The real low pay problem
Nicholas Bosanquet
A book on low pay by supporters of the Child Poverty Action Group IS not the obvious Christmas present for many readers of this journal. But we have not written a work of propaganda. Our views arise from evidence.
No phrase has done more damage to happiness in recent Years than 'the affluent society.' It has allowed politicians and informed voters to treat poverty as a 'pocket' — a small island in an ocean of well-being. But in reality a fifth of our population live in the world of the hard-pressed — a world of desperation and shame. The usual standard of poverty is the supplementary benefit allowance. Our accounting shows that at least 10.6 million people are trying to live at about this level of income — 76p per day for each married adult and 40p for each child — to cover all outgoings except rent. The rest of us are not faced with the virtual impossibility of buying a new pair of shoes. We are living under the illusion that everybody is getting a little richer all the time. But in fact the fortunes of the hard-pressed have been improving slowly if at all in recent years. Most calculations are in terms of weekly.earnings. The gains to poorer families at work were rather small between 1960 and 1973. But even these gains Would probably disappear if we Were able to measure directly the
really crucial sum annual household income. Annual income was affected by irregularity of employment. After 1966 the labour market became what it still IS — a fairly bleak place for bread-winners in poorer families. At any level of unemployment the unemployment rate of the unskilled is about 2i times the general rate for men. When the Male unemployment rate, as now, IS about 4 per cent, the unemployment rate facing unskilled men is around 10 per cent. Growing irregularity of employment affected many people among the hard-pressed. It affected families. But it also affected Pensioners, looking for part-time work. It forced more people into Permanent dependence on supplementary benefits. A policy for low pay means that Nicholas Bosanquet, formerly Industrial Relations Adviser at the Prices and Incomes Board, is now a Lecturer in Health Economics at the Kings Fund College, London.
the hard pressed would make relative gains. The first argument for it is that poverty is not an ethereal state of relative deprivation, but a cause of real human sufffering. The second part of the argument is that the alternative — not to have a policy — would lead to a growing inequality of incomes. We are personally against this. But we think it can also be argued more neutrally that a society with a growing gulf between rich and poor is likely to be an unhappy place. Growing inequality of incomes, in the absence of a policy for low pay, will arise in part from a change in the labour market. The proportion of professional and managerial workers in the labour force is rising year by year. Many of these are young — reflecting recent expansion in higher education. This new generation is taking and will continue to take in the future a growing share in national income. Growing inequality will also result from the impact of certain strongly held attitudes about pay. In practice the greatest gulf in pay and living standards is between the top 10 per cent of male salaried workers and the rest of the labour force.
But it is generally believed that the greAest gulf in pay is between the 'affluent worker' — car workers and dockers — and the rest of the community. Without a policy for low pay we are likely to see an increasingly bitter struggle for income and shares between manual and salaried employees.
Are we soft-hearted but irresponsible people advocating a policy which has a ring of justice about it, but in fact has disastrous consequences for the employment of the low paid? Many might agree in principle but argue that the side-effects would be too great. We deal carefully with the evidence on employment effects. We argue that much of it is based on a false analogy between the problem of the low pay today and that which existed before the first world war. In the earlier period many of the low paid did work in declining manufactures such as hand tailoring. But now the typical low-paid worker is to be found in a service industry such as hotels and shops. These activities are fairly profitable and often have labour shortages. Low pay reflects the broad difference in pay levels between services and manufacturing. Our conclusion .from, the
British evidence is that unaccompanied by full employment and re-training, a policy for low pay could be dangerous, But accompanied by such policies it would not. A full employment economy, in which many of the low paid are working in expanding industries, provides a novel setting.
The failure of the wages council system shows that a minimum wage legislation would be a dead one. Once the goal is agreed, the best means of helping the lower paid is through a national incomes policy. The objectives might be, over a period of three or four years to raise the hourly earnings of women from about 55 to about 75 per cent of men's hourly earnings and to ensure that no adult male worker was getting — in current terms — less than £22.50 for a forty-hour week. Such a policy for low pay is needed in addition to more help for the hardpressed through higher family allowances and pensions. Such changes are not a substitute for raising the earnings of the low paid. This is because of the large number ot hard-pressed who are in employment and because in the long run the level of social security benefits will be greatly affected by the level of pay in the least well paid jobs. If we are serious about ending the division between better .off and hardpressed, we need changes in social policy and a policy for low pay.
To deal with anxieties about the future of vulnerable workers and firms we need a Low Pay Board. This Board would have duties both towards firms and towards workers in low paid industries. To firms it would have staff to give technical and consultancy advice. It would be able to give investment help and in certain circumstances pay compensation to firms in the event of closure. For workers the Board would try to get better opportunities in training — particularly the training of less well qualified school leavers. At present thousands of young people are leaving school without a good standard of education and are going into dead end jobs.
Finally we need to reform the wages council system. It should be concerned less with pay than with giving effective protection to the lower paid on conditions of work and fringe benefits. The rationale and methods of state intervention need the basic rethinking which they have not received since 1909. The initial move here might have to be a Royal Commission or a Departmental Committee.
Worked over a period of years, these policies would do much in conjunction with the right policies for taxation, for pensions, and for family allowances to bring the hard-pressed into the wider society. The main danger is that our society will become increasingly divided between the affluent and the less well off. On one side will be the world of youth and opportunities — on the other the poor. We have already constructed one unpleasant private world for the old. A policy for low pay would do much to avert further division.
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