Everyone loses out from a low-pay economy

Over the last year I’ve seen how David Cameron and George Osborne’s failure to make work pay is affecting people across the country.

In May last year I met working families in Croydon whose wages aren’t enough to pay the rent. In Dudley last month I met young apprentices who had spent months struggling to find a secure job. And in April last year I met jobseekers in Bristol who had found it tough to hold down a job which would allow them to earn, save and build a career.

The Tory failure to make work pay has hit millions of people in the pocket. Workers are paid, on average over £1,600 a year less than they were in 2010 and the number of people earning less than a living wage has risen from 3.4 million in 2009 to 4.9 million according to the latest figures.

Everyone loses out from a low-pay economy.

Workers lose out because they can’t afford to make ends meet, often having to take on two jobs to survive.

Taxpayers lose out because a low wage economy leads to higher benefit bills. New analysis we are publishing this week shows the huge cost of five more years of Tory failure to make work pay. If wages fall short of expectations to the same extent in the next parliament as they have in this parliament Britain will face another £9 billion in social security spending on top of that already projected. That’s a £337 bill for every household in the country.

And our economy loses out because we aren’t making the most of our country’s potential if we are over-reliant on low quality, low skill, low productivity jobs that offer people little opportunity to learn, progress and develop their talents.

A Labour government will take a very different approach. With Labour, making work pay, will be a national priority.

But we know turning round the Tory low wage economy to make work pay will require action across government to build a high skill, high wage labour market that gives everyone the chance to learn, work and fulfil their potential.

That means tackling low pay and challenging poor employment practices by:

• Raising the National Minimum Wage to £8 before the end of the next Parliament
• Bringing in Make Work Pay contracts to get more workers paid a Living Wage
• Banning exploitative zero hours contracts,
• Closing loopholes in Agency Worker regulations
• Cracking down on false self-employment
• And outlawing the exploitative use of migrant workers to undercut wages and working conditions

It means giving people the chance to earn a better standard of living by;

• Backing small businesses and the growth industries of the future;
• Securing investment in ideas, innovation and infrastructure;
• Getting more homes built in the places we need them;
• Extending accessible and affordable childcare for parents who want to work;
• Reforming banking and energy markets so they work for the whole economy;
• Devolving power and money to city and country regions to grow their economies;
• Keeping in Britain in Europe, where our key export markets lie.

And it means ensuring our social security system is a spring board to opportunity and greater productivity by;

• introducing a Basic Skills Test to give jobseekers the skills they need to find work
• bringing in a Youth Allowance to ensure young people are in training or work
• launching a Compulsory Jobs Guarantee
• reforming the government’s failing Work Programme
• delivering a dedicated, more tailored service for disabled to stop the scarring effects of long-term unemployment

Under David Cameron jobs in low paying industries have been growing at twice the rate of those in other industries. Labour will aim for high paying jobs to be growing at twice the rate of low-paying jobs.

Labour will halve the number of workers on low pay by 2025 and create a million more jobs in high-tech industries.

And I believe it should be our ambition to build an economy in which someone who is willing to put in the hours at work can support themselves and raise a family without having to rely on benefits to cover the rent.

This means building a very different economy to the one we have today. So we need to elect a Labour government this May so we can get started on laying the foundations.

Rachel Reeves is Shadow Secretary of State for Work and Pensions