Paul Gregg is a Professor of Economic and Social Policy in the Department of Social and Policy Sciences at the University of Bath.
At 8pm every Thursday night for the last ten weeks, huge numbers of people across the UK took to their doorsteps or windows and clapped, or banged pots and pans to celebrate the country’s key workers. These are the people who, when it comes down to crunch time, are essential for the rest of us to carry on. People working in health, care, emergency services, food retail and security, have put their own safety and often that of family members at risk to keep the country functioning.
These jobs have been revealed as those of the highest social value in the country. That’s why we applaud.
What is striking, though, is that for the most part they are low paid. Many are minimum wage or just above. Others, in nursing and emergency services for example, are poorly paid, given the skill levels involved.
In economic terms, the market gives these jobs a low valuation. Markets value jobs highly when the skills they involve are scarce and they produce high financial returns for the businesses that employ them. Doing something for the greater good often comes with a pay penalty.
As some people will want to do certain work because of its social value, not just because of the pay, this allows firms (and often charities) to recruit, retain and motivate staff at lower wages. This is sometimes referred to as the intrinsic motivation of the job rather than financial motivation. If jobs are less attractive, because of the danger involved for instance, wages tend to be higher as a compensating pay differential. But markets do not value simply doing good.
In the near future, the risk associated with these jobs may put off some people and push wages up. But the stronger influence will be the impact of the coronavirus recession that is underway. Unemployment will spike when the government furlough scheme ends.
Mass unemployment always hits the entry level jobs that require no qualifications and experience particularly hard. This is simply because of the high competition for jobs, as the unemployed try and re-enter the labour market. This then leads to a reduction in wages in lower paid jobs, down to the minimum wage.
Public sector wages tend to be driven down by another factor, which is the government deficit. When governments have no money, public sector pay gets squeezed. So the pay prospects for the UK’s key workers, with their essential service and commitment to the public, is not good.
Change is possible
If the nation wanted to do something about this, it could. The public sector is of course under the control of government and NHS staff and others could be rewarded for their service. Equally, minimum wages can and might well be raised as a result of government policy. Not only would this benefit many key workers, though of course other low paid workers would see pay rise too.
The government could go even further. In many countries there are higher minimum wages set for certain industries or occupations. The UK only has minimum wage variation based on age, but Germany, Australia and New Zealand, to name a few, vary their minimum wages by sector. In Australia, for example, they set higher minimum wages by sector, taking into account quaifications and experience.
Another way to increase pay for key workers is through requiring a licence for certain jobs. Many, of course, already require this – from doctors to heavy goods vehicle (HGV) lorry drivers – often out of concern for public safety. A recent addition to these groups has been security staff, who now require a Security Industry Authority licence to work.
This requires training across a number of units and passing a criminal records check. It’s not particularly onerous to gain but does, importantly, restrict the numbers that will apply for jobs and this raises pay.
It is not hard to imagine that social and child care, along with nursing assistants, could be licensed (as of course are nurses), requiring some basic qualifications and training. Moving these occupations onto a more professional footing, while also recognising career advancement routes, would be a practical method to recognise and reward many key workers.
In other areas it will be hard to do more than have higher minimum wages, though. Ultimately, Britain must decide if it’s prepared to back its applause – and the country’s key workers – with money.
This blog was originally posted via The Conversation on 2 June 2020.
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