There is no standard definition of low pay. Commonly, it is considered as hourly rates falling within the lowest 10 per cent of earnings (the lowest decile), but this figure can vary quite widely depending on the data source used. Another way of calculating low pay is in terms of a percentage of median earnings, though again this can lead to widely varying estimates because median earnings can be calculated in different ways. The Low Pay Commission (LPC), in its first report recommending the level of the National Minimum Wage (NMW), adopted a working definition of low pay as gross earnings at or below £3.50 per hour at 1997 pay rates. There has been mounting concern at low pay in recent years, which has resulted in the establishment of the NMW. This concern has arisen because of a widening of the distribution of earnings in the UK since the 1970s and evidence of substantial and growing in-work poverty. Many low-paid workers supplement their earnings through state benefits, such as Family Credit, and there is concern at the health, social, and economic costs which are associated with a substantial pool of low-paid workers. The incidence of low pay is variable across the economy and is concentrated in certain industries and amongst certain categories of employee. The analysis of low pay by the LPC indicated that the following groups are more likely to be low paid than others: women, young people, ethnic minorities, people with disabilities, part-time workers, lone parents, temporary and seasonal workers, and homeworkers. It found that low pay occurs disproportionately in certain regions, such as the northeast, Wales, and Northern Ireland, and that it is concentrated in particular industries, with clothing and footwear, retail, hospitality, contract cleaning, agriculture, hairdressing, social care and security having particularly poor records. Low pay is also more common in small firms and companies which do not recognize trade unions. [See living wage.]
Subjects: Human Resource Management.