Closer to crisis? Why Labour must do more to help the low-earners hardest hit by recession

By Sophia Parker

This week’s labour market statistics make for less depressing reading than they have done in a while – with the smallest increase in unemployment since March-May 2008. But although the deterioration has slowed, the direction of travel is still downwards. Long term unemployment has risen, and projections indicate that, as in previous recessions, unemployment will continue to grow long after the economy enters its technical recovery.

However, some are more exposed by the current circumstances than others. Far from the early predictions of a ‘white collar’ decline, instead it is the UK’s 7.2 million low-paid, low-skilled workers at the sharp end of a flexible and global service economy who are being hit hardest.

These workers are more at risk of losing their jobs by virtue of the industries, occupations and geographic areas where they are concentrated. For those low earners who do lose their jobs, they will find it harder to re-enter the labour market due to their low skills levels.

This should matter to everyone, but to the Labour Party in particular, which knows its strength on the doorstep is a history that is rooted in championing working people’s causes and tackling inequality.

This week, the Resolution Foundation published Closer to Crisis?, an in-depth analysis of how the recession is impacting on low earning households across the UK. We argue that despite a swift response by government, further action is necessary to protect low earners during the downturn and to ensure that this recession does not entrench the already-growing gap between the rich and the poor.

Some of this action must focus on addressing the immediate risks presented to low earners by the recession. For example, we propose that training should count towards eligibility for Working Tax Credit, as skills help to protect people against job loss. We argue that more must be done to fully engage all lenders and utility companies in showing forbearance: without it, low earners can be tipped quickly into crisis by any change in working patterns, let alone a redundancy.

But there remains a deeper set of questions which all progressives now need to embrace, about how and why low-earners came to be in such a vulnerable position in the first place. Our analysis shows that even in the good times this group was living on the edge, with 11.1 million low earners in poor financial health in 2008, and many of them struggling to progress beyond ‘dead-end’ jobs which lack the occupational perks and security of many higher-paid roles.

As we move towards a period of gradual economic recovery, the challenge to government will be to ensure that this recession does not reinforce or enhance these patterns of polarisation that could be traced back to long before when the downturn took hold. This matters for both social and economic reasons.

But it also matters politically. Looking at MORI’s latest analysis of voting intentions, it seems that low earners are drifting away from Labour, with the same numbers now planning to vote Conservative next year as voted Labour in 1997 and many certain not to vote.

If Labour still believes that the working classes are their voters they need to demonstrate this commitment, by doing everything possible to help low-earners maintain their fragile economic independence. This is not an easy task – but it is a necessary one if low earners are to return to Labour once more.

Sophia Parker is the author of ‘Closer to Crisis? How low earners are coping in the recession’ and Director of Policy & Research at the Resolution Foundation.