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Lack of job mobility traps low-paid workers in underpayment

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The Low Pay Commission publishes its 2023 Report looking at compliance and enforcement of the National Minimum Wage.

The Low Pay Commission (LPC) today publishes a report into compliance and enforcement of the National Minimum Wage (NMW). In the context of rising underpayment in recent years, we look at data on underpayment from 2012 to 2019 to explore the persistence of underpayment for individual workers.

We find that around one in three underpaid workers were still underpaid the following year. The surest way to escape underpayment remains by changing jobs; workers who remain with the same employer year-to-year are more likely to continue to be underpaid. Too many factors, however, continue to create constraints for low-paid workers who wish to exercise their mobility and challenge exploitative employers.

The report marshals evidence from employers and low-paid workers on employment conditions, the labour market and the factors which force workers to accept exploitation. Even though the labour market has tightened since the pandemic, and vacancies have scaled record levels, the obstacles to changing jobs continue to weigh heavy in the minds of low-paid workers we speak to. The prevalence of insecure work makes job moves feel risky, while insecure employment leaves workers in a position of greater dependency on their employers and creates the conditions for exploitation. This wariness about moving jobs may be exacerbating employers’ recruitment difficulties.

Bryan Sanderson, Chair of the Low Pay Commission, said:

We are entering a crucial period for the National Minimum Wage, with major decisions impending over the policy’s future trajectory. It is important to remind ourselves that the minimum wage is only truly effective in protecting living standards if it is enforced. This is a necessity not only for the employees but to ensure that the great majority of employers who are managing through difficult times are protected from unfair competition.

In addition, enforcement of one right does not exist in a vacuum, but is connected to conditions in the workplace and workers’ confidence in the labour market. A truly comprehensive strategy would go beyond enforcement to consider labour mobility and the provision of means by which employee rights can be more effectively asserted.

Aligned with the above, very few workers bring underpayment cases to the enforcement body, despite the abundant evidence and anecdote suggesting it takes place on a considerable scale. The report repeats previous recommendations for the Government on the need to better identify the scale of the problem and improve the awareness and enforcement of workers’ rights.

Later this year, the LPC will present evidence to the Government to help decide what should happen to the National Living Wage after 2024, when it is hoped the rate will reach the target of two-thirds of median earnings. This advice will include new research into worker mobility and monopsony in the UK labour market.

Read the LPC’s report.

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