Time to Act on Progression

18 February 2015

The latest labour market figures from the Office for National Statistics, published this morning, show that the employment rate is now at 73.2% – the highest it has been in 30 years. Despite this, relatively low average earnings growth suggests the economic recovery is not yet improving productivity. Here, Kathryn Ray, Senior Researcher at The Work Foundation blogs about NIACE’s proposals to help people in low-paid progress:

The government has been talking about the importance of sustainable employment and progression for a number of years, but, as we have argued before, has not thus far put sufficient resource behind this agenda. Last week, NIACE published proposals for a National Advancement Service to enable people in low-paid work to build their career and boost their earnings. This is an idea whose time has surely come. There are currently no incentives for employment support providers to place people into work that pays a living wage or that offers opportunities for progression; there is limited financial support for people in low-paid work to take up training; and the National Careers Service is under-resourced and beneath the radar of people in work.

This might not be a problem if career pathways existed within the workplace for people to move easily from entry level jobs to better paid positions. But we know that in many low-wage sectors flat organisational structures predominate, while outsourcing and delayering have disrupted career ladders even in large organisations. This is reflected in the UK’s high share of low-paid jobs – at 21% of the workforce one of the highest levels in the OECD – and more importantly a high level of persistent low pay. One study found that only a fifth of low-paid workers moved into a consistently higher pay bracket over a 10-year period. In addition to causing difficulties for individuals, this is not good for the economy – both because lower wages mean lower tax revenues and because low paid jobs signal a structural problem of low-cost, low-productivity business models.

So what prevents people from progressing out of low pay and what should an advancement service seek to do? Previous research suggests that a combination of structural and individual factors are at play in hampering progression.

At the individual level, people in low-paid work may lack confidence in their abilities to take on more responsibility or to undertake training, especially if previous experiences of education have been negative. Moreover, the limited and uncertain financial rewards that might accrue from progression – particularly if this means moving into a different occupation or sector – means that trade offs may be made in favour of stability or protecting family time over increases in income. This is where careers advice and guidance has a key role to play, both in raising aspirations and in guiding individuals’ decisions by providing information about education and training options and their likely outcomes in terms of career and income. A service targeted at low-paid workers with sufficient resources for outreach is therefore a critical first step. It will be important to engage people via as many avenues as possible, and not just in the workplace where employers in low-wage sectors may well be sceptical about its value.

The second hurdle is structural or institutional factors. It is easier for people to take steps to progress if there are structured opportunities to do so within the workplace and supportive line managers. The evidence shows that people are much more likely to get stuck in low pay if they are in sectors which lack these career ladders such as retail and hospitality. There is therefore a role for strategic partners at the local level to foster the development of career ladder schemes within sectors that can clarify and strengthen progression pathways. Finally, while current skills policy is directed towards encouraging employer ownership – a necessary step to ensure a good match between skills supply and demand – there must also be a package of support (funding, guidance and flexible provision) outside of employer control to enable individuals to reskill and move across sectors to enhance their earnings prospects and to meet the changing needs of the economy.