Raising the benchmark

Key findings
  • Public services employ one million low wage workers: double previous estimates
  • 1 in 4 local authority workers are on low pay, a similar figure to those employed in the private sector
  • Ending the public sector pay freeze and adopting the living wage would have economic benefits for the entire country

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Photo credit:   Fotos GOVBA

December 9, 2013 // Written by:

Helen Kersley, Head of Valuing What Matters
Faiza Shaheen, Senior Researcher, Economic Inequality
Jacob Mohun Himmelweit, Researcher
Olivier Vardakoulias, Economist, nef consulting

Britain is experiencing a growing problem of low and falling pay and precarious employment conditions among ordinary workers. These issues cut across sectors including public services. More evidence reveals that reducing the value of wages for middle and lower income earners means greater economic and social fragility. Action to tackle these trends is therefore not only essential but increasingly unavoidable. This report proposes that nothing short of an inclusive set of policies capable of guiding the labour market is required; and that the public sector offers fertile ground for starting, and in some cases reinvigorating, a movement for progressive labour practices.

The interconnected problems of low-pay and constrained living standards in the UK are well-documented and becoming a feature of public and political discourse. Public service employees, along with many other workers in the economy, face an unprecedented squeeze on their living standards and are struggling to be heard in the tide towards budget cuts and labour market ‘flexibility’.

The trend towards low and falling pay clearly presents challenges for individuals and their families. It also however presents a broader, sustained problem for society which will not be resolved by flickers of economic growth seen in recent economic indicators. Growing evidence of feedback loops through the economy mean that we have better knowledge of the extent to which depressed wages, lack of confidence and worsening inequality dampen the motors of economic activity and economic and fiscal stability which in turn generate further weaknesses in employment, pay and performance. And even if the current strategy for greater labour market flexibility and fiscal restraint did generate economic gains the social protections that are being lost to society risk storing up costs for the future.

There is a growing debate about the challenges of low and falling pay, and job insecurity. The debate has most recently recognised the phenomenon of zero-hour contracts, officially estimated at around 250,000 workers, but with others putting it much higher at up to one million.1

Research carried out by the New Economics Foundation for UNISON shows why and how the public sector can lead a shift to progressive employment practices for all public service workers and public sector supply chains. And there is also the prospect not only of benefiting around one million low paid public service employees, but catalysing a wider progressive labour market movement.

Historically public service employment has played a progressive role, with fairer pay distribution, solidaristic wage bargaining and a track record in progressing gender equality providing an important benchmark for the wider labour market. But now, benchmarking of pay to unregulated norms of wage-cutting in the worst parts of the private sector has embedded a race to the bottom for millions of workers, including in vital public services. As a result nothing less than a counter-cultural response is needed to raise the benchmark to a better standard.

Six key recommendations for public sector action flow from the research:

  1. Active support at all levels of government to ensure the living wage is paid by employers across public service supply chains, directly benefiting 1 million public service workers today.
  2. Government to lift the pay cap, which has resulted in pay in public services falling by more than £2000 a year on average in real terms since 2010.
  3. Policy action by government to establish robust fair wage resolutions determining benchmarks for employment conditions across public service supply chains.
  4. Active support by government for collective bargaining of pay and employment standards throughout public service organisations and businesses.
  5. Action by policy-makers, commissioners and employers to scrap zero-hours contracts in key sectors such as social care.
  6. Implementation of new indicators, such as mandatory reporting of top, middle and bottom pay by employers across public service supply chains.

Public Service Reform, Jobs & Industrial Strategy

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