Download New Economy Research, Strategy, Policy and Evaluation

Low pay in the UK:
Lessons from research findings
Damian Grimshaw
Manchester Business School
Director EWERC www.research.mbs.ac.uk/ewerc
A longstanding problem
60%
50%
40%
30%
20%
Share of low-wage work
10%
0%
A longstanding problem
60%
£28,000
£26,000
GDP per capita
40%
£24,000
£22,000
£20,000
30%
£18,000
20%
£16,000
Share of low-wage work
£14,000
10%
£12,000
0%
£10,000
GDP per capita (chained volume measure)
50%
A longstanding problem
60%
£28,000
Union density
£26,000
GDP per capita
40%
£24,000
£22,000
£20,000
30%
£18,000
20%
£16,000
Share of low-wage work
£14,000
GDP per capita (chained volume measure)
50%
10%
£12,000
0%
£10,000
‘It takes drastic shifts in policy to create meaningful changes in [the incidence of low
wage work]; Thatcher certainly acted more drastically than Blair did’ (Solow 2008: 13)
And an outlier in Europe
25%
2002
2012
20%
15%
10%
5%
0%
OECD database (full-timers only); France from Eurostat
Is low productivity the main cause of
low pay?
The
worker?
• What abilities?
Education? Motivation?
• Youth –transitioning to
better jobs?
• Bargaining position –fair
reward for skills &
experience?
• Gender –unequal division
of caring responsiblities?
Is low productivity the main cause of
low pay?
The
worker?
• What abilities?
Education? Motivation?
• Youth –transitioning to
better jobs?
• Bargaining position –fair
reward for skills &
experience?
• Gender –unequal division
of caring responsiblities?
The
job?
• Skill requirements?
• Capacity for learning?
• Regular upgrading with
technology?
• Job design –what bundles
of tasks?
• Job value –gender bias?
Employers exercise ‘constrained discretion’ in
how they organise low-level jobs
• Low average productivity in UK induces many employers
to design production around low technology/ low quality
products & services
• But responses vary… Research reveals a major difference
in the value employers place on the continuity and
productivity of their workforces
Employers exercise ‘constrained discretion’ in
how they organise low-level jobs
• Low average productivity in UK induces many employers
to design production around low technology/ low quality
products & services
• But responses vary… Research reveals a major difference
in the value employers place on the continuity and
productivity of their workforces
Casual labour
Asset labour
-Interchangeable parts
-No business advantage
in investment or
continuity
Workers’ value recognised
& enhanced by job design,
skill development &
attachment to
organisation
Specific conditions impose constraints on, and open up positive
opportunities for, employer discretion
Specific conditions impose constraints on, and open up positive
opportunities for, employer discretion
Dominant customer effect? …evidence from a
study of Local Authority procurement of Elderly Care
We divided local authorities by type of procurement
practice:
i. Level of fees paid (low, medium, high)
ii. Partnership orientation towards care providers
(e.g. quality uplifts, long-term relations)
iii. % of service users who were LA funded
We estimated the quality of HR practices among care
providers:
•
Six indicators (pay level, pay strategy, employee
development, recruitment & retention, working time, work
organisation)
Dominant customer effect?
 quality of pay practices show significant differences
between providers classified by fee level
Dominant customer effect?
… but controlling for other factors suggests an additional pound
in unit fees only delivers an extra 18 pence in basic hourly pay
Minimum wage effect? Can a rising MW be a catalyst
to better pay and productivity?
Can it ‘shock’ employers into adopting a high road, quality-based
product market approach?
• Longstanding inertia of low-skill, low pay, low cost production system
• External shock incentivises employers to invest in technology, worker training,
value-added product market strategy
• Part of the LPC’s early thinking (eg 1998 report)
But empirical evidence in the UK is limited –Why?
• The level is too low?
• Other market & regulatory conditions offset its positive effect (e.g. cost
competition; SME obstacles to training investment) –vicious circle of
constraints
• Time to design and introduce a set of ‘beneficial constraints’ (Streeck) –but
what?
Minimum wage effect? The problem of an isolated
regulatory instrument
30%
2003
2008
2012
Percentage of employees
25%
20%
15%
10%
5%
0%
Women
Men
Paid MW plus 10%
Women
Men
Paid MW plus 20%
Women
Men
Paid MW plus 30%
Increasing clustering of workers, especially women, in narrow
‘minimum wage job contours’ …. But why?
Minimum wage effect?
European comparative research points to the need for
complementary pay practices and institutions
1) Some pay structures achieve ‘long-reaching ripple
effects’, so that raising bottom rates of pay ripples
through higher grades
• Collective bargaining
• Better designed HR pay practices
Minimum wage effect?
European comparative research points to the need for
complementary pay practices and institutions
1) Some pay structures achieve ‘long-reaching ripple
effects’, so that raising bottom rates of pay ripples
through higher grades
• Collective bargaining
• Better designed HR pay practices
2) Others focus on ‘baseline ripple effects’ to
ensure a premium over the minimum wage
• Typical among employers not wishing to be seen as
a ‘minimum wage employer’
• Reflects outcomes of many living wage practices
• High risk of squeezed pay differentials above the
new baseline
New employer norms?
• Marketisation and financialisation pressure all
organisations for rapid responses to fastchanging circumstances
 Strong rise in flexibility in contracts, hours and wages
 Many employers minimise their responsibilities, shift to non
standard contracts, reduce cost overheads, etc
 Produces too many precarious jobs (& shifts too many
responsibilities to the state –tax credits, compliance
inspectorates, etc.)
New employer norms? The evolving
character of Britain’s ultra-flexibility ….
Cost
Control
C-Flexibility
Flexibility bites back?
Commodification
Rubery, Grimshaw, Keizer (2015)
Compliance
Lessons for employers & for policy
• Supply chain effects
• Raising fees for low-wage services is a necessary but not
sufficient condition for improving job quality –Can trade
unions provide the needed leverage (e.g. living wage)?
• Limits of Minimum Wage policy
• Employers need to value their jobs carefully, not over-rely on
the minimum wage as the going rate –What can be done to
improve job design & pay policy? (e.g. higher pay for multifunctional contract cleaning jobs)
• C-Flexibility
• Need to move away from disposable, cost-minimising
approach to a win-win functional flexibility –Is it the moment
for a new partnership/stakeholder approach for Greater
Manchester?