Pay, productivity and social value

Why key workers deserve a better deal

25 February 2021

By Rosie Stock Jones

7 minute read

This paper considers UK key worker pay in the context of the coronavirus pandemic, with a focus on the adult social care sector.

Key workers have enabled our country to continue functioning during a health crisis, often at great risk to their own health, yet tend to be lower paid than other members of the workforce. They deserve both better compensation for their contribution to society over the last year and for their longer-term remuneration to be more closely aligned to their social value.

Key worker incomes are not determined by an efficient market; they are subject to power imbalances and policy decisions. In many key worker sectors labour productivity and true ‘market’ value is difficult to meaningfully quantify, while the wages received by those in key worker roles is at odds with their importance to society.

Care work is a prime example of this. The current crisis has highlighted carers as frontline workers in a global health pandemic and asked them to risk their lives, yet has failed to rectify the fact that in many cases this work does not pay enough to live on. Where wages so clearly and consistently diverge from social value the government should intervene to pay workers a wage that better reflects their contribution.

Key findings

  • On average, the death rate for key workers from coronavirus between March and December 2020 was 40% higher than for the average working age person.
  • The key workers at highest risk are also some of the lowest paid. Care workers and home carers had a death rate over three times higher than the average working age person, yet their hourly earnings are nearly 30% below the median and over a third are employed on zero hours contracts, which have been associated with economic insecurity.
  • The social value of care work appears to exceed its ‘market value’. The majority of care workers are paid less than £10 an hour, yet existing research suggests the social return on investment in social care interventions to be between £1.20 and £6.50 for £1 spent. Care work also generates economic activity by enabling unpaid carers to participate in the labour market.
  • Health and social care occupations have seen below average increases in pay over the period 2011 to 2020 despite increasing demand. This has coincided with increasing turnover in the sector, which suggests that the current pay model is not working.
  • The demand for social care in more deprived places such as Hartlepool, the Isle of Wight, Sefton and Redcar and Cleveland is estimated to be high and growing. Better remuneration for care workers in these places would contribute towards inclusive growth and levelling up.

Recommendations

CPP argues that society should acknowledge the vital work done by these people in offering a one-off compensation payment in recognition of the personal risks they have taken.

But respecting and properly renumerating key workers remains essential beyond the pandemic. The demand for social care in particular is already high and is increasing in deprived areas in the UK; paying care workers a fair wage would both improve care outcomes and contribute to the levelling up agenda. CPP recommend:

  • Making all key workers eligible to apply to HMRC for a tax-free coronavirus compensation payment of between £200 and £1,200 at the March Budget at an estimated cost of £1.5bn - £4bn.
  • Consulting on developing sector specific, minimum pay and employment conditions that better reflect the social value and risk associated with key worker roles.
  • Funding local councils to pay all publicly funded care workers the real living wage as a minimum.
  • Building social care up as a profession by developing nationally agreed skills and competencies frameworks and providing progression pathways.

Figure 1. Death rate involving Covid-19 by key worker occupation (rate)

Key worker occupation group

Share of all key workers

Covid-19 death rate (per 100,000)

Difference from average Covid-19 death rate (percent)

Education and childcare

20%

29.3

20%

Food and necessary goods

14%

36.0

47%

Health and social care

31%

46.2

89%

Key public services

5%

21.4

-13%

National and local government

2%

24.7

1%

Public safety and national security

5%

37.9

55%

Transport

6%

35.2

44%

Utilities and communication

16%

18.6

-24%

Weighted average

33.9

39%


Figure 2: Suggested social compensation for key worker occupations based on a VPF of £2.1m

Key worker occupation group

Minimum

(based on average risk across all key worker occupations)

Maximum

(based on riskiest individual occupation)

Education and childcare

£200

£700

Food and necessary goods

£200

£1,000

Health and social care

£200

£1,200

Key public services

£200

£900

National and Local Government

£200

£400

Public safety and national security

£200

£800

Transport

£200

£800

Utilities and communication

£200

£800

Comments

Rosie Stock Jones, Senior Research Analyst, Centre for Progressive Policy, said:

“Key workers have been invaluable to society over the past year, with many taking huge personal risk whilst the rest of us stay home - yet these workers are often low paid, with many on insecure contracts.

“This discrepancy between social and ‘market’ value must be rectified, and there is widespread public support for this. CPP calls on government bodies to work together to ensure that the pay and working conditions reflect the contribution key workers make to society, starting with compensation for the risks taken during the pandemic.”

Laura Gardiner, Director, Living Wage Foundation, said:

In these difficult times, it is more important than ever that those who are continuing to risk their health and wellbeing to keep our economy going are paid what they need to live. Key workers are providing a crucial service in supporting and caring for the vulnerable and their families. As a society, we have a responsibility to go beyond the clapping, and to compensate these key workers fairly for their contribution.

Paying the real Living Wage is not only the right thing to do, but is also beneficial financially for firms – a fair wage increases motivation and productivity. And in sectors like social care where wages are driven by public spending, we need to move beyond words of appreciation – policy makers should commit to a Living Wage for care workers and increase funding for the sector accordingly.”

Sarah Davidson, CEO, Carnegie UK Trust, said:

Even before the pandemic, there were deep inequalities in the quality of work people have access to, and endemic challenges in social care which compromise the wellbeing of the staff employed in the sector as well as those in their care.

The recommendations in this thoughtful and pragmatic report set out the levers government has at its disposal to improve the situation of key workers, and how we must go further than clapping for carers by taking concrete steps to improve their job quality.” 

Notes

CPP analysis of ONS data on coronavirus related deaths by occupation, 2020. Death rates are for those aged 20-64 and are age and gender standardised to isolate the impact of occupation on risk. Key workers are identified by individual occupation and CPP cannot guarantee that everyone within every occupation is a key worker. This means that differences are likely to be understated.

The share of key workers in each occupation group is based on ONS Key worker reference tables published in May 2020 which are based on 2019 data.

For more details please refer to the technical appendix, which is available as a separate document.