Businesses, local leaders and employment service providers can work together to end low pay

10th Mar 2016

We can all gain from creating a virtuous circle of higher skills, jobs progression and better pay, says Dave Innes.

More people are in work than ever before. This is good news: we know work is the best route out of poverty. But, increasingly, merely being in work isn’t enough to escape poverty. Over two million workers in the retail and hospitality sectors earn less than the Living Wage. And low-paid workers often face being trapped – only one-fifth have left low-paid work completely 10 years later. Progression into higher-paid, more productive jobs is essential to help people fully escape hardship.

It is therefore very encouraging that business leaders today sat down with local leaders and national government representatives at JRF’s Better jobs, better business conference to discuss the role they can all play to create a virtuous cycle of higher skills, jobs progression and better pay in the hospitality and retail sectors.

We all stand to gain from creating this virtuous cycle. UK productivity lags behind that of leading Western economies. Yet forthcoming IPPR research shows that improving productivity in ‘low-wage’ sectors – which include hospitality and retail – could close one-third of this gap, providing a huge boost to national prosperity.

Businesses also have a lot to gain. The NLW, due to be introduced in April, will give a welcome boost to families’ incomes. But it will also add to an already challenging climate for many businesses. The British Retail Consortium recently warned that 900,000 retail jobs could be lost over the next five years as a result of higher wages, the apprenticeship levy, online retailing and technological change.

Businesses therefore need to take job progression seriously to be successful. As Julia Unwin said at today’s conference, “The businesses that survive and thrive in this more challenging and competitive climate will be those that find ways to make the most of their people’s skills and abilities to offer more compelling services and products”.

But boosting productivity is hard for businesses to do on their own. A recent survey conducted by the Resolution Foundation found that, of the firms affected by the NLW, only 30% felt they could cope by becoming more efficient. Over one-quarter of firms planned to take lower profits, while one-fifth of service firms expecting to reduce their employee numbers.

The report JRF launched today about improving progression from low-paid jobs highlights the important role local governments can play to catalyse productivity improvements. International evidence provides three important lessons:

  • a ‘dual-customer’ approach can help low-wage workers as well as meeting the needs of their employers;
  • skills development needs to be strongly linked to progression routes; and
  • the need for a partnership approach: boosting productivity in retail and hospitality will require the combined effort of employers, local leaders and employment service providers.

Local leaders should draw on this evidence to implement policies that can make a real difference.

Speaking at the Better jobs, better business conference today, Leader of Leeds City Council Judith Blake demonstrated a commitment to work with employers to do just this, saying “We want businesses to come to Leeds, and also to invest in people and contribute to the fabric of society”.

The conference today is hopefully the beginning of a fruitful relationship between businesses, local leaders and employment service providers. By working together to boost productivity in retail and hospitality they can reduce poverty, boost national prosperity and create dynamic businesses.