In March of last year the NERI's Spring Quarterly Economic Observer analysed earnings and low pay across Northern Ireland. We highlighted the gender, age and geographical breakdown of low pay and the implications of these statistics for policymakers. In December of last year the latest figures from the Annual Survey of Hours and Earnings were released and they painted a bleak picture for pay in Northern Ireland across the board. In that Spring QEO we examined three measures of 'low pay' and the first of these was the minimum wage. The minimum wage is, quite obviously, the minimum legal hourly rate of pay for workers in the UK (with lower rates for younger workers). The Minimum Wage however, is not a subsistence rate for employees but a rate that is designed to cause minimum disruption to the behaviour of employers i.e. one that would not cause undue unemployment. The minimum wage is and was always meant to be a wage floor, an absolute minimum not a starting salary, but as the chart below shows, in 2014 in Northern Ireland 10% of workers earned just the minimum wage and increase of 1% from last year.
The more official measure of low pay is those earning below ⅔ of the median wage. As the chart above shows, this measure of low pay actually fell from 2013-2014. This is not as good as it looks. As was mentioned in the Spring QEO the '⅔ median wage' measure is imperfect because it is a function of the overall pay distribution. If the median wage in Northern Ireland decreases, the number of people earning below ⅔ of it may also decrease without any worker actually significantly improving their pay packet. In 2014 the median hourly wage fell from £10.25 to £10.00, and consequently anyone earning below £6.83 in 2013 was classified as low paid while the same person would have to earn under £6.66 in 2014 to meet the same classification.
The final measure used to gauge low pay is the number of earners below the Living Wage. This is a rate independently determined by researchers as the minimum hourly wage necessary to sustain a basic standard of living. The change in this measure between 2013 and 2014 has been the most alarming. In 2013 25% of workers earned below the Living Wage and that increased to 28% in 2014. This means that in 2014 28% of NI workers earned an hourly wage below what is deemed necessary for a basic standard of living. The Spring 2014 QEO is found here and the policy recommendations made then appear even more relevant today.
*In April 2014 the Minimum Wage was £6.31, £6.66 was ⅔ of the Median Wage and the outside London Living Wage was £7.65. Also note the Annual Survey of Hours and Earnings does not include the self-employed.