Published: 11 Nov 2014
Executive summary
The escapers
Do low-paying jobs act as the first rung on the career ladder? Understanding for whom entry-level positions lead to higher earnings – and for whom they don’t – is crucial to improving labour market outcomes for the UK’s 5.2 million low paid employees. Previous Resolution Foundation research examined how much pay progression was occurring among all low paid employees, tracking the same group of people over time. Here, we focus primarily on those who were low paid in 2001 and remained in employment for most of the subsequent decade.
Our analysis finds that of those who were predominantly in work over the following ten years, one in four people (25 per cent) escaped from low pay. Among those who didn’t escape, the majority (64 per cent) moved onto wages above the low pay threshold – equivalent to £7.69 in 2013 – at some point but had not succeeded in earning consistently higher wages by the end of the period. A smaller group (12 per cent) remained in low pay throughout.
Progression and living standards
Escapers appear to have left low pay well behind as their wages grew by on average 7.5 per cent a year in real-terms (RPI) over the course of the decade, bringing their pay up to around the level of typical workers. Those who didn’t escape saw their wages grow half as fast, at 3.6 per cent annually after controlling for inflation. What impact do these varying trajectories have on living standards?
Our analysis finds that while the household incomes of the low paid look relatively similar at the beginning of the period, a significant gap opens up over the following decade. In households in which escapers live, incomes – unsurprisingly – increased by on average 80 per cent whereas the incomes of households of those who were regularly in work but didn’t escape increased by 11 per cent.
Understanding the escapers
What explains the pay progression experienced by the escapers but not by the others? To answer this, three datasets – British Household Panel Survey, Understanding Society and the New Earnings Survey Panel Dataset – were analysed. A series of interviews and focus groups were held with low-paid staff and managers to explore how these issues play out in the workplace.
Personal, household and attitudinal factors
Two groups potentially in need of more support and flexibility from employers in order to progress –single parents and people with disabilities – were less likely to progress, with their characteristics negatively associated with progression. The analysis highlighted that having a degree at the beginning of the period or receiving one during the following decade significantly boosted a person’s likelihood of escaping low pay. The importance of a strong work ethic and a positive attitude was regularly highlighted in the qualitative research. This was reinforced in the quantitative analysis by the finding that people who felt that the ‘future looks good’ were more likely to progress.
The employee-employer relationship
The analysis underscores that staying in regular employment is important to progress from low paid work but by no means guarantees it. Among those who are usually in work however, doing so on a part-time basis is negatively associated with escaping from low pay. The findings of our qualitative research prompt a number of explanations for this, in particular that in many firms moving into higher paid positions was only possible for those working full-time, as well as ‘softer’ factors including limited knowledge of progression opportunities and a less developed relationship with managers.
Working for a large employer (1000+ employees) is positively correlated with moving out of low pay. There may be a number of factors involved, notably that large firms are often higher paying and have more senior positions for staff to progress into.
The respondents to the qualitative research worked primarily for large employers, among whom the vast majority reported that there were progression policies in place. While staff appreciated these and those among the managers who had progressed themselves had often availed of such schemes, there was a consensus that in many firms, the policies were not implemented in an effective way. The processes were often completed with an attitude of ‘box-ticking’ by managers whose primary focus was on meeting their own sales and performance targets and had usually received little or no training on how to develop their staff.
Importantly, the data analysis found that training – with a variety of types specified in the data – did not play a significant role in improving people’s chances of progressing. This again was echoed by respondents working in retail and hospitality who made the point that training was completed once progression had been agreed upon but to find oneself in the position to move up, other hurdles had to be cleared first.
Is progression worth it?
Perhaps the most vital conceptual factor emerging from the qualitative research was the difference between pay progression and career progression i.e. being promoted into more senior positions. For most respondents, moving from an entry-level role to the next rank up resulted in a pay increase of often less than 50p per hour. Progression brings with it disruption to a settled work-life balance and the risk involved with leaving any steady job.
The pyramidal shape of the workforce means progressing further becomes more competitive the higher you rise. Taken together, the choice to remain in their current role felt like a rational one for many respondents.
Sectoral factors
Our analysis finds that, overall, working in the private sector is negatively linked to escaping compared with the public or third sectors. It also highlights how pay progression varies across industrial sectors and occupations, with remaining in the hospitality or sales roles negatively linked to escaping.
‘Progression pathways’ are often put forward as a tool to promote upward mobility but limits to that may be posed by a sector or firm’s hierarchical structure, in that a dearth of higher paid roles to progress into curtails an individual’s chances of moving up. Low-paying industries often did have a higher share of stuck employees, but a number of sub-sectors manage to combine better than average rates of employees escaping with offering many low paid roles.
Conclusion
Given one in five employees is low paid, it is unrealistic to expect every low paid employee to escape. Our findings highlight that employees can move into higher paying roles but escaping completely from low pay is more difficult. Overall, the evidence presented here suggests that employers and government do have scope to develop the progression prospects of low paid staff. While much is already being done, there are particular groups of people – part-timers, single parents, employees outside of large companies – who are not feeling the benefits.
The report argues that employers and government alike should review their policies and approaches to pay progression to ensure that this large part of the UK’s workforce is not denied the opportunity to move up in work. But the research also revealed that in many ways, progression is just one part of the wider low pay story, with small wage increases for perceived significant increases in responsibility discouraging many from moving off the first rung.