The Low Pay Commission’s (LPC) report for 2023 sheds light on an issue that has long been simmering under the surface but rarely spoken of with the urgency it deserves—underpayment in the context of the National Minimum Wage (NMW). As job vacancies reach record levels, one might assume that workers have ample opportunities to escape underpaid positions. But the LPC’s data tells a different story.
According to the commission’s extensive research, approximately one-third of workers who were underpaid last year are still trapped in underpayment this year. What’s more intriguing—or perhaps unsettling—is that the most effective escape route from underpayment appears to be switching jobs. And yet, factors too numerous to ignore continue to prevent low-paid workers from exercising this seemingly straightforward option.
In an era where employment conditions are under the microscope more than ever, the labor market has indeed tightened since the onset of the COVID-19 pandemic. Employers are finding it challenging to fill job vacancies, but that’s not translating to upward mobility for low-paid workers. One reason? The increasing prevalence of insecure work.
Insecure employment situations make job-hopping a risky proposition. The conditions create a climate where workers are more reliant on their current employers, exacerbating their fears about changing jobs. This reluctance serves a double blow: it doesn’t just lock workers into underpayment but also compounds the recruitment challenges that employers are already facing.
Bryan Sanderson, Chair of the Low Pay Commission, highlights the need for rigorous enforcement of the National Minimum Wage. He rightly points out that such enforcement benefits not just the workers, but also employers who are doing the right thing, as it protects them from unfair competition. Sanderson underscores that merely enforcing the minimum wage isn’t sufficient. A comprehensive strategy must also consider facilitating labor mobility and providing avenues for workers to assert their rights more effectively.
Interestingly, despite plenty of evidence, very few underpayment cases ever reach the enforcement bodies. This suggests a systemic lack of awareness and an urgent need for a robust enforcement strategy that goes beyond mere regulations.
It is worth mentioning that the LPC report uses data from the Office for National Statistics’ (ONS) Annual Survey of Hours and Earnings (ASHE) and Labour Force Survey (LFS) to present a well-rounded view. According to ASHE, the number of workers underpaid less than their entitled National Minimum Wage fell from 428,000 in April 2019 to 334,000 in April 2022. However, the percentage of workers paid within 5 pence of their NMW rate has remained stable.
As the Low Pay Commission prepares to offer recommendations on the future trajectory of the National Living Wage beyond 2024, it is essential for all stakeholders to consider how to create a labor market that allows for equitable growth, mobility, and, most importantly, the elimination of underpayment.
The Workers Union Says…
“The issue of underpayment in the context of National Minimum Wage cannot be taken lightly. A multi-dimensional approach that looks beyond mere enforcement is essential to untangle the complex web of obstacles that keep low-paid workers trapped in a cycle of underpayment.”