Fair Work Action Plan 2022 and Anti-Racist Employment Strategy 2022: Fairer Scotland duty assessment

4. Evidence and key issues

4.1 Socio-economic disadvantage overview

This sub-section summarises some of the key issues and evidence relating to socio-economic disadvantage in relation to the RAP and ARES. It is important to note that socio-economic disadvantage is a society-wide issue and those who face it are not one homogenous group. It is inherently intersectional and has the potential to affect individuals irrespective of their characteristics.

4.2 Low income

Low income is a key driver of a range of negative outcomes and can be defined in multiple ways. Primarily, low income can be considered through the lens of poverty including:

• Relative poverty - individuals living in households whose equivalised income is below 60% of UK median income in the same year:
• Absolute poverty - individuals living in households whose equivalised income is below 60% of inflation adjusted UK median income in 2010/11)^[30]; and
• Persistent poverty - where households live in poverty for 3 years out of 4^[31].

Since the pandemic, 4 in 10 households have become categorised as low income, the effect of which means people are going without essentials, are unable to pay utility bills, and no longer have the option to save money^[32].

4.3 Real Living Wage

The real Living Wage (rLW) is an hourly rate of pay established by the Living Wage Foundation which employers can voluntarily commit to. It is £10.90 across the UK, and £11.95 in London for people aged 18 or over. Unlike the UK Government's minimum wage ('National Living Wage' for over 23s – £9.50), the real Living Wage is the only wage rate independently calculated based on living costs. It is a voluntary base rate for employers who wish to go beyond the government minimum to demonstrate that they value their lowest paid staff. Living Wage employers pay all their directly employed staff aged 18 and over – as well as in scope regular third-party contractors – at or above the real Living Wage. It represents a means through which the poorest families and households in Scottish society may avoid poverty and the associated stressors it can cause.

At present, according to the Employer Directory in Scotland there are 1,649 real Living Wage employers, with concentrations seen in large cities such as Edinburgh and Glasgow.^[33]

Research from the Living Wage Foundation (2017) revealed that out of the 840 employers surveyed across the UK (201 in Scotland) who pay their employees the real Living Wage, 75% reported an increased motivation and retention rates of employees and a 25% drop in absenteeism.^[34] The Living Wage Foundation (2017) also reported that 93% of students want to work for employers who pay at least the real Living Wage.

Social Enterprise Scotland has also demonstrated the potential outcomes of paying the real Living Wage:^[35]

• Over 57,000 workers currently employed by over 2,800 Living Wage employers in Scotland will receive a welcome pay boost because of the new rate; and
• As a result of rate increase, a full-time worker on the real Living Wage will earn £1,950 a year more than their current pay.

4.4 Zero Hours Contracts

A zero-hour contract exists when an employer is not obliged to provide employees with a minimum number of working hours. Between 2018-2019, statistics showed that the number of people working zero-hour contracts grew by 10% to over 70,000, however, the UK government as well as Scottish groups such as Citizens Advice Scotland have become increasingly conscientious of the potential negative implications zero-hour contracts can have. For people from a low socio-economic background, uncertainty on working patterns and when income can be expected can lead to stress and financial difficulties^[36].

Inappropriate use of these contracts can instil distrust, insecurity and low performance and productivity in the workforce.^[37] Employees require regular work to secure a consistent income stream to fund financial commitments. This ultimately reduces stress surrounding monies and increases focus on productivity.

4.5 Low / no wealth

Access to wealth is a key factor that can protect people from socio-economic disadvantage. Conversely, lack of or no wealth is a driving factor behind generational socio-economic disadvantage. Wealth refers to an individual or group's money and/or material assets that have built up over time (Public Health Scotland, 2021). For example, financial products, assets, equity from housing and pension savings. Accessible savings can help households deal with problems that arise on a day-to-day basis.

Certain households are more likely to have above average wealth, for example pensioner couples, married couples, and households with degree-level qualifications. Whereas lone parent households, those in social rented housing, and households where the household reference person is unemployed or economically inactive tend to have below average wealth.

4.6 Material deprivation

Material deprivation is an additional way of measuring living standards and refers to the self-reported inability of individuals or households to afford goods and activities that are typical in society at a given point in time, irrespective of whether they would choose to have these items, even if they could afford them^[38]. There is a key line of intersectionality between socio-economic disadvantage in the form of material deprivation, and children and pensioner households.

4.7 Area deprivation

Area deprivation refers to the possibility that living in a deprived area can exacerbate negative outcomes for individuals and households already affected by issues of low income. Those areas that have consistently been in the 5% most deprived in Scotland face historic and ongoing socio-economic challenges. The Scottish Index of Multiple Deprivation presents a relative measure of deprivation across 6,976 small areas (called data zones). If an area is identified as 'deprived', this can relate to people having a low income, but it can also mean fewer resources or opportunities^[39]. In Scotland, the least deprived area is in Stockbridge, Edinburgh, and the most deprived area is in Greenock town centre. The area with the largest local share of deprived areas was Inverclyde, with 45% of data zones among the 20% most deprived areas in Scotland. Glasgow City has similar deprivation levels at 44%.

However, socio-economic disadvantage is not always experienced in neat concentrations of people in recognisable communities. For example, over half of people on low income do not live in the 20% most deprived areas in Scotland. In some instances, therefore, it is necessary to consider deprivation as it affects communities of place or communities of interest.

'Communities of place' refers to people who are bound together because of where they reside, work, visit or otherwise spend a continuous portion of their time. For example, people in rural, remote and island areas face a particular set of circumstances which exacerbate disadvantage. Poorer people in those areas will have different experiences from better-off residents, but also from poorer people living in cities. Poverty is often hidden in smaller, rural, and/or island communities; cost of living and accessibility of transport, education, and employment impact more negatively on rural populations. According to research done by the Highlands and Islands Enterprise, an economic and community development agency for the north and west of Scotland, budgets that households need to achieve a minimum acceptable standard of living in remote rural Scotland are typically 10-40 percent higher than elsewhere in the UK. This premium is greatest for single people and families supporting children.^[40]

'Communities of interest' can refer to groups of people who share an experience. For example, consideration of the impact of strategic decisions on people who have experienced homelessness, or the care system, may help develop a deeper understanding of possible socio-economic impacts. Those who share one or more of the protected characteristics listed in the Equality Act 2010 can also be considered communities of interest. Those who share an identity – for example, lone parents – can similarly be communities of interest too.^[41]

4.8 Socio-economic background

Socio-economic background represents a mechanism by which disadvantage can persist across generations, essentially it refers to the structural disadvantage that can occur due to a parent's education, employment, and income. Low socio-economic background can be a causal factor behind higher rates of student absenteeism and low educational attainment^[42], poor physical and mental health^[43][44], and lack of social mobility^[45]. In terms of education and social mobility, low socio-economic background can result in lesser networking opportunities, lack of knowledge around employment opportunities, and reduced confidence in one's own abilities.