Since Birmingham City Council adopted the living wage in July 2012, public sector workers in the city have seen a noticeable decrease in their risk of being paid below the living wage, but many working within the private sector continue to experience low pay and the challenges that this brings.
Birmingham, as with other parts of the UK, has experienced a sustained period of economic uncertainty since the recession began in 2008. Household incomes peaked shortly after and while in recent months there have been signs of wage growth returning, earnings for many are not back to where they were in 2009. Increases in rents in the private sector, cuts to the value of benefits and other welfare reforms have adversely affected many families and individuals who were already struggling. Changes in the structure of the labour market and in the type of work available have further combined to make work more insecure than in the recent past. At a local level, and on top of all of this, Birmingham City Council has faced significant cuts to the funding it receives from central Government – amounting to a 22% reduction in the spending power of the council between 2010 and 2016 – and the cuts in funding are set to continue for the next few years. This creates a challenging environment in which to support those in low paid, insecure employment across the city.
In our report looking at the living wage, child poverty and the impact of particular elements of welfare reform within Birmingham, it is clear that the city faces some significant challenges over the coming years, but also that the adoption of the living wage by the Council has impacted positively on low pay in the public sector.
The latest available data (for 2013) show that Birmingham has a smaller proportion of workers earning below the living wage than nationally (19% compared to 21% nationally). The data also show that since the adoption of the living wage by Birmingham City Council, the proportion of public sector workers below this level has fallen to only two per cent of workers, compared to eight per cent nationally. While this is clearly positive news for many public sector workers, other factors such as staff cuts or the outsourcing of lower paid jobs may also have contributed to this reduction. There is though a stark contrast between public and private sector workers within the city: 27 per cent of private sector workers were paid less than the living wage in 2013 compared to two per cent in the public sector. The introduction of the living wage has clearly done much to reduce low pay in the public sector, but low pay within the private sector remains a challenge for Birmingham and one that needs to be addressed in order to help tackle some of the key challenges facing the city.
Child poverty within Birmingham is one of these challenges. The latest estimates produced by CRSP show that after housing costs, child poverty levels in Birmingham in 2013 were well above the UK average: 37% of children in Birmingham were living in poverty compared to 25% in the UK as a whole. At ward level, only 8 of the 40 wards in Birmingham had levels of child poverty lower than the UK average of 25%. Child poverty estimates show that Birmingham faces significant challenges in terms of tackling and lowering child poverty levels – the recently launched Child Poverty Commission will have a key role to play in ensuring progress in reducing child poverty levels.
When pay is low and living costs are high, as they have been over recent years, housing costs can also have a major impact on the ability of low to middle income households to make ends meet. The introduction of the bedroom tax, the benefit cap and strict limits to the support given by the state to meet private rents is resulting in a shortfall between housing benefit and rent for around 8%of all households in Birmingham. This means that currently at least 35,000 households in Birmingham are at greater risk of real hardship because they are having to dig into other benefits in order to cover housing costs.
Recent economic uncertainty and the ‘austerity Britain’ response to this at a national level have contributed to a growing number of households within the UK who are struggling to make ends meet. In certain respects Birmingham has fared reasonably well during this period: the proportion of workers with earnings below the living wage is lower than nationally and a growth in self-employment, for example, could be seen as a positive response to what has been a difficult labour market over the past few years. In other respects the city faces a number of challenges particularly in reducing child poverty levels and in encouraging employers in the private sector to pay a living wage – the recent announcement about the National Living Wage will doubtless help here, but there is still more that can be done to alleviate low pay, particularly among workers who are under 25.
Signs of improvements or recovery at a national level are to be broadly welcomed but much ground has been lost and the key issues in Birmingham will have to be addressed in a context of continued austerity. Further cuts in the value of benefits, lowering the level of the benefit cap and changes in support for housing costs, for example, will make it more difficult for some families and individuals to make ends meet and continuing reductions in local authority budgets will require innovative and smarter local responses to these challenges. The living wage is a good start, but there remains much more to be done.