“NEW DEAL” NEEDED FOR LOW PAID:
MINIMUM WAGE WON’T SOLVE THE PROBLEM
The National Minimum Wage and Government tax credits will not be enough to
solve the problem of poverty pay, a new report warns today.
“Why Worry Any More about the Low Paid?” published by the New Policy
Institute [1], shows that:
● The National Minimum Wage (NMW) is too low to ensure that employees
are free of poverty without means-tested support – “at £4.85 the NMW falls
short of that level even for a single adult working full time”.  The very
low level at which the NMW was introduced in 1999 meant that it benefited
around one million low paid workers - not the two million which the Low Pay
Commission expected at the time.
● An hourly wage rate in the range £6 to £7 per hour is needed if
most employees are to escape poverty on the basis of their earnings.  Even
with the NMW rising by 7% a year (as it has in both 2003 and 2004), it
would take five years just to reach the bottom of that range.
● Tax credits “treat the symptoms of low pay, namely household
poverty, without treating the problem itself .. by subsidising the
employers of low paid workers, tax credits not only make low pay work
economically possible, they create disincentives for employers to do
anything about it”.
The report calculates that there are up to seven million low paid workers
in the UK (defined as earning less than £6 to £7 an hour).  Of these, more
than four million are women.  Three million are part-time workers, of whom
80% are women.
Although the largest sector for low pay is the retail and wholesale sector,
one quarter of all low paid workers are in public sector jobs, generally in
health, education and social work.  Many more are employed by private
contractors working for the public sector.
The report also presents evidence on the many other disadvantages faced by
low paid employees.  These include: reduced access to training
[2];insecurity at work [3];denial of rights [4] and much lower levels of
trade union representation [5].  “The emphasis on moving people from
welfare to work as the cornerstone of the anti-poverty strategy has tended
to blunt critical analysis of the quality of the jobs that are accessible
to people moving into employment”.
The report calls on the Government to launch a ‘New Deal for the Low Paid’
with the aim of ensuring that employers in both the public and private
sector take responsibility for improving the pay and conditions of low paid
jobs.  Key elements include:
● A leading role for the public sector, both as direct employer of
many low paid workers and as purchaser of services from firms who employ
many more.  The scale of public sector employment, especially in deprived
areas, will put pressure on private sector employers, who are competing for
much of the same labour, to follow suit.
● Stronger enforcement of workplace rights, to help low paid worker
who are more vulnerable to infringement of rights, but less well-placed to
take action to remedy the situation.
● The Low Pay Commission to continue on the course it set in 2003,
increasing the minimum wage faster than earnings, so helping with the
extreme end of low pay.
● The Trade Union movement as a whole raising the level of union
membership among the low paid, and ensuring that their interests are
properly promoted.
The report has been welcomed by trade unions and anti-poverty organisations.
TUC General Secretary Brendan Barber [6] said:
"This timely pamphlet identifies a problem that demands new policies and
approaches from Government, unions and employers. Low pay, low quality jobs
and low productivity workplaces are all connected, and demand a response
that combines tax credits, the minimum wage, better employment rights and a
positive role for the public sector.  As unionised workplaces tend to be
better paid workplaces than those without a union presence, unions need to
make the recruitment of low-paid workers a priority if we are to strive
towards removing all workers from a life of poverty."
Kate Green, [7] Chief Executive of the Child Poverty Action Group, said:
“Tackling low pay is fundamental to ensuring that the Government's welfare-
to-work policies achieve a reduction in family poverty.  The goals of
halving child poverty by 2010 and eliminating it by 2020 will not be
reached so long as employers are allowed to go on paying poverty wages. ”
Commenting, NPI Director and co-author of the report, Dr Peter Kenway [8]
said:
“The minimum wage and the system of tax credits were a powerful way for
Labour to launch its assault on poverty in the late 1990s but they have led
some people to believe that the problem of low pay has now been dealt
with.  Our evidence shows that this is not so.”
Co-author of the report, Catherine Howarth [9], added:
“The day-to-day experience of people in low paid jobs in this country
remains a struggle despite the minimum wage and tax credits.  A New Deal
for the Low Paid  would make a real difference to the lives of millions of
people”.

NOTES:
(1)"Why Worry Any More about the Low Paid?” by Catherine Howarth and Peter
Kenway, is published by the New Policy Institute.  For an embargoed copy,
email [log in to unmask]  Free copies for download will be available
from www.npi.org.uk.  References to the site are much appreciated.
(2)For example, only 10% of workers with no qualifications receive job-
related training in a typical three-month period, one quarter the rate for
those with a degree.
(3)For example, 40% of people making a new claim for Job Seekers’ Allowance
were last claiming the benefit less than six months previously;
(4)For example, failure to provide a written contract is far more common
amongst low paying employers in sectors with high staff turnover
(5)Among those on £6 an hour or less, barely 15% belong a to a union,
compared with more than 40% among those earning £10 to £20 an hour.
(6)Quotation via Liz Chinchen, Senior Media Officer, TUC, 020 7467 1388, or
mobile 07778 158175 or [log in to unmask])
(7)For further comment, Kate Green, CPAG Chief Executive, can be reached
via the CPAG press office (contact Ashley Riley) on 020 7812 5216 or mobile
07811 324339)
(8)For further comment or information on the report, contact Peter Kenway,
Director, New Policy Institute (020 7721 8421 or mobile 07711 068744 or
[log in to unmask]) or Catherine Howarth (mobile 07753 833827).
(9)Catherine Howarth is a Community Organiser for TELCO (The East London
Communities Organisation) and writes here in a personal capacity.

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