Tackling Low Pay in London 16 October 2014
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Tackling Low Pay in London
Welcome Jo Wilson
Head of Policy, Future of London
Agenda 8.00Arrivals and refreshments 8.30Welcome – Jo Wilson 8.35Chair’s introduction – Sara Turnbull, Bootstrap Company 8.45Low pay in London & LLW overview – Jonathan Hoffman, GLA Economics 9.00Improving conditions through commissioning, using the Act – Sarah Ireland, LB Croydon
Social Value
9.15
Foundation
Alternatives to the LLW – Kathryn Ray, The Work
9.30Q&A and discussion 9.55Chair’s summing up 10.00
Coffee and networking
10.30
Close
Tackling Low Pay in London Sara Turnbull
Chief Executive, Bootstrap Company
Tackling Low Pay in London Jonathan Hoffman
Senior Economist, GLA Economics
Low Pay in London
16 October 2014 Jonathan Hoffman
Data source Annual Survey of Hours and Earnings (ASHE) 1% sample of all employee jobs from HMRC PAYE records (sample ~180,000 UK & ~26,000 London) Does not cover self-employed Used workplace basis (not residence) Longitudinal datasets also generated to enable analysis of individuals over time
What is “Low Pay”? (1) National Minimum Wage? (£6.50) London Living Wage? (£8.80) Lowest paid x% of all employees? Lowest paid x% employees in each industry?
What is “Low Pay”? (2) Definition used: “the 20th percentile of basic hourly earnings of all London workers”
or more simply: “London workers earning the lowest 20% of hourly wages (excluding overtime)” 20th percentile Hourly earnings
lowest paid
20% 80%
People ranked by pay
highest paid
What is “Low Pay”? (3) Observed hourly pay thresholds in London, including LLW and NMW Hourly pay (£) 18.00 16.00
Median pay for London workers
14.00 12.00
2/3 of median full-time pay (OECD)
10.00
20th percentile of pay 60% of median pay (EuroStat)
8.00
London Living Wage
6.00
National Minimum Wage (aged 22+)
4.00 2.00 0.00 1997
2000
2003
2006
2009
Source: ONS ASHE results (table 5, 1997 final upto provisional 2012), and the Low Pay Commission
2012
Working patterns in London (1)
Proportions of employed people by sex and time-status 60% 50%
female 46%
Male full-time
40% Female full-time 30% 20% Female part-time 10% 0%
Source: ONS ASHE 1997 final and 2012 provisional
Male part-time
male 54%
Working patterns in London (2) 20th percentile hourly earnings (exc. overtime) for London workers by sex and status 12.00
Male full-time Female full-time
10.00 All employees
8.00 Female part-time Male part-time
6.00
4.00
2.00
0.00 1997
2000
2003
Source: ONS ASHE results (table 5, 1997 final upto provisional 2012)
2006
2009
2012
The extent of “Low Pay” 266,500 (16%) of employee men in London and 340,000 (21%) of employee women in London ... earned less than the LLW in 2012 (£8.30 May 2011- Nov 2012)
Low Pay sectors Cleaning – – –
cleaning of buildings industrial cleaning dry cleaning
Hospitality & Catering –
all accommodation, food and drink service activities
Retail – – – –
all retail plus: retail & wholesale of motor vehicles rental of video tapes/disks repair of personal & household goods
Social Care –
residential care including medical nursing homes
Extent of Low Pay by sector Percentage of employee jobs that are “low paid� by sector in London 100 90
Cleaning
80
Hospitality & Catering
70 60
Retail 50
Social care
40 30 20
All other sectors
10 0
1997
2000
2003
2006
Source: ONS ASHE (all employees on all rates of pay aged 22 and over)
2009
2012
What is “persistence”? Persistence defined as: “Remaining in a low paid job in London in a specific industrial sector for at least 3 years in a 4 year period”
Four four-year periods: 1997-2000, 2001-2004, 2005-2008, 2009-2012
Complications if people: – move sectors – change pay – move location
- become self-employed - become unemployed/inactive - disappear from the survey
Persistence in Low Pay: overall Percentage of employee jobs in London that are “low paid� for at least three years (per four year period) by sector 1997-2000
2001-2004
2005-2008
16 14 12 10 8 6 4 2 0 All low pay sectors
All other sectors
Source: ONS ASHE panel dataset (all employees on all rates of pay aged 22 and over)
2009-2012
Persistence in Low Pay: by sector Percentage of employee jobs in London that are “low paid� for at least three years (per four year period) by sector 1997-2000
20
2001-2004
2005-2008
2009-2012
18 16 14 12 10 8 6 4 2 0 Retail
Social care
Hospitality and Catering
Cleaning
Source: ONS ASHE panel dataset (all employees on all rates of pay aged 22 and over)
All other sectors
Persistence in Low Pay: context Percentage of employee jobs in London that are “low paid� in each four-year period in all low-paid sectors 1997-2000
2001-2004
2005-2008
70 60 50 40 30 20 10 0 At least 1 year
At least 3 years
Source: ONS ASHE panel dataset (all employees on all rates of pay aged 22 and over)
2009-2012
Persistence in Low Pay: by age Percentage of employee jobs in London that are persistently “low paid� in each four-year period in all low-paid sectors by age group 22-29 All ages (22+)
50-59 All ages (22+)
60+
25
25
25
20
20
20
15
15
15
10
10
10
5
5
5
0
0 '97-'00 '01-'04 '05-'08 '09-'12
All ages (22+)
0 '97-'00 '01-'04 '05-'08 '09-'12
Source: ONS ASHE panel dataset (all employees on all rates of pay aged 22 and over)
'97 -'00 '01-'04 '05-'08 '09-'12
Further considerations? 43% of the growth in the number of employees in London over the last 4 years has been in temporary contracts! Rise in temporary contracts vs permanent contracts 31.5% temp. contracts on low pay vs 19.1% permanent Temporary contractors work fewer hours
London Living Wage (1) (2) Income distribution approach = £7.90
(1) Basic Living Costs approach = £7.45
An AVERAGE of (1) and (2) calculates a ‘POVERTY THRESHOLD’ WAGE = £7.65
A margin of 15 per cent is applied to the poverty threshold wage to obtain the LIVING WAGE in LONDON = £8.80
London Living Wage (2) Basic living costs approach: Take ‘LLW shopping basket’ and update using CPI components Update other costs: transport, council tax, childcare and housing costs Update tax and benefits model Calculate wage required to meet basic living costs after tax and benefits, for each household type (11 types) Apply population weightings and calculate weighted average wage
London Living Wage (3) Income distribution approach Take 60% of median disposable income (after housing costs for various household types) Using tax and benefit model calculate wage required to achieve this income for each household type Apply population weightings as before Then the average of the two weighted averages (Basic Living Costs and Income Distribution approaches) gives us the poverty threshold wage To calculate the LLW, a 15% margin is added (for unforeseen events)
London Living Wage (4) Over 400 London employers are accredited LLW employers Benefits over 19,000 employees Boroughs accredited: Brent, Camden, Ealing, Enfield, Hounslow, Islington, Lambeth, Lewisham, Southwark, Tower Hamlets
London Living Wage (5)
To conclude
“Low Pay in London�, working paper 59 www.london.gov.uk/priorities/business-economy/publications/gla-econom Jonathan Hoffman jonathan.hoffman@london.gov.uk 0207 983 4644
Tackling Low Pay in London Sarah Ireland
Director of Strategy, Commissioning, Procurement & Performance, LB Croydon
Improving pay conditions through commissioning, using the Social Value Act Sarah Ireland Director Strategy, Commissioning, Procurement & Performance
Croydon: a complex, challenging and interesting place • largest population of London Boroughs, 363,400 • Population growth higher than projected – impact on demand, particularly for housing • Young borough - Greatest number of 0-16yr olds across London • Croydon’s relative deprivation position worsened between 2004 and 2010 • The north of borough is generally more deprived than the south • 12th largest BME population in London • 12% of the population are 65+ yrs old • Significant skills gap - low proportion of highlyqualified residents / high level unqualified adults • Average weekly wages £100 pw lower than London average
Change in income support claimant rate (source: DWP)
Croydon’s income support claimant rate has overtaken the London average in the last 34 years
Income inequality (total mean annual household income) 60000 50000
Croydon wards - Total Mean Annual Household Income estimate (GLA 2012)
40000 30000 20000 10000 0 Fieldway
Croydon overall Thornton Heath Upper Norwood
Fairfield
Purley
London overall
There is very significant income inequality within the borough – the average household in the most deprived ward earns around a third of households in the lest deprived ward
The Council as a provider and employer Croydon Council arranges over 500 services to its residents and local businesses We employ over 3,000 staff (70% are residents) We spend over £1 billion annually on serving the local community By 2015 the Corporate Contract Portfolio will likely contain awarded contracts with a potential expenditure value of ~£1.2bn* Of which £393m was awarded in 13/14 and £135m are proposed for award in next 6 months. Over 1,000 organisations currently provide services on behalf of Croydon Council
Ambitious for Croydon – political commitment The Council is committed to: • raising living standards • pay all directly employed staff the London Living Wage (LLW) • wherever possible make LLW a contractual requirement for those who deliver services on behalf of the council. “The people of Croydon deserve a fair wage for a day’s work – they need to be paid enough to live comfortably in the nation’s capital where they contribute their time and skills to growing the nation’s economy.” Leader of the Council – Councillor Tony Newman
LLW in practice – Croydon as an employer All permanent staff paid LLW (This excludes apprentices, work experience placements and those in community and voluntary controlled schools) All temporary staff contracts have been reviewed to ensure that all agency staff are paid LLW. The Council has formally asked all governing bodies of community and voluntary controlled schools to consider payment of the London Living Wage, and is urging all governing bodies to make a positive decision to do so.
LLW in practice – Croydon as a contracting authority • Political commitment to make LLW a contractual obligation wherever possible • Outcome based commissioning approach that drives social value and focusses on leveraging investment in local communities and the local economy
Why is social value so important to us? • We need to get more whilst spending less • Supports localism and our communities • Supporting the voluntary and community sector • Committed to Corporate Social Responsibility • Delivering sustainable outcomes • Equality Act 2010 • Social value policy and legislation • It just makes sense!
E.g. the integrated framework agreement • Croydon’s Integrated framework agreement total value of over £80m and will provide services to some of our most vulnerable residents • brings together all community based social care services under a single arrangement to provide services which enable people to live more independently in the community • LLW formed part of the tender evaluation process • Includes contractual commitment to paying staff at least the London Living Wage
LLW and the Social Value Act • Enforcing social value requirements in commissioning can address: –
unemployment and employability
–
wage inequalities
–
average level of pay, therefore addressing in-work poverty
• Provides legislative framework to build social value in the tender evaluation process • Brings together work around economic development and procurement • Delivers quantifiable SROI – that forms part of overall contract management framework
Risks and challenges
• Equal pay considerations • Market conditions and competition • Ability of the market to absorb costs • Not pricing out small business but supporting small business to reap the rewards • Introducing in a managed way
“Divide each difficulty into as many parts as is feasible and necessary to resolve it.” Rene Descartes
Contact details Commissioning Support Team commissioning@croydon.gov.uk 020 8726 7383 Sarah Ireland, Director SCPP Sarah.ireland@croydon.gov.uk Genine Whitehorne, Head of Commissioning and Procurement Genine.whitehorne@croydon.gov.uk 020 8726 6000 (extn. 60584)
Tackling Low Pay in London Kathryn Ray
Senior Researcher, The Work Foundation
Moving on: P olicie s for pa y progre s s ion Ka thryn Ra y, The Work Founda tion Future of London s e mina r: Tac kling lo w p ay in Lo ndo n 16th Octobe r 2014, Arup, London
Ne e d to look be yond wa ge floors to de ve loping progre s s ion route s from low pa y • The share of low-paid jobs in the UK has remained at around a fifth over the last 20 years • High rates of persistent low pay – 4 in 5 do not progress • Increasing policy spotlight on progression • Universal Credit and in-work conditionality
Who e xpe rie nce s pe rs is te nt low pa y? • Personal characteristics • Women, older workers, low-skilled
• Employment characteristics • Private sector, smaller • Sectors and occupations • Part-time
• Drivers of persistent low pay • Structural changes in the labour market limit progression • Product market strategies focused on cost-minimisation
Low pa y in London • Lower rates of low pay in London, but costs higher housing, childcare, transport • 21% of londoners paid below the living wage • London can act as an ‘escalator’, but high levels of polarisation limit mobility for the least skilled • 571,000 Londoners stuck in low pay for a year or more
Loca l policy le ve rs to promote progre s s ion
Employme nt a nd s kills initia tive s • The current employment and skills system does not support progression • There is a need to develop structured career pathways within low-pay sectors • Example: Career ladder schemes
• And provide better access to training and advice • in-work support effective when targets good jobs and promotes job mobility • Careers advice based on good quality LMI targeting of low-wage workers
Ta rge te d bus ine s s s upport • Business support focused on developing and utilising skills in low-wage sectors • • • •
Advice on business strategy Incentive schemes to promote investment in skills Support for building HR capacity in SMEs Peer to peer support and business champions
• Current business support is fragmented and demand-led • Potential for cities/LEPs to play greater role in proactive, targeted business support to low-wage sectors
Curre nt opportunitie s & cha lle nge s • Career progression prioritised in London ESIF strategy, 2014-20 • Opportunities to trial new initiatives • Share learning from existing initiatives: • Plymouth and South West Peninsula City Deal – wage progression pilot • Skills Support for the Workforce and Local Response Fund • DWP Universal Credit pilots
• Limits to what can be achieved through a voluntarist approach?
Furthe r informa tion: Kathryn Ray kray@theworkfoundation.com 020 7976 3611
Rising to the Challenge: A policy agenda to tackle low pay http:// www.theworkfoundation.com/Reports/365/Rising-to-the-Challenge-A-policy-ag
Employment, pay and poverty: evidence and policy review http:// www.theworkfoundation.com/Reports/364/Employment-Pay-and-Poverty-Evide
Furtehr info: •
Re a d the re port a t: http://www.the workfounda tion.com/
•
Conta ct us a t: •
Ka thryn Ra y, The Work Founda tion, kra y@ the workfounda tion.com
•
P a ul S is s ons , Ce ntre for Ente rpris e , Economy a nd Bus ine s s Ethics , Cove ntry Unive rs ity, pa ul.s is s ons @ cove ntry.a c.uk
Thank you! Future of London www.futureoflondon.org.uk @ futureofldn Future of London
Tackling Low Pay in London 16 October 2014
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