One in five UK employees were on low pay last year

New report finds proportion of employees on the minimum wage has been rising steadily over past 15 years


The Resolution Foundation has today released its fifth annual report on the prevalence of low pay in Britain, coinciding with the Conservative party conference.

The think tank defines low pay as gross hourly earnings (excluding overtime) below two-thirds of the median, equivalent to £7.67 an hour in April 2014. It finds that in April 2014:

  • One-in-five UK employees (21 per cent, or 5.5 million individuals) were low paid.
  • Extreme low pay affected 2 per cent of employees – likely to be young people and apprentices as well as some possible minimum wage non-compliance. This reflects the fact that the threshold for young people falls below the adult minimum wage.
  • More than one-in-five employees (22 per cent, or 5.7 million individuals) were paid less than the Living Wage. This is an increase from 20 per cent in 2013.
  • One-in-twenty employees (5 per cent, or 1.4 million individuals) were on the minimum wage. This proportion has been increasing steadily since the early 2000s.
  • Across all measures, those most likely to be low paid include women, the young, part-time and temporary employees, those in lower-skilled occupations, and those employed in the hospitality, retail and care sectors. 26 per cent of female employees earned below the main threshold in 2014, compared with 17 per cent of male workers.
  • There are significant regional variations. In London, just one-in-eight (12 per cent) workers earned less than two-thirds of national median hourly pay in April 2014 in London, compared with one-in-four in many other parts of the country. This includes the East Midlands (26 per cent) and the West Midlands, Wales and Yorkshire and the Humber (all on 25 per cent).

The Resolution Foundation has been largely positive about the impact of George Osborne’s new ‘National Living Wage’ (NLW), which will come into effect in April 2014:

“Roughly 1.9 million employees will receive a pay rise in April 2016 as a result of its introduction, either as a direct consequence of having their pay lifted to the new wage floor, or because of the ‘spillover’ effects associated with employers raising the pay of those just above the NLW in order to maintain differentials between staff.”

However, the report also acknowledges that the NLW will lead to significant ‘bunching’ of pay distribution. It explains that after the introduction of the minimum wage in 1999, the share of employees paid only the age-specific wage was just one-in-50.

By 2014, around one-in-20 were on the wage floor.

The report predicts that by 2020 the NLW will mean that one-in-nine will be paid at or only just above the legal minimum. It recommends that employers provide personal progression opportunities to help people get beyond the wage floor.

It also concludes that living standards will only truly improve with a combination of real wage growth for all (underpinned by productivity growth), employment levels, and changes in welfare support.

Ruby Stockham is a staff writer at Left Foot Forward

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