Tackling low pay means tackling its root causes

By Ben Willmott - Head of Public Policy, CIPD, @Ben_Willmott

New proposals to raise the value of the National Minimum Wage (NMW) announced today rightly highlight the importance of tackling the underlying causes of low pay.

The proposals, included in Alan Buckle’s independent review of low pay for the Labour Party, set out plans to ensure the NMW increases faster than median earnings for the duration of the next Parliament, to boost the value of the NMW relative to the value of median wages. 

 To ensure that increases to the NMW are sustainable, Buckle recommends that such a target must go hand in hand with a long-term strategy to tackle low pay and build an economy with fewer low skill, low paid jobs and more high skill and high paid jobs. This is something the CIPD has long been advocating. In our view, when considering how to tackle low pay, it is crucial there is a better understanding of the structural causes of low pay and low productivity in the UK.

 In all, 22% of jobs in the UK require no more than compulsory-level schooling, the second highest level in the OECD, compared to 5% or less in countries like Germany, Japan and Sweden. We also have the second highest level of over-qualification in the OECD, meaning too many people are not able to put the skills they do have to productive use. Not surprisingly the UK’s productivity levels compare badly in relation to our key international competitors.

 Recent CIPD research Industrial strategy and the future of skills policy finds that one of the reasons for these failings is that skills policy under this government and previous administrations has focused almost exclusively on boosting the supply of skills, while neglecting the need to stimulate greater employer demand for investment in skills and to support effective skills utilisation. Put simply we have too many low road employers in the UK, competing on low cost and not enough who are building competitive advantage through enhanced leadership and management capability, effective work organisation, job design and smart learning and development interventions.

 It is only by tackling these issues that we will be able to deliver real, sustainable increases in people’s wages.

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