Thursday 26th Sep 2019
According to research published by the Trades Union Congress (TUC), real pay has fallen for millions of lower- and middle-income jobs since 2010.
In fact, the TUC research paper - published in August - actually shows that middle- to high-income earners (those in jobs paying £12.74 - £25.45 per hour) have experienced a 3% pay cut when you adjust for inflation, and the rising price of goods.
Despite a substantial increase in minimum wage, the TUC report also shows that low-income earners (ie. people in jobs paying £9.56 - £12.73 per hour) have also suffered a 1% reduction in real pay, while real pay for the highest earners appears to have grown by around 4% since the recession.
The TUC concludes that low- to middle-income earners are still footing the bill for the last financial crisis, but it is important to consider other reasons for wage stagnation. According to Andrew Godwin, the lead economist at Oxford Economics, low productivity growth and an increase in secondary labour costs are significant factors.
Put plainly, this means that things like:
The cost associated with auto-enrolling staff in pension schemes
The costs associated with supporting an increasingly-elderly workforce
The rapidly increasing cost of business-essential technologies
A drop in real-term profits
Could all be suppressing wage growth by preventing employers from implementing the kind of sweeping and large-scale pay rises that are needed to reverse the real term pay-cuts mentioned in the TUC report.
It is also important to remember that 60% of the UK workforce is employed by SMEs (small to medium enterprises) with less than 250 members of staff. Traditionally, these businesses operate on very tight margins, and don’t have the positive cash flow needed to offer their employees generous pay rises. This is particularly true of lightweight, B2B businesses, who often:
Have to chase the payment of invoices
Need to invest heavily in credit control/debt recovery processes
Need to redirect spare capital to projects that will allow them to survive short-term hardships
- Struggle to maintain positive cash flow
For these businesses, it’s simply impossible to offer substantial pay rises without cutting back on other areas of the business.
One solution could be a restructuring of the business model, with an increased focus on staff training, promotion and pay. Alternatively, small- to medium-sized B2B businesses could explore invoice factoring options.
Invoice factoring allows businesses to effectively sell unpaid invoices to a lender to boost their cash flow, provide ready capital and unlock assets that are normally tied up in their sales ledger. Because the lender assumes responsibility for the debt, invoice factoring also allows small- to medium-sized businesses to reallocate some of the resources spent on debt recovery; providing a boost to productivity, and providing some of the capital needed to start exploring pay rises.