IntroductionThe lack of growth withregards to low pay in the UK has become an obvious issue compared to othersimilar economies. These issues have had a negative effect on the individualsand the society they are a part of. The extent and significance of low pay inthe UK will be scrutinised with use of analysis regarding possible policysolutions that address the issues that occur from low pay.Significance of Low Pay in the UKOECD (2017a) defines low payas “share of workers earning below two-thirds of median earnings”. As of April2014, low pay was at £7.67 in the UK according to Corlett and Gardiner (2015).The UK’s wages are below OECD’s average; this means that the UK have highlevels of low pay in the long term. According to Figure 1, it shows that 15% ofemployees are affected by incidence of low pay in the UK. (Keese and Grubb,2015)Figure 1 – Source: (OECD, 2015b)The United Kingdom’s level ofoutput is restricted due to the workers having low pay and less skills. Thisaffects the country’s productivity as it keeps the GDP per hour less than theOECD average, as well as other similar economies such as Germany and France.This is shown by Figure 2. The International Labour Office (2010) claims thatthe future success of any economy depends on how many people are in employment,how educated and skilled they are to make them productive in their work. Inaddition, it is believed that there is a connection between education, skills,output and economic growth. Therefore, improving skill utilisation, workorganisation and quality of work can positively affect the output of a country.NationalOutput per hour worked in 2014; 2010=100Figure 2 – Source: (OECD, 2016a)Firm Quality The United Kingdom relies onmarket conditions for outcomes regarding investment and training. Publicspending on the labour market is significantly low compared to Germany andFrance, along with other similar countries. (Figure 3) Lanning and Lawton(2012) state that this can lead to lower levels of employment prospects andless competitive advantage against other economies.Public spending within thelabour market from 2000-2014: total % of GDPFigure 3 – Source: (OCED, 2017c)Utilisation of SkillsThe decrease in semi-skilledoccupations reduces jobs and opportunities for skilled workers, this results ina skills misallocation. (Figure 4) The inequality will rise along with thedivergence of occupational wages and the lack of job prospects, this is becauselow pay tends to occur within low and semi-skilled professions. (Corlett andGardiner, 2015)% of Employee’s over-skilled andunder-skilled, by industryFigure 4 – Source: (Wright and Sissons, 2012)Policy Responses and ImpactsThe implication of low pay canbe stemmed from the organisation of certain firms and sectors will restrict therelevant resources needed for career development. (Ray et al., 2014) Althoughthere is an undesirable undertone regarding high labour market regulations andinstitutional involvement. Many northern European countries, through higherlevels of labour productivity, innovation and training, have achieved higherlevels of employment protection compared to the UK. (Lanning and Lawton, 2012) TheUK will need to get rid of these policies to improve the development in thelabour force through enhancing job quality.Human CapitalHuman capital is a criticalfactor of earnings. Due to unfair distribution of higher education and trainingprospects throughout society, it is important that there are further skillenhancements. This is aimed at those who work low wages in low quality jobs.(OECD, 2015a)The government gives financialaid for those that decide to invest in higher education, even then people areunaware of these investments. (McNally, 2012) In order to increase the numberof people who go into higher education, career prospects will need to betargeted through policy incentives and make more information available inschools and job centres.Improvements in the knowledgeeconomy will mean that the gap between highly skilled workers and other workerswill increase. To tackle this issue, the UK needs to achieve a society that iswell skilled and makes use of individual abilities throughout all professions.(Lanning and Lawton, 2012). In order to improve the overall skills of thesociety, the government will need to provide the best facilities for youngpeople who are trying to attain qualifications such as GCSEs and A-levels.Setting higher qualification standards for teachers will improve teachingquality and ultimately lead to higher quality education. (OECD, 2007) This canresult in a more educated society which improves the wages of individualsinvolved, knowledge spillovers and economic growth.In addition, throughgovernment subsidisation, apprenticeships decrease training and recruitmentcosts as it gives employers incentives to take part in the scheme to provideapprenticeships. The government plans to introduce an ‘apprenticeship levy’ tohelp the them fund 3 million apprenticeships that will starting between 2015and 2020. (Amin-smith et al., 2017) Nevertheless, there is still an issueregarding the significance of low pay as most of the apprenticeships are lowpay and within low progression occupations. According to the Social Mobilityand Child Poverty Commission, employers and the government will need to imposestrategies for earnings and career prospects for apprenticeships in industrieswhich have low pay and low career prospects. (Milburn et al., 2016)Moreover, OECD (2007) believesyoung people who pursue vocational courses, as opposed to academic ones, do nothave enough resources. Low skilled workers have less chance of receiving thetraining they need as they will be preferred to workers who possess betterskills. (Ray et al., 2014).Trade Unions and CollectiveBargainingThe United Kingdom’s trade union density is greater than other countries with similar economies. However, the density has decreased over the past couple of years at an insignificant rate. (OECD, 2017b) Due to existence of monopsonies, there will be a better representation of workers regarding employment progression and also an increase in earnings. In addition, the involvement of the trade involvement will minimise the levels of unemployment. Overall, it will encourage firms to target quality over price. However, the trade union wage has declined over the past years. In order to for it to be a success, the trade union will need to adapt to the new labour market.National Living Wage The National Living Wage (NLW)was put into effect on the 1st of April 2016, as an attempt to putthe costs back on to the firms. (The Economist, 2015) According to OECD(2015b), the outcome of a National Living Wage is unclear, as it could reducethe chance of low pay, reduce wage inequality in the short run and increaseproductivity. However, it can also lead to an increase in unemployment as thereis an increase in labour costs.A rise in the national minimum wage will affect firms severely in the long run as the productions will increase, exceeding the profits of the perfectly competitive firms. This could lead to an increase in the level of unemployment, with all other factors remaining the same. On the other hand, with regard to a monopsony, there will be reduction in the marginal expense of labour due to the required wage set by the government. This is because the profit maximising point is set above the required wage. The decrease in marginal expensive of labour result in the firm to replace labour with capital in the long run if all other factors remain the same. Although, the National Living Wage increases the wage for individuals in low pay, it can be the case that unemployment will increase if the wage is too high. This is because firms will not be making enough profit and may close down.ConclusionThe welfare of people andsocieties within the United Kingdom is threatened by low earnings. Although thegovernment has been attempting to come up with a solution for the issue of lowpay, more needs to be carried out to make sure there is an increase in theimprovement of the labour force as well as a decrease in low earnings.Government policies that aim to decrease the incidence of low pay must targetboth demand and supply problems within the labour market. Although, job qualitycan be improved through National Living Wage, such development can only supportbut not efficiently eradicate the implication of low pay. There should be morefocus on employers, employees and human capital to increase employmentprojections in order for employees to gain benefits from being a part of thelabour force.ReferencesAmin-Smith, N., Cribb, J. and Sibieta, L. (2017). Target of 3 million apprenticeships and new funding system risk poor value for money. [online] Ifs.org.uk. Available at: https://www.ifs.org.uk/publications/8864 [Accessed 1 Apr. 2017].Corlett, A. and Gardiner, L. (2015). Low Pay Britain 2015 – Resolution Foundation. [online] Resolution Foundation. Available at: http://www.resolutionfoundation.org/publications/low-pay-britain-2015/ [Accessed 2 Apr. 2017].International Labour Office (2010). A Skilled Workforce for Strong, Sustainable and Balanced Growth. G20. 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