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Low paid workers at biggest risk of losing jobs when furlough ends

Emma Lunn
Written By:
Emma Lunn

Staff earning the least bore the brunt of the Covid crisis and are most likely to become unemployed when the Coronavirus Jobs Retention Scheme ends, according to the Resolution Foundation.

The think tank’s Low Pay Britain report looks at the impact of the Covid-19 crisis on those on low pay and what that might mean for such workers as the economy starts to recover.

It found that workers in lower paid jobs have faced greater health and economic risks than high paid workers during the pandemic. These workers are also more at risk of unemployment, decreasing job security and infringements of labour market rights.

The Resolution Foundation found that a rising minimum wage has driven down low pay. It said the run up to the crisis was a positive one for low paid workers, with a fast-rising minimum wage improving the pay of the lowest earners.

However, low paid workers have been three times as likely as higher paid workers to experience a negative impact on their work due to the pandemic. In March 2021, more than one in five (21%) workers in the bottom weekly pay quintile had either lost their job or lost hours and pay due to the crisis, or were furloughed, compared to less than one in 10 (7%) of those in the top earnings quintile.

But the report also found there are reasons for positivity as the economy reopens. It said the reopening of the economy should benefit low paid workers the most. Furlough rates in hospitality fell from 58% at the end of March to 48% at the end of April.

Most workers leaving furlough are returning to their previous job. In March of this year, 44% of previously-furloughed workers were back in work in their previous job, and a further 12% had found new jobs. A third (34%) were still furloughed and 7% were no longer working.

Those in the bottom half of the pay distribution were more likely to still be furloughed – likely reflecting the slower opening up of lower-paying sectors such as hospitality and leisure. Previously furloughed workers in retail have been relatively more likely to find new jobs in other sectors.

But the report found that, despite the economy reopening, there are risks facing low paid workers. This includes rising unemployment as the furlough ends, but also less job security and abuses of employment rights.

The Resolution Foundation found that one in five (20%) low paid workers has an insecure job, defined as having a zero-hours contract, involuntary working on a temporary contract, or working low hours and wanting more. This compares to 6% of higher paid workers.

More than one in 10 (14%) of workers in the lowest pay quintile said they did not receive any paid holiday – compared with 6% of the highest paid workers.

Gary Smith, general secretary of GMB union, said: “The pandemic has exposed the deep inequalities in the UK economy after a decade of politically driven austerity. It’s just wrong that carers are paid less than £10 an hour, and millions in the so-called gig economy don’t even have basic employment rights, never mind decent pay.

“A furlough cliff-edge will also exacerbate pay inequality, increase unemployment, and damage the credibility of the government’s ‘levelling-up’ agenda – killing off a recovery before the country gets back on its feet.

“The scale of the challenge is enormous but it’s one we must rise to meet. We need proper value for our key workers, stronger and better rights at work, and a proper industrial plan for jobs and investment in our forgotten communities.”