Media Release

Press Release: Low pay ‘trap’ and lack of skills holding back UK’s global competitiveness

Advancing the skills of low-paid workers is essential if the UK is to make work pay and remain globally competitive says the Social Market Foundation (SMF) in its new report, Making Progress: Boosting the skills and wage prospects of the low paid, released on Monday 28 April 2014.

The new SMF report highlights the fact that the number of people on low pay in the UK is high by international standards and that a large proportion of the workforce have only low-level skills. It identifies as a particular concern the one in eight workers over the age of 25 over who remain stuck in low pay for at least 12 months, representing some 2.9 million employeexs. Making Progress argues that tackling low pay is also crucial as all political parties seek to reduce the benefit bill, with tax credits going to working households currently costing the state £21 billion per year.

The SMF calls for a radical new government-backed ‘Skills for Progress’ scheme to boost the skills and wages of those stuck in low pay, decrease the amount paid out in benefits to working households and improve the poor productivity of the UK economy. The report finds that those on low pay who receive training are almost twice as likely to progress up the occupational ladder as those who do not receive training. Based on new calculations of the earnings boost that comes from training, Making Progress finds that the government would be able to spend over £2,000 on each person stuck in low paid work through a mixture of training costs and financial incentives, recouping the money through increased tax receipts and lower benefits pay out.

The ‘Skills for Progress’ scheme would:

  • Make money available directly to employers to fund skills training and qualifications for some 2.9 million workers, boosting the skills and prospects of those stuck in low pay, increasing productivity and making these individuals more valuable to UK firms.
  • Lead to higher household incomes with the take-home pay of a single adult currently on low pay increasing by £555 per year.
  • Be cost-free over the course of a parliament, with reduced benefits payments and increased tax receipts cancelling out the initial investment made by government.

Report co-author and SMF Research Director, Nigel Keohane said:

“The problem of low pay in the UK is pronounced, with one in five of all workers on low pay. Of even greater concern are the one in eight workers who remain stuck in low pay over time. The root of the problem is the UK’s poor productivity – where we languish behind countries such as the USA, Germany and France. And, we must address this head on, by advancing the skills and earnings of those stuck in low pay, whilst reducing the reliance on tax credits and benefits.”

In response to the report, Adrian Ringrose, Chief Executive of Interserve said:

“This report is a welcome addition to the critical debate about how best to tackle the challenges of low-pay by focusing on developing peoples’ skills as the key to increasing their income. With 50,000 employees in the UK Interserve is a major employer. We believe that skills must be a core part of any solution that aims to address the prevalence and persistence of low pay and the lack of progression within the UK working population. We believe that a real partnership between Government and business is the best solution to support economic growth through structuring real opportunities for the UK’s lowest paid workers.”

Notes to Editors:

  • Low pay is calculated as two thirds of the median hourly wage for the working population excluding students and those under the age of 25. The low pay threshold for this group is £7.62.
  • Making Progress will be launched at an event on Monday 28 April 2014. Details are available here.
  • This report is sponsored by Interserve and the SMF retains absolute editorial control over its outputs.
  • The Social Market Foundation (SMF) is a leading independent UK think tank which develops innovative ideas across a broad range of economic and social policy, champions policy ideas which marry markets with social justice and takes a pro-market rather than free-market approach.


Related items:

Page 1 of 1