One reason for this could be the failure of real earnings growth to keep up with minimum wage increases
There is a bigger concentration of jobs at the bottom end of the pay scale in 2015 than there was in 1997, many of them being paid close to the minimum wage. This is the finding of the Office for National Statistics (ONS), which has released new analysis of its Annual Survey of Hours and Earnings today.
The National Minimum Wage (NMW) was introduced in 1999, set at £3.50 per hour for people over 22. The rate has gradually increased over time, standing at £6.70 per hour in October 2015. The ONS says that over this period, the proportion of hours worked at or close to this rate has increased.
In 1999, around 2 per cent of hours were paid within 2 per cent of the NMW, and this has steadily increased to more than 5 per cent of hours in 2015.
Looking further back, the ONS finds that in 1997 many jobs were paying between £4 and £5 per hour, with the number of jobs being paid more than this gradually decreasing as hourly pay increased.
In 2015, by contrast, there is a large spike of jobs being paid around the £6.50 mark – (the NMW for workers aged over 21 in 2014). Above this level of pay, the distribution follows a similar pattern to that of 1997.
So why are more people being paid less? The ONS says one possible reason is that earnings growth for employees hasn’t always matched increases to the minimum wage – which have been greater than inflation in most years since its introduction.
In 2002, around 70 per cent of full-time employees saw real earnings growth (a measure that is adjusted for inflation). In 2011, following the economic downturn, this had fallen to around 35 per cent. Many full-time employees actually saw reductions in their real weekly earnings during this time.
By 2015, the trend had reversed again, with around 70 per cent of full-time employees experiencing real weekly earnings growth in the week to April.
See the ONS’s full December 2015 Economic Review here.
Ruby Stockham is a staff writer at Left Foot Forward
Leave a Reply