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UK must invest in its low paid, low skilled workers

Workers’ low pay and lack of skills are holding back UK’s global competitiveness, an independent think tank has claimed. It says advancing the skills of low-paid workers is essential if the UK is to make work pay and remain globally competitive, a new report from an independent think-tank claims.

Its report, Making Progress: Boosting the skills and wage prospects of the low paid, released yesterday (Monday (28 April) identifies as a particular concern the one in eight workers over the age of 25 over who remain stuck in low pay* for at least 12 months, representing some 2.9 million employees, and argues that tackling low pay is also crucial as all political parties seek to reduce the benefit bill, with tax credits going to working households currently costing the state £21 billion per year.

The new report from independent UK think tank Social Market Foundation (SMF), and sponsored by Interserve the facilities management and construction firm, calls for a radical new government-backed ‘Skills for Progress’ scheme to boost the skills and wages of those stuck in low pay, decrease the amount paid out in benefits to working households and improve the poor productivity of the UK economy.

The suggested ‘Skills for Progress’ scheme would:

  • Make money available directly to employers to fund skills training and qualifications for some 2.9 million workers, boosting the skills and prospects of those stuck in low pay, increasing productivity and making these individuals more valuable to UK firms.
  • Lead to higher household incomes with the take-home pay of a single adult currently on low pay increasing by £555 per year.
  • Be cost-free over the course of a parliament, with reduced benefits payments and increased tax receipts cancelling out the initial investment made by government. 

The report found that those on low pay who receive training are almost twice as likely to progress up the occupational ladder as those who do not receive training. Based on new calculations of the earnings boost that comes from training, Making Progress finds that the government would be able to spend over £2,000 on each person stuck in low paid work through a mixture of training costs and financial incentives, recouping the money through increased tax receipts and lower benefits pay out.

Report co-author and SMF research director, Nigel Keohane, said:

“The problem of low pay in the UK is pronounced, with one in five of all workers on low pay. Of even greater concern are the one in eight workers who remain stuck in low pay over time. The root of the problem is the UK’s poor productivity – where we languish behind countries such as the USA, Germany and France. And, we must address this head on, by advancing the skills and earnings of those stuck in low pay, whilst reducing the reliance on tax credits and benefits.”

In response to the report, Adrian Ringrose, Chief Executive of Interserve, which employees 50,000 people in the UK, said:

“This report is a welcome addition to the critical debate about how best to tackle the challenges of low-pay by focusing on developing peoples’ skills as the key to increasing their income. We believe that skills must be a core part of any solution that aims to address the prevalence and persistence of low pay and the lack of progression within the UK working population.”

 

 

*Low pay is calculated as two thirds of the median hourly wage for the working population excluding students and those under the age of 25. The low pay threshold for this group is £7.62.

 

 

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