Pay progression for low-paid workers 2

This report from the UK think tank Social Market Foundation is the second research paper on pay progression for low-paid workers, focusing on the role of corporate decision-making.

The report seeks to understand whether and how policymakers can use the tools at their disposal to shape corporate-decision making. In particular, it focuses on how to encourage businesses to use their decision-making to promote wage progression and career progression among low paid workers. The SMF’s research notes that company behaviour on wage progression and career progression, and workforce training (an enabler of progression), is driven by a wide range of factors, such as:

Pressure from investors – Investor activism can influence corporate behaviour on a wide range of issues, from environmental matters, to whether a company takes a short-term or long-term view on investment in the workforce.

Reputational concerns – Companies such as Amazon have increased wages for lower paid workers in response to bad media publicity about poor working conditions. Over 5,000 businesses in the UK voluntarily pay the real Living Wage, with reputational benefits cited as a key driver of this.

Pressure from consumers – Consumers are also concerned about workers’ pay, with nine in ten of British consumers agreeing that wages should reflect living costs. However, the evidence is inconclusive on how this concern manifests in the form of encouraging pay and career progression for workers on low-pay in particular.

Pressure from prospective workers – PwC research from 2011 found that providing opportunities for career progression was the most commonly cited factor which makes an organisation an attractive employer, among 52% of millennials globally. The same survey also reported that the most influential factor leading millennials to accept their current position was the opportunity for personal development.

Legal considerations – Section 172 (S172) of the Companies Act 2006 obliges corporate directors to act in the interest of the company’s employees, among other stakeholders such as shareholders, suppliers, and local communities affected by company activities. However, there is limited evidence that S172 has a significant impact on company behaviour given that it is difficult to enforce.

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