Autumn Statement: Retail sector too big to ignore in Government's quest to solve productivity puzzle

Britain’s 1.5 million low-paid retail workers could get better pay and progression – and the retail sector’s productivity could improve – if the Government includes the sector in its plans for an industrial strategy

A new report shows that the retail industry is too big to ignore if the country is to improve output and living standards.

The research for the independent Joseph Rowntree Foundation (JRF), written by Kitty Ussher at Tooley Street Research, examines how to raise the pay and job quality of front-line retail workers, in a way that supports both their firms and the wider economy.

It finds retail workers’ talent and potential are being underused in the workplace – for instance, almost three quarters say they have ideas which could improve the productivity of the business. The report makes 10 recommendations on how the Government, employers and industry bodies can work together to improve pay, progression and productivity.

The retail industry is the largest low pay sector in the UK. Three million people work in retail in the UK, and more than half earn less than the voluntary Living Wage. The sector produces 12% of the country’s total output.

But the likelihood of escaping low pay is 31% for low paid workers in retail, suggesting they are getting stuck in low-paid roles. They are more likely than other sectors to be in low-paid work 10 years later.

1 in 4 employees in the retail sector are likely to be stuck on low pay 10 years later

JRF says working with the retail industry to improve pay and prospects could help achieve the Government’s ambition of “making Britain work for everyone”, as well as improving business performance and overall output in the economy.

The Government should kick-start the process in the Autumn Statement by working with industry on a white paper, setting out how to improve job progression by addressing structural barriers to change within the industry, particularly for part-time workers.

The research found:

  • There is underused human potential in the low-paid retail sector: 52% of retail workers feel they are overqualified for the work they do. Nearly three-quarters (72%) feel they could see improvements in the way their business runs, but just 44% say these ideas for improvement are taken seriously.
  • The research identified two distinct cohorts working in the retail sector: those who want to work more hours and gain promotion to increase their earnings, and those who value flexibility and convenience:
  • 54% of staff said they wanted more hours to earn more money, a sentiment shared by single parents, students, people receiving tax credits. This included 57% of part-time workers, showing not all choose to worker fewer hours.
  • However, 65% agree with the statement: “I would take a job I was overqualified for, if it offered flexibility in my hours”, and more than half of part-time workers (54%) agreed that, “I’d accept a promotion if I was offered it, but only if I could keep my part-time status.” A majority of retail employees (56%) believe that people are less likely to be promoted if they work part-time.
  • Some retail workers think promotion isn’t worth it: 44% agreed that it was not worth working a lot harder for not much more pay. This sentiment increased among employees aged over 25, particularly among people aged 45 and 54.
  • Perks are valued, but cash might be better for some: 84% received staff discounts and many benefited from annual bonuses, long-service awards and free car parking, but 51% would prefer their benefits in cash, even if this was of a lesser value. The polling found a disparity in the number of full-time staff receiving annual bonuses (43%), compared to 31% of part-time workers.

The report recommends:

  1. Professionalising entry-level jobs in retail (and other low-pay sectors), possibly acting through a reinvigorated National Skills Academy for Retail. Entry-level jobs in retail should be professionalised with modular qualifications linked to progression routes that are recognised across the industry. It would raise the status of entry-level jobs, and increase the commitment of individuals to their employer, as well as giving ways for individuals to signal their commitment and skill levels in isolation to any concerns over their working hours
  2. Employers should explore redesigning jobs to combine responsibilities that were previously split between entry-level and first-tier managers, so allowing the pay at the lowest rung to rise because the contribution to the firm from entry-level individuals will have increased.
  3. Redesign these roles so they can be performed on either a full or part-time basis, depending on the individual’s preference, with parallel modular training routes of equal status for both cohorts. To ensure that neither the ‘more hours’ nor the ‘controlled hours’ groups are inadvertently discriminated against, larger firms should publish the ratio of part-time to full-time advertised vacancies for all salary bands within the organisation.
  4. ​Government should publish a white paper on spurring part-time progression route
  5. Employers should routinely ask all staff what they want from their working hours.
  6. Managers should seek to understand the relationship between an individual’s motivation at work and their wider aims for their working lives to aid the building of effective stable teams.
  7. Government and employers should work in partnership with the retail industry to improve careers advice for younger people starting out in retail.
  8. Target tax credit recipients for personalised support on how to improve their position in a way that supports the wider aims for their working lives.
  9. Explore if free pre-school childcare at the point of use for over 15 hours a week has a higher take-up than if reimbursed through the tax and benefit system.
  10. ​Employers of all sizes should offer staff a choice between perks of the job and their cash value to the company, even if this is less than the retail value. Perks should be available to both full and part-time staff.

Dave Innes, policy and research manager for economics at JRF, said:

“At a time of great pressure in the industry, many retailers are adapting and working with their employees to improve skills and progression. There are significant gains to be made if government supports this approach with industry: low pay sectors constitute about 23% of the UK economy, but account for around a third of the productivity gap with leading Western European economies.

“Industrial strategies overwhelmingly focus on high-value sectors. But for every science park in the economy, we have a retail park. If we are serious about increasing productivity and living standards for everyone, we cannot afford to ignore low-paid sectors, with the talents and potential of so many workers being underused.

“Boosting pay, progression and productivity could unlock greater growth in the economy, boost business performance and deliver much-needed improvements in the living standards for over a million low-paid retail workers.”

Kitty Ussher said:

"For years we have presumed that the policy solution to low productivity is more training. Of course it's important to have a high-skill economy, but this research shows that the barriers to raising productivity in the largest low-paid sector are different. In retail, people on the lowest rungs of pay say they are already overqualified for what they do. Instead they are unable to contribute more to their business due to structural factors; unable to show what they can do, unable to get promoted in a way that supports their working hours, and for younger people in particular, lacking the knowledge of how to get on.

"What this means is that we have an exciting opportunity to boost our economy, raise pay and support higher business performance, but that the solutions are around aligning the ambition of the workers with the needs of the business, through job redesign, part-time progression routes and supporting individuals to a greater extent on their own personal career journeys."