Local elections 2021: Addressing low pay and inequality

By Rachel Kay | 12 May 2021

In-work poverty, insecure jobs and vast economic inequality are entrenched characteristics of the UK’s labour market. The COVID-19 pandemic has only exacerbated these problems: over the course of the pandemic, lower-paid workers and workers on atypical contracts have been more likely to be furloughed, lose hours or lose their jobs.

Low pay and insecurity are in large part a consequence of the fact that UK workers are extremely disempowered, with workers and trade unions excluded from the governance of most businesses. On a measure of democracy at work among 28 European countries, the UK scores right at the bottom end, performing better than only Latvia and Estonia in 2019.

While most policy and regulation on pay and worker voice is set by central Government and regulators at the national level, there is substantial scope for local and regional authorities to promote more responsible employment practices. Local economic strategies are especially necessary given that the pandemic has had widely divergent impacts on different parts of the UK. The role of local and regional authorities as economic actors will be essential in rebuilding local economies.

The High Pay Centre’s recently published paper outlines ten steps that local and regional government can take in order to promote fairer pay and worker voice.

The paper highlights several policy levers that subnational authorities have at their disposal. Most obviously, they are major employers, and control pay and conditions for their staff. Authorities can make a substantive difference to the lives of their staff and outsourced workers by paying them at least the real Living Wage. There is a moral argument for paying the real Living Wage: it is the amount necessary to ensure that everyday needs are met. There are economic arguments too: paying higher wages tends to result in increased retention of staff and higher productivity, and it also creates value for the local economy, as workers are able to spend more.

Subnational authorities can also impact the pay and employment practices of local businesses. Authorities have substantial ‘soft power’ in their local economies. They can exercise this by creating an employment charter setting out standards that local businesses can sign up to. Such a charter should include minimum standards such as paying the real Living Wage, providing secure employment and ensuring trade union recognition.

The standards set out in the employment charter can then be embedded into activities where the authority has more direct control over external employment practices. In this respect, a major strategic lever for local and regional authorities is their procurement policy, as they can use this to require suppliers to adhere to the standards set out in the charter.

Another lever is available when authorities take on the role of property owner and developer. For example, when authorities are renting out space in a property to businesses, they can use this position to ensure that those businesses meet the charter’s standards.

Of course, it is important to acknowledge the barriers that subnational authorities face in their efforts to effect change. The most substantial is the severe funding cuts local authorities have experienced over the last decade. On top of this, COVID-19 has subjected authorities to further losses of income and increased expenditures. Funding cuts also create challenges around enforcement, as authorities struggle to ensure that employers are meeting the legal minimum for employment standards, let alone the higher standards that they may be trying to promote.

While the challenges facing local and regional authorities should not be played down, several authorities have found ways to overcome or mitigate them: for example, 125 subnational government bodies are now Living Wage accredited. Authorities should build relationships with one another in order to share resources and good practices, and should prioritise fairer pay and worker voice in their overarching strategy.

Last week’s elections came at a critical point for shaping post-pandemic local economies. The Government has placed regional inequality high up on its list of issues to tackle, and has committed £4.8bn to its Levelling Up fund for local infrastructure. However, if this investment simply goes to multinational companies, whilst workers remain poorly paid, insecure and disempowered, then ordinary people and local economies will see very few benefits. In order to truly bring about ‘levelling up’, workers must be allowed to share in the wealth they have helped to create. Newly-elected local and regional politicians must work to make this a reality.

Rachel Kay is a researcher at the High Pay Centre

@HighPayCentre

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