Think Tank urges Holyrood to help lowest paid Scots workers

John Swinney helps with the teas and coffees during a visit to Living Wage employer Rabbie's Tours. Picture: Neil Hanna
John Swinney helps with the teas and coffees during a visit to Living Wage employer Rabbie's Tours. Picture: Neil Hanna
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TOO many Scottish workers are paid poor wages, according to new research showing that one in five people earn less than the low pay threshold.

The figure has come to light in new analysis conducted by the Resolution Foundation, an independent think tank which will this week publish a major study into the Scottish economy.

The foundation has called on Scotland’s political parties to make tackling low wages a priority as May’s Scottish elections approach.

While the new higher minimum wage for the over-25s, which comes into effect this April, is set to help around half a million workers across Scotland, the foundation estimates that around one in six workers across Scotland are still set to be low paid in 2020. Low pay is defined as less than two-thirds of the average wage – the equivalent of £7.80 per hour in Scotland.

The prevalence of low wages has led to the foundation emphasising the need for a wider low pay strategy which includes, for example, moves to boost coverage of the higher voluntary living wage.

More encouragingly for Scots, this week’s report, “The State of Working Scotland”, reveals a typical wage in Scotland is now higher than the average English pay packet for the first time.

The historical cross border pay gap has closed in recent years and Scottish workers are now making more than their English counterparts.

In 2004, typical hourly pay in Scotland was 7.2 per cent lower than in England.

However, strong wage growth in the mid-2000s reduced the gap to just 2.9 per cent by 2009 – the year real earnings peaked, before falling throughout the UK as a result of the economic crisis.

Scotland’s relatively shallow pay squeeze compared with the rest of the UK following the crash reduced the gap further still. Typical pay in Scotland is now – at £11.92 an hour – marginally higher than in England (£11.84) for the first time since records began.

Conor D’Arcy, a policy analyst for the foundation, said: “Scotland’s impressive pay performance has been underpinned by high employment and steady economic growth, particularly in the run-up to the crash. But its recent employment and growth record has been less impressive.

“While Scotland’s strong pay growth has been good news for many workers, it is still the case that one in five employees are low paid.” He added: “With the higher minimum wage for the over-25s expected to reduce rather than eliminate low pay, tackling this long-standing problem should be a top priority for parties in the run-up to May’s election.”

The analysis shows that pay in Scotland has grown faster than in any other nation or region in the UK over the past two decades. Earnings growth in Scotland has also been stronger than in England across all pay levels, other than for those at the very top.

The Foundation notes that steady growth, high employment and improved productivity in the early and mid-2000s were likely to be the driver of Scotland’s strong pay performance before the crisis. The country subsequently experienced a shallower pay squeeze than the rest of the UK in the aftermath of the financial crisis, though this came at the expense of sharper employment falls.

Fair Work minister Roseanna Cunningham said: “While employment law remains reserved to the UK government, the Scottish Government continues to do everything we can to further improve employment standards and promote good working practices, including the Living Wage of £8.25 an hour.