have identified: working with low-pay sectors such as retail and hospitality, improving basic skills, launching a Shared Prosperity Fund and designing a ‘Rebalancing toolkit’ to support investment in less productive parts of the UK.

The proof though will be in how these priorities are delivered.  This will require much greater action from the government but also from City Mayors and local authorities and from employers and business.  People struggling to make ends meet across the UK need to see real change, delivering decent living standards, security and a stronger economy.

Helen Barnard, Head of Analysis, Joseph Rowntree Foundation @Helen_Barnard @jrf_

 

 

This article was published in Reform’s social mobility conference brochure on the 12th December 2017. You can view the brochure here.

 

 

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