How can business help to tackle poverty and improve living standards?

The statistics are striking and depressing. Despite being the sixth largest economy in the world, the latest figures show that 13 million people in the UK are living in poverty, including 3.5 million children.

As well as being harmful to individuals (and particularly scarring for children), poverty is a drain on the UK economy – tackling child poverty alone is estimated to cost £29 billion a year.

Poverty means the UK economy does not work as well as it could: it limits productivity and is wasteful.

Employers, across all sectors of the economy, have a vital role to play in addressing poverty as so much of it is suffered by people in work and their families. For the first time, over half the people experiencing poverty in the UK today live in a household where at least one person is working.

And in its latest report, the CBI has recognised the need to raise living standards for the lowest income, working families and that growth needs to work for everyone.

“By helping address poverty, businesses are not bystanders but can help drive social change towards a better off Britain.”

Whilst there is good news in the labour market in terms of a fall in unemployment and the number of new jobs, there are deeply concerning trends in the types of jobs being created. Many of these new jobs are low paid, low-skilled, part-time and insecure.

Increasing pay is part of the solution…

Undeniably, increased pay for the lowest paid workers is very important in addressing in-work poverty. We know that one in five employees (around 4.9 million people) earned less than the living wage in 2012. The Living Wage rate is based on evidence of what members of the public think households need to achieve a socially-acceptable living standard balanced with what is considered affordable to employers.

Over 1000 employers have signed up to pay the Living Wage and Living Wage employers have talked about the advantages to their business. Economic output is estimated to increase by an average of £13,000 with each person who moves from worklessness to employment on the Living Wage.

…but companies can do more to support people progress in work too

Increasing pay is only part of the answer to in-work poverty: we also need workplaces that provide decent, secure work with good quality training, opportunities for progression, for workers to have a say at work and access to flexible working: the exact opposite of precarious, ‘dead-end’ work.

Crucially, developing this kind of decent workplace is often a win-win for both businesses and low paid employees, as employers can boost productivity, motivation and loyalty and reduce staff turnover costs and absenteeism.

Many employers will recognise this as the strategy they already take to run a successful business but perhaps have not made the link to how this approach can be drawn together as a package to address poverty. That’s why at JRF we are developing a programme of work to establish what an ‘anti-poverty’ employer should do.

It is helpful to look at the evidence. In research for JRF, the Jobs Economist John Philpott investigates the business case for a proactive approach to human resource management and development and finds that when delivered well these practices can help employees progress to a better job, reduce the stress of balancing work and home life and help reduce the cost of living.

JRF has also published research that looked at progression in low-paid, low-skilled retail, catering and care jobs. It shows that although there are problems with progression in these industries there are examples of good practice such as the approaches taken by Pets at Home and the Spirit Pub Company.

Employers can drive social change 

Low paid employees need the opportunity to develop their skills in a way that suits them and be offered more than basic induction and mandatory courses. Benefits packages (including voucher, cash-back and health insurance schemes) need to be designed so that employees across the income scale can benefit from them.

Employers need to make flexible working a reality as much as possible, particularly so that employees with caring responsibilities can both access and remain in work. Employees also need a say in their workplace and feel confident in joining a union to represent them.

The UK needs fewer bad, low paid jobs with fewer businesses relying on a low cost, low quality model. Over the past year, tackling the bottom of the labour market has risen sharply up the political agenda. By helping address poverty, businesses are not bystanders but can help drive social change towards a better off Britain.


Louise Woodruff is a Policy and Research Programme Manager at the Joseph Rowntree Foundation

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