The pay packets of nearly three quarters of workers in the UK with a steady job fluctuates on a monthly basis, according to a new report investigating the volatility of monthly earnings.
The Resolution Foundation report highlights how the impact of changing monthly pay packets is most severe on low paid workers.
It found that more than four in five low-paid workers (earning about £10,000) experience pay volatility, compared to just two in three higher paid workers (those paid in the region of £35,000).
A further two in five workers experience ‘persistent volatility’, with significant changes in monthly pay at least six times a year.
The ‘Irregular Payments’ report by the Resolution Foundation, a think tank working to improve the lives of low and middle income earners, analysed the impact of pay fluctuations on living standards and draws on data from seven million anonymised banking transactions.
Fluctuations Upwards and Downwards are Significant
Credit: Ollie Cole
The report highlights monthly fluctuations as “very significant”. From 2016 to 2017, the average notable upward change was 22 per cent while the average monthly decrease was 20 per cent – which equates to more than the average UK household’s monthly grocery bill of £250.
The fluctuations and volatility in monthly pay packets also means that it’s hard to save, something which affects low earners more acutely. The report found that 40 per cent of those on low-to-middle incomes are unable to save £10 or more a month.
Focus groups with low earners experiencing volatile pay reported that it led to increased anxiety, stress and more debt and fewer opportunities to save for the future.
The report also highlights a major gender imbalance in low paid work, with 2.9 million women in low paid work compared to 1.9 million men.
Calls for Change
Credit: Flickr War On Want
The Resolution Foundation highlights two key areas to address the issue of volatile monthly pay for low earners, including action on zero hour contracts and minimum notice periods to change working hours.
The think tank also calls for reforming Universal Credit, which acts a safety net for low earners, so it can respond to monthly fluctuations.
Daniel Tomlinson, Research and Policy Analyst at the Resolution Foundation, said: “Much of Britain, from our bills to our welfare state, is built around a steady monthly pay cheque. But our research shows this is not the reality of working life for many of us.
Government and employers should look to support workers by reducing pay volatility, and mitigating its impact on workers’ living standards.
“Around three in four workers experience big upward and downward changes in their monthly take-home pay. This volatility is a particular challenge for low paid workers, who are less likely to have savings to fall back on when their pay packets shrink, and yet are more likely to have big falls in monthly pay.
“Government and employers should look to support workers by reducing pay volatility, and mitigating its impact on workers’ living standards,” he continued.
“By providing more notice on shifts and avoiding unnecessary use of zero and short hours contracts, firms can lessen the effects of volatile pay on their employees. The government should also ensure Universal Credit is able to live up to its potential in softening the impact of volatile pay on family living standards.”
Workers’ rights and better pay and conditions, particularly for people in precarious employment, have been in the public eye recently.