How employers can reduce poverty among their workforce

30th Apr 2014

Employers have an important part to play in reducing the UK’s huge problem with in-work poverty - and zero-hours contracts are only part of that problem.

Employers have an important part to play in reducing the UK’s huge problem with in-work poverty, says Katie Schmuecker – and zero-hours contracts are only part of that problem.

There are 1.4m jobs being done by people on zero-hours contacts, according to new figures published today by the ONS. This means a fairly sizable chunk of the workforce has a job, but won’t necessarily be offered any hours by their employer from one week to the next. Perhaps it is not surprising that zero-hours contracts have become the poster-boy for bad employment practice in 21st century Britain.

But as the debate about an appropriate response to this particular problem steps up a gear, there is a risk that we fail to see the wood for the trees. As pernicious as the insecurity brought by zero-hours contracts can be for some workers, they are but one part of the UK’s much bigger problem with in-work poverty.

More than half of the 13 million people experiencing poverty in the UK live in a household where at least one person is working. This gives an indication of the scale of the problem. And it is not a problem that can be solved by pushing up the minimum wage and regulating the use of zero-hours contracts alone. Neither is it a task that government can tackle alone: employers also have an important part to play.

New research from JRF today examines how employers can help to tackle working poverty. It takes paying the Living Wage as a given, and asks what other employment and management practices might help to address poverty. Written by the Jobs Economist John Philpott, importantly it also asks what the business case is for employers implementing different practices.

The report looks across human resources management and development practices such as structured recruitment, training, performance management, flexible working and fringe benefits, such as help with travel and childcare costs or access to a staff discount scheme. It finds that – when delivered well – these practices can help employees progress to a better job, reduce the stress of balancing work and home life, and help reduce the cost of living. For employers they can boost productivity, employee motivation and loyalty. They can also reduce staff turnover costs and absenteeism.

So far sounds like a win-win situation.

But there are three caveats.

First, getting the desired outcome relies on practices being delivered by good-quality managers, an area where the UK falls short compared to other competitor countries.

Second, they seem to work better when employees are involved in decision making, for example through trades unions or staff councils.

Third, and most challenging, is the large number of British businesses operating perfectly profitably competing on the basis of low-cost and low-quality products and services. So long as these companies have no difficulty hiring people into low-paid, low-skilled jobs that require little by way of formal skills, and where job-related skills can be acquired relatively quickly and cheaply, there is little incentive for them to change.

Many employers are only vaguely aware – if at all – of the problem of poverty among their workforce, and much can be achieved by working with employers to raise awareness and improve business practice in ways that are good both for the employer and the employee. We cannot simply focus on zero hours contracts as a symbol of what is wrong with the labour market. Rather we need employer aspiration to translate into demand for a more skilled workforce, changing the nature of work at the bottom end of the labour market.

Until that happens we stand little chance of making serious headway with tackling in-work poverty.