New workers being ‘trapped in low-paid, part-time work’

The average income of the self-employed in 2011, which is down from £16,100 in 2002

Millions of young first-time workers and women face becoming entrenched in temporary and low-paid jobs on the bottom level of an increasingly divided workforce, claim researchers.

Early signs of economic recovery have failed to prevent the emergence of a two-tier workforce with more than a third of jobs for new employees remaining part-time in 2013, according to the Resolution Foundation think tank.

The report, Low Pay Britain, due out later this week, suggests that millions of new workers have been consigned to precarious, poorly paid and part-time jobs with whole sectors of the economy – such as the hotel and restaurant industries – dominated by low pay.

Researchers at the foundation, which supports workers on low and middle incomes, said other struggling developed countries faced the same economic pressures as Britain but appeared to perform much better on the issue of low pay.

The report comes amid official concerns of a renewed housing bubble preventing the poorly paid from buying their own homes, while the long-term employed reap the benefits of rising prices.

The report also highlighted growing struggles for the increasing numbers of self-employed, who have seen their average incomes slump from £16,100 in 2002 to £11,900 by 2011, during a period when the cost of living has increased.

Someone working full-time on the national minimum wage, currently of £6.19 an hour, would earn just more than £12,000 a year, according to the Joseph Rowntree Trust. Its analysis earlier this year found that a single person needed to earn at least £16,850 a year before tax to reach a minimum acceptable living standard.

The Resolution Foundation report suggested that more than two-thirds of hotel and restaurant workers earn less than the living wage – the threshold for a basic standard of living, while in retail the proportion stands at 39 per cent.

The Prime Minister has supported the idea of the living wage and Labour leader Ed Miliband has said that he plans to make it central to his party’s work, with Whitehall contracts only awarded to those companies that paid it to their lowest workers.

It currently stands at £7.45 an hour outside of London, rising to £8.55 for those in the capital, where the Mayor, Boris Johnson, said that paying the living wage was “morally right” and made good business sense.

While the number of jobs has increased, the UK economy still produces 3 per cent less than it did five years ago. The Governor of the Bank of England, Mark Carney, said last week that an economic recovery appeared broad-based and was set to continue but he warned there would be bumps in the road ahead.

Matthew Whittaker, senior economist at the Resolution Foundation, said: “Jobs growth is welcome news and hailed by many as a sign of economic recovery.

“But this may conceal a worrying scenario in which the two-tier workforce we’ve seen developing became an established feature on the landscape.”

The group said that women appeared to be hardest hit as the country emerged from recession with women making up three million of the five million low-paid workers.