UK needs higher standards for low-paid workers, says think-tank

The UK should set higher standards for low-paid jobs alongside further increases in the minimum wage to match the protections extended to workers by international peers, according to an influential think-tank.

In a report published on Wednesday, the Resolution Foundation said that even though Britain had one of the highest minimum wages in the rich world, it lagged behind similar economies on standards for the quality of work.

Among its proposals — which come as chancellor Jeremy Hunt seeks to boost the size of the workforce — were making sick pay much more generous; giving employees more certainty over their hours and shift patterns; offering earlier protection against unfair dismissal; and raising the floor for parental pay and minimum holiday entitlements.

These reforms would raise the cost of labour, potentially leading to higher consumer prices — especially in sectors such as hospitality and leisure, which tend to employ people on low incomes and sell to higher earners.

“Better jobs for some will mean higher prices for others,” said Nye Cominetti, Resolution Foundation senior economist, adding that there was no need to panic if rises led to shifts in patterns of production. He cited the relative cheapness of hotels and restaurants in the UK compared with Europe, noting that their share of overall consumption in the UK was therefore higher.

Cominetti added that the reforms would not impair labour market flexibility because they would not have a big effect on companies’ decision to hire and fire.

In its annual report on low-paid work, the foundation said the UK was on course to eliminate hourly low pay — defined as pay below 60 per cent of the median — by the mid-2020s, and had so far not experienced a significant loss of jobs as a result.

But the country has one of the least generous systems of statutory sick pay in the rich world. Mandatory sickness benefit for a UK private sector worker taking four weeks’ absence is worth just 11 per cent of average earnings, compared with an OECD average of 64 per cent, the Resolution Foundation said.

Statutory maternity pay in the UK is also much lower than the OECD average, and in 2011 the government extended from one to two years the period employees have to work in a new job before qualifying for protection against unfair dismissal. This lack of protection mainly affects lower earners: more than five in 10 people with salaries below £20,000 expect to receive only the statutory minimum if they fall sick, compared with one in 10 people on more than £50,000, according to the report.

Higher earners are also much more likely to benefit from employer schemes for maternity pay, which are considerably more generous than the statutory minimum.

The think-tank warned that if employers looked for ways to cut costs in order to accommodate future rises in the minimum wage, these standards risked falling further. It also argued that the government should expand the remit of the independent Low Pay Commission, which advises ministers on minimum wage policy, to look at raising pay alongside other employment standards.

A spokesperson for the Department for Work and Pensions said the government was “committed to making sure work pays and to further improving workers’ rights”, and was therefore supporting six private members’ bills to enhance workers’ rights. 

The government last year shelved plans to introduce its own employment bill.