UK Worker Rights Unlikely to Boost Earnings

Sarah was in a comfortable job, working for an archaeology business before being diagnosed with cancer. Much of her 20-year career had left her with reliable employment rights in the civil service.

But having made a career change and moved to a small business, she was now reliant on statutory sick pay, just over £100 a week at the time. To avoid a catastrophic loss of income, she had to work from her hospital bed in between sessions of chemotherapy, before being forced to return to work just weeks after a bone marrow transplant.

This is a stark reminder of how anyone can have the fundamental dignity of life stripped away.

Many of the lowest-income families continue to face unacceptable levels of hardship. But these pressures have spilled into higher earners, too. Those out of work continue to face the greatest risk of being in poverty, but rising costs and largely stagnant incomes have meant that many more people are living on inadequate wages.

The government has rightly recognised the current settlement stores up huge problems. The Employment Rights Bill, laying out the details of the government's "make work pay" policies, has been presented to parliament and has been described by Labour as "the biggest shake up-in workers' rights in 30 years".

But is it really a gamechanger? While the package undoubtedly contains reforms that will improve the working lives of millions, it's worth considering how far these go in raising living standards.

Affording a decent life

Using the minimum income standard benchmark developed by the Centre for Research in Social Policy, two measures can be assessed: baseline hourly pay and reforms to statutory sick pay.

The work we do at the centre, where I am co-director, sets out what the public thinks everyone needs for a minimum standard of living in the UK today. Through hours of discussions and deliberations, groups decide what households need to live in dignity.

This is not just about being able to afford the basics - it is about being part of society, feeling included, connecting with others, and thriving rather than just surviving. We've updated this minimum income standard research every year since 2008, tracking what the UK public thinks is important to live a dignified life, and in September we published our latest update.

This research highlighted the strains on public services and what this can mean for the costs faced by households. For the first time, groups included £200 a year per adult to spend on private health services like counselling or physiotherapy. Accessing these services can be critical in avoiding long periods of time off work.

But costs like this potentially add to the financial pressures already facing millions of workers. Our analysis of household incomes shows that 64% of households without the income they need for a dignified life include at least one adult in work - that's around 3.3 million working households.

The bill is intended to support low-paid workers, and while the proposed changes are a welcome and long-overdue step, the measures focused on income do not go as far as they could.

There are two key components. First, the current national living wage (NLW), payable to employees over 21, and what the prospective increase might look like in the next year. We know from our latest research that even where both parents are working full time on the NLW, a family with two children still fall around £140 a week short of the income they need for a minimum standard of living.

The Low Pay Commission, which advises the government on the NLW, estimates that it could increase from £11.44 to £12.10 in 2025 - while this increase would be welcome, it would still leave a significant shortfall for many working households.

The proposed reforms to statutory sick pay are another area needing proper scrutiny.

Earlier this year, I worked with cancer charities and the Centre for Progressive Change to look at the financial effect of the rate of statutory sick pay on workers. For a worker with a serious illness, this doesn't do much to tackle their financial predicament. A person on an average salary taking two months off for cancer treatment, for example, would face a loss of around £3,500, plus any extra costs of travelling for treatment.

Nothing is less dignified than struggling back to work after a serious illness, because of money worries. The new deal should place more emphasis on helping millions of low-income workers at risk of losing even more money - and falling deeper into poverty as a result.

The new deal promises sick pay from day one of employment, a very welcome change, and also removes the previous lower earnings limit. But based on average illness periods and the current rate of £116.75 a week, this might only increase the incomes of sick workers by an average of £60-£120 in a given year.

That's just a fraction of the income they would lose from not being able to work and still leaves the UK at the bottom of OECD league tables.

So, while it offers important reforms, what has been announced so far may not offer transformative change in terms of living standards.

There is a real opportunity to introduce changes that genuinely improve living standards for all. But to achieve this, we would need to see several things that are not properly laid out as yet.

First, the government should now move quickly to make sure that all workers aged over 18 are paid the same rate of NLW. Second, the Low Pay Commission should give real consideration to the cost of living in recommending the NLW rate in future years, building this into every annual increase.

Lastly, the government must detail how it will improve sick pay. It needs to lay out a transparent and evidence-based process to set this at a level that avoids creating further hardship for some of the most vulnerable workers in the UK.

Matt Padley is a member of the Labour Party.