The number of workers in the UK on low-paid jobs increased by 250,000 in 2013 to 5.2 million, says the Resolution Foundation, a think tank. They define low-paid workers as those earning less than 2/3 of median hourly pay, i.e. £7.69 ($12.37) per hour or less.
While the increase is partly due to the country’s rapid growth in employment, the number of low-paid employees coming into the job market has increased again after dropping marginally last year.
The rapidly-growing number of workers entering the market on low pay is a serious problem for the government, because it keeps tax revenues low, the left-of-center think tank explained.
The UK government has increased the tax-free threshold, meaning a much higher percentage of lower-paid employees pay virtually no income tax.
British workers are more likely to be employed in lower-paying jobs compared to rival nations such as Australia, Belgium or Germany, the authors wrote.
Tens of thousands of people demonstrated in Belfast, Glasgow and London last week about austerity and low wages. A large number of civil servants, nurses and teachers were among the protesters complaining that the 1% pay-hike offer was well below inflation.
Mr. Wittaker says general wage stagnation means a growing number of workers with jobs over the last ten years no longer have guaranteed economic security.
According to the Resolution Foundation report, many low-paid workers are stuck in poverty for several years. Nearly one quarter of all employees on the minimum wage stay on that level of pay for at least five years.
The UK minimum wage is £6.50 after increasing by 19 pence at the beginning of October 2014. According to the Living Wage Foundation, a living wage for a UK citizen should be set at a £7.65 minimum (£8.80 in London).
Matthew Whittaker, chief economist at Resolution Foundation, said:
“While recent months have brought much welcome news on the number of people moving into employment, the squeeze on real earnings continues. Being low paid, and getting stuck there for years on end, creates not only immediate financial pressures, but can permanently affect people’s career prospects.”
“A growing rump of low-paid jobs also presents a financial headache for the government because it fails to boost the tax take and raises the benefits bill for working people.”
In his report – Low Paid Britain – Mr. Wittaker wrote:
“Workers in general, and low and middle earner in particular, failed to share equally in the gains from economic growth in the period before the (financial) crash. It is a trend that is in evidence in a number of advanced economies, with apparent ‘decoupling’ of productivity growth from wage growth appearing more or less established depending on the country considered.”