Can employers help solve in-work poverty?

Strathclyde Business School academics Patricia Findlay and Colin Lindsay have carried out research into in-work poverty for the Rowntree Foundation and here they blog about some of their findings.

Getting a job is widely considered to be the solution to living in poverty, and often it is – but not always.  In reality, the number of people in poverty in a household where someone works has been rising, and 6.8 million people in poverty in the UK are in a ‘working family’. More than half of these people live in households where all adults work. For these households, getting a job doesn’t lift them out of poverty.  Working with the Joseph Rowntree Foundation, we set out to explore employers’ awareness, perceptions and willingness to address this challenge.

We found an interesting paradox in terms of employers’ awareness of in-work poverty.  On the one hand, most employers had very little direct knowledge of poverty as it might affect their own staff.  But when pressed, they could identify visible signals that staff might be facing financial hardship.  Yet many workers won’t disclose financial problems to their employer or to colleagues due to the stigma of in-work poverty or debt, and few employers will raise the issue, seeing it as a private matter for staff. Employers realised, however, that financial problems can affect employees’ health, wellbeing and performance at work.

Low pay is obviously the main factor explaining in-work poverty, but other factors such as working part-time or part-year, temporary rather than permanent contracts, being the sole earner in a household and having family responsibilities increase the risk of in-work poverty.

Low pay is, of course, a consequence of employers’ decisions, given that employers set pay rates. Many businesses obviously face constraints and cost pressures in pay setting, especially in highly competitive or ‘low value added’ markets and sectors. However, even in challenging contexts, some employers pay more. 

How then do we encourage more employers to address in-work poverty?  The short answer from our research is for them to know more and do more.  A crucial starting point is for employers to have better understanding of how their pay rates might deliver poverty outcomes, not least because the employers in our research didn’t want to be ‘poverty’ employers and wanted to identify more actions to address in-work poverty. Conversations around well-being, including financial well-being, can be an important starting point to a workplace discussion of poverty.

Beyond better awareness, what can employers do? Quite a lot actually, including:

• Paying at least the accredited Living Wage
• Working towards pay predictability and people having sufficient hours
• Offering benefits tailored to the needs of low-paid workers
• Providing support and advice on financial and other issues, and providing emergency financial support
• Supporting skills development and progression
• Thinking seriously about the ‘wage share’ and a fair distribution of business benefits.

There is a strong ‘business case’ for offering competitive pay – those employers who were interviewed said it reduces turnover which results in better performance, productivity and service or product quality. They also said that retaining high-performing staff meant they were able to invest in product knowledge and customer service skills, generating better customer satisfaction.

Businesses that pay at or beyond the accredited Living Wage and work seriously to eliminate in-work poverty can also enhance their reputation, attracting custom because of this ethical attitude. There is also a role for well-known (frontier) firms to adopt these practices to influence and shape behaviour within sectors and across supply chains. 

Business support organisations also have an important role to play.  Encouraging businesses to factor in decent pay and other fair work conditions at the start of any business development phase – set-up, expansion or succession – embeds fair pay in business models from the outset.

Many employers had not talked about in-work poverty at all, and feared being associated with it – making it a particularly challenging issue to research. So we need to talk about in-work poverty.  We need to destigmatise the experience of poverty, to speak out about it more, and to address the issue of eliminating in-work poverty wherever we can - especially in management learning and development provision, especially from professional bodies and business schools, and amongst business industry and representative organisations.

Low pay can trap hard-working people and their families in poverty, impacting not just their prosperity but also their health and well-being. Employers have a responsibility to ensure that working people can earn a decent living-standard and thrive. This research has shown there are many ways employers can alter their business models and practices to bring about positive change, and can benefit their business too. 

To help turn our research into positive impact, we have set out a Framework for Employer Action on In-Work Poverty in the full report.

The full report, "Influencing employers to more people break free from poverty through work" is published by the Joseph Rowntree Foundation and is available here