Poverty wages don’t add up to good business strategy

In-work poverty is not new, but in years past, the link between unemployment and extreme financial hardship was far stronger than it is today.

Continuing job losses as the furlough programme starts winding down will undoubtedly tip more people over the edge of “just about making it”, but the problem was getting worse even before the pandemic. According to new findings from the Institute for Public Policy Research (IPPR), the average working person is now 32 per cent more likely to be living in poverty than in 1996.

Different types of households have been affected in different ways. Single parent households have seen the most drastic rise, from 20% in 2010 to 40% in 2020. Households with only one working adult have also seen a sharp rise, from 19% in 2004 to 31% in 2020.

Many factors have contributed to this but the IPPR found the three biggest to be rising housing costs, low wages and the high cost of childcare.

For many families the cost of renting in the private sector has increased exponentially, meaning that both parents must be earning to stay afloat. Add in the lack of affordable and flexible childcare and it’s easy to see why many in low-income employment have struggled to keep up.

The IPPR argues that although “work still pays”, minimum wage incomes offer little protection from falling into poverty. Unless action is taken, the IPPR warns that in-work poverty will continue to rise.

The omission of the Employment Bill from the Queen’s Speech signals a further delay in any moves to strengthen the rights of low-paid workers. Government focus in the wake of the pandemic has been on keeping unemployment at a minimum, but this will do nothing to stem poverty if the quality and security of the work on offer is poor.

Organisations that have consciously created business models that rely on poverty wages and zero-hours contracts are unlikely to be shamed into contrition, and probably won’t act until forced to do so. However, there is much that principled employers can do without government intervention.

Those who can afford to pay the real living wage should do so, and those that can’t should find other ways to help low-income staff manage their finances.

The moral case for eradicating poverty wages is clear, but supporting financial wellbeing also brings business benefits, as worries over money and debt have a negative impact on performance. Paying decent wages is not a luxury, but rather a sound business investment.

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