The growing problem of in-work poverty

Low wages and job insecurity are the hidden crises of the recession. The most recent figures show that unemployment in the UK is falling, in October it fell below 2 million people for the first time since the financial crash in 2008. This sounds like good news, a sign that the UK economy is finally recovering after bankers’ greed and irresponsibility drove it to collapse. But while David Cameron crows that falling unemployment means that the UK coalition Government’s financial plans are working, the lived experience of ordinary people tells a different story.

This week on Click on Wales This week on Click on Wales, we hear from four Welsh politicians on the biggest issues affecting employment, for better or for worse, in Wales. An assembly member from each of the parties represented in the National Assembly for Wales will offer their view, ranging from zero hours contracts and new employment practices to the impact of changing tax thresholds.

Hidden behind the official figures are stagnating wages and underemployment. Real wages have fallen by around 10% from their pre-recession peak and, for the first time, the majority of people in poverty in the UK are in work. In the 6th wealthiest country in the world, parents are having to go hungry just so their children can eat.

In Wales, 80,000 people were given emergency food aid at Trussell Trust foodbanks this year, a 124% increase on the previous year. 20% of those referrals were primarily as a result of low income.

Zero hours contracts have become emblematic of the problem of in-work poverty. Defined as contracts that offer no guaranteed minimum number of working hours to employees, zero hours contracts give employers total control over how much work each employee gets per week. They can require a worker to be available for work at all times, even if none is granted. This means someone can be essentially on-call for no pay. They also enable unethical bosses to avoid granting their staff the rights they might be entitled to, like maternity and paternity leave, sick pay, pensions and redundancy payments.

Zero hours contracts can be useful in some limited circumstances where flexibility is important, like students picking up some extra casual work. However, many on zero hours contracts feel trapped, earning too little, working too few hours and unable to find more secure work. The majority of workers on zero-hours contracts earn less than the living wage and their income can vary hugely depending on how much work is granted. Employees are left feeling powerless, having to wait round for work that might not appear or risk irritating a boss who could cut back their hours entirely and leave them with no work and no pay.

The stress of life on a zero hours contract is considerable. Workers are unable to plan ahead. Making arrangements for childcare or meeting other caring responsibilities is difficult without a regular schedule and, without minimum working hours, making enough money to pay the bills is a constant worry. No wonder one trade union calls them ‘Victorian’. They are a reversal of so many hard fought for workers’ rights.

The rise in zero hours contracts is partly a symptom of the recession 6 years ago. But evidence suggests that they may also be part of a broader long-term trend. The labour market is being polarised, with those at the top earning more and more while too many others are trapped in low paying, unskilled work with little chance for advancement. Competition for these jobs is high and with fast staff turnover, there is little incentive for employers to pay fairly or offer proper training and opportunities to progress.

However, this does not mean that we should resign ourselves to letting hardworking people live in poverty. The campaign for a fair living wage is a growing force and Plaid Cymru has made a living wage for all in Wales a key commitment for the general election. This would benefit 250,000 workers who are currently paid less than they need to get by.

But we must also make ending exploitative zero hours contracts a priority. I have been disappointed with the Welsh Government’s inaction on this issue. In March this year I put pressure on the Government to amend the Social Services and Well-being Act to stop local councils procuring care services from companies that use zero hours contracts. More than 300,000 workers in the care sector are employed on zero hours contracts, including 60% of domiciliary care workers who look after the elderly and disabled in their own homes. Carers provide an essential and undervalued service and deserve fair pay.

This was an opportunity for the Welsh Government to put Labour’s promises on ending exploitative zero hours contracts into action, but instead they voted with the Conservatives to block the amendment.

Ending the rise of zero hours contracts will not solve the growing problem of in-work poverty in the UK, but it will protect a significant number of workers who find themselves trapped in low paid work that leaves them struggling to afford basic living costs. Zero hours contracts are unfair and unethical and we must take action to stop their spread.