Low-paid workers at greatest risk of redundancy

Employment rates in hospitality have risen but this should not be cause for complacency

Low-paid workers are at greatest risk of losing their jobs when the government’s furlough scheme closes, according to analysis by the Resolution Foundation.

The think-tank’s annual Low Pay Britain report has found that low-paid workers have borne the brunt of the Covid crisis, being three times more likely than higher paid workers to experience a negative impact on their work.

It found that in March 2021, 21% of workers in the bottom pay quintile had either lost their job, were doing fewer hours or had been furloughed. Just seven percent of higher paid workers in the top earning quintile fell into these groups.

The Resolution Foundation added that, while a rising national living wage has had a positive impact on pay levels, job quality for low-paid workers was unlikely to improve and could worsen if unemployment was to rise after September when the furlough scheme ends.

That said, the report noted that many low-paid workers were employed in the hospitality and retail sectors, whose businesses had recently reopened and were even reporting shortages of staff.

Figures from the Office for National Statistics show that rates of full or partial furloughing in hospitality fell from 58% at the end of March to 48% at the end of April.

Employees in retail, hospitality and leisure – the three largest low-paying sectors of the economy – accounted for more than half (55%) of the 880,000 drop in furloughed workers during April.

Overall, furlough numbers have dropped by a third since January, according to the ONS.

The Resolution Foundation also found that previously furloughed workers in retail had been relatively more likely to find new jobs in other sectors, while 44% were back in work in their previous role.

One in five low-paid workers has an insecure job, according to the think-tank, which it defines as a zero-hours contract, working on a temporary contract involuntarily or working fewer hours than desired. This compared with just 6% of higher-paid workers, it added.

The report’s authors said the summer period would be “positive” for lower-paid workers as employment rose but they also warned of “major risks ahead”.

“The most obvious of those risks is that new variants delay – or even reverse – the path of relaxing social distancing restrictions,” the report said.

“But there are further risks beyond a deterioration in the path of the pandemic. The first is of rising unemployment later in the year. The second is that there is no improvement in – or even a deterioration in – their quality of work, and the extent to which the low paid experience violations of labour market rights.”

The think-tank urged policymakers to make the withdrawal of furlough support contingent on the state of employment recovery and to deliver effective employment support programmes to support those out of work.

It also recommended the government makes the £20 top-up it provides to benefits claimants during the pandemic permanent (it is due to end in September), as this would help to stimulate recovery.

Other recommendations included tougher enforcement and higher fines for minimum wage breaches through a Single Enforcement Body and that an Employment Bill introduces a right to regular hours and minimum notice if shifts change.

Both policies had been discussed as potential legislative changes, but the timetable for the Employment Bill is still unclear.

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