Number on less than the living wage rises to almost 5 million

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The economic downturn has pushed a further 1.4 million employees below the Living Wage – the rate deemed necessary for a basic standard of living, according to a new report.

Low Pay Britain 2013 , published by independent think tank the Resolution Foundation, shows that 4.8 million Britons (20 per cent of all employees) earn below the Living Wage, compared to 3.4 million in 2009. Women, the young and those living outside the South East are particularly affected.

The Living Wage was calculated at £7.20 outside London and £8.30 in the capital for the period covered by the report – April 2012 – the most recent full figures available. Since then the Living Wage has risen to £7.45 an hour outside London and £8.55 in the capital.

The report finds that:

– One in four female employees (2.9 million or 25 per cent) earned less than the Living Wage in 2012 – compared to 15 per cent of male employees (1.9 million)

– Three-quarters of employees aged 20 and under (77 per cent) earned less than the Living Wage

– Just 16 per cent in the South East and London were paid below the Living Wage, compared to almost 23 per cent in Wales and more than 20 per cent in many other parts of Britain

– Pay below the Living Wage is most common in the hotels and restaurants sector, where two in three employees (67 per cent are low paid) are in this position. It is least common in public administration and defence (just 2 per cent).

As well as the numbers paid below the Living Wage, the report also records those in low pay – a different, internationally-recognised measure defined as those earning below two-thirds of the median hourly rate (£11.15 in the period covered by the report). Using this definition, 5.1 million of all employees (21 per cent) are low paid. This includes anyone earning £7.44 or less – equivalent to £13,530 a year for a 35 hour week. Because levels of low pay are calculated relative to median pay, which has also fallen during the downturn, they have remained flat over recent years.

It notes a significant fall in low pay among older employees – those aged over 60. In the mid-1990s, as many as 37 per cent of this group were in low pay – by 2012 that had fallen to 24 per cent – fewer than one in four. Over the same period, the number of low-paid younger employees (aged between 16 and 30) has climbed steadily – from 26 per cent to 37 per cent in 2012. The report suggests this shift may be down to the growth in student employment among younger people and a general increase in older employment – with those continuing to work beyond 60 being higher-skilled and higher-paid than in the past.

The report also suggests the emergence of a two-tier workforce in Britain, in which the lower tier is increasingly characterised by low-paid, low-skilled work which is often temporary, part-time or self-employed. Initial evidence suggests that early signs of economic recovery, such as an increase in jobs, have done little to avert this trend with rates of part-time or temporary work among new employees (those starting or returning to work) remaining high. It says in 2009 the median hourly wage for a new employee stood at £8.42 – it is now just under £8.

Matthew Whittaker, senior economist at the Resolution Foundation and author of the report, said : “For most of the working population real wages have been flat or declining for many years and as a result more and more people have dipped below the level of the Living Wage. This means an increasing struggle to keep up with the cost of living.

“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.”





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