SOCIALIST UNITY

Despite today’s improved unemployment figures, it’s still not plain sailing for the 9.4 million low earners in work. Continued falls in employment levels, growth in long-term unemployment, expectations of a sluggish economic recovery in the private sector and a squeeze on public sector activity and employment mean that sustained improvements in the labour market remain some months away.

Low earners:

1. are concentrated in industries vulnerable to unemployment

5.0 million low earners work in the manufacturing, construction, banking and retail sectors, and 1.8 million work in public administration, health and education

2. face difficulties with job retention and progression

workers recorded as low-paid in 2000 were twice as likely as higher earners to be unemployed in 2005 and three times as likely to be economically inactive

3. have fewer safety nets to weather periods of unemployment

half of low earner benefit units have less than one month’s gross income in savings and assets

Low earners continue to be disproportionately affected by unemployment because of their high representation in those industries such as manufacturing, construction and retail where most job losses have occurred. While employment is likely to stagnate in these industries for some time, the forthcoming fiscal consolidation is likely to concentrate further job cuts in the public sector. As such, the 1.8 million low earners working in education, health and public administration, who have so far been largely protected from unemployment, could face a particularly difficult 2010-11.

Across all industries, low earners are more likely than higher earners to face unemployment because of their concentration in lower-skilled occupations: between April 2008 and February 2010, the number of JSA claimants reporting their usual occupation as elementary increased by 197,000; by contrast, the number of claimants from professional occupations increased by just 32,000.

Even during economically benign times, low earners are more likely than higher earners to face difficulties with job retention and progression. They are typically restricted by job insecurity, time constraints, transport issues, and immobility. They are also caught in a training gap: less likely than higher earners to receive training from their employer and less likely to have the private finance necessary to self-fund, but also less likely than those with the lowest levels of skills to qualify for government schemes. This range of disadvantages means that low earners who have lost their jobs during the recession are more likely than higher earners to have become long-term unemployed: in February 2010, 195,000 JSA claimants from elementary occupations had been on the count for more than six months, compared with just 17,000 from professional occupations.

Low earners are also more vulnerable to the consequences of labour market issues than higher earners. In part this is because of lower levels of savings and insurance and in part it is because of lower levels of redundancy payments among members of the group. Similarly, while reduced working hours, increases in part-time and non-standard work and wage restraint have all helped to keep unemployment at a lower level than had been expected at the start of the recession, low earners living at the edge of their means have found the consequences of underemployment difficult to handle. At the end of 2009, half a million low earner households said they were having difficulty keeping up with bills and credit commitments because of a fall in their income associated with reduced working hours.

The positive impact of swift action by the government is apparent with overall figures being lower than anticipated and lower than in previous recessions. However, given ongoing softness in the labour market, it is important that measures introduced in response to the recession designed to support those vulnerable to, or experiencing, job loss are sustained, and that medium-term work and skills policies are developed with the needs of low earners in mind. In particular, the Government should:

· Extend the Job Guarantee to all who have been unemployed for 12 months or longer in order to reduce long-term unemployment;

· Ensure that youth unemployment schemes reach non-graduates who are most vulnerable to the scarring effects of early-age unemployment;

· Continue to tackle cultural barriers in Jobcentre Plus to ensure that it is configured to help the changing profile of clients;

· Reform welfare-to-work programmes by bringing forward the enhanced skills assessment from 26 to 13 weeks, assessing employability by time out of work rather than by time on benefits and focusing provider targets;

· Make it easier to combine jobs and training, especially during a period in which people are working fewer hours - by widening eligibility of Working Tax Credit so that training as well as paid work counts for example; and

· Ensure that low earners working in the public sector do not bear the brunt of any future spending squeeze - by limiting public sector pay freezes to those workers earning more than the median salary for example.

Matthew Whittaker, Senior Economist of the Resolution Foundation, said:

“It is promising to see another fall in unemployment this month, however, we mustn’t be complacent as many low earners, especially those in the public sector, may still face unemployment over the next year. Once out of work low earners with low-level skills struggle to get back into work quickly which is why we recommend keeping them as close to the labour market as possible through extending the job guarantee scheme and bringing forward the enhanced skills assessment.”