Scotland's National Strategy for Economic Transformation

6. A Fairer and More Equal Society

Significantly reducing poverty boosts our economy, but achieving it requires better wages and fair work. We will ensure that work provides a sustainable standard of living and a genuine route out of poverty.

6.1 Our Aim

To reorient our economy towards wellbeing and fair work, to deliver higher rates of employment and wage growth, to significantly reduce structural poverty, particularly child poverty, and improve health, cultural and social outcomes for disadvantaged families and communities.

6.2 The Opportunity

Our aim is to create a society that is thriving across economic, social and environmental dimensions, and that delivers prosperity for all Scotland's people and places. A fair and equal society and a wealthier, greener economy are mutually reinforcing.^[20] Economies that have stronger productivity growth also have higher wellbeing – good businesses recognise that well-paid and respected workers are productive workers.

Scotland has the opportunity over the next ten years to build a successful economic model that ensures that work pays for everyone through better wages and fair work. In this way, and in tandem with other government interventions, like the Scottish Child Payment, economic opportunities can significantly reduce levels of child poverty and in-work poverty, particularly for women, and eradicate low pay. We can improve life chances, achieve equality of opportunity for all to access and progress in work whilst at the same time mitigating the risk to employment through a just transition to net zero.

A fully-functioning childcare sector is a pivotal part of Scotland's national economic infrastructure, and will be vital to enabling parents and carers to return to work, or increase their working hours. We have committed to building a system of wraparound school age childcare, offering care before and after school and in the holidays, which will be free to families on the lowest incomes – as well as expanding the provision of funded early learning to all one- and two-year-olds, starting in the course of this Parliament with children from low-income households.

We have the opportunity to design and deliver employability services tailored for local areas and people, using place-based and person-centred design, building on our No One Left Behind approach.

Tackling poverty will substantially increase Scotland's economic performance, increasing the wellbeing of our citizens and enabling our business to increase their turnover. Tackling child poverty is an economic as well as a moral imperative. The cost of child poverty in Scotland was estimated to be more than £3 billion in 2021.^[21] Around half of this cost is attributed to lower productivity and higher unemployment levels of those who have grown up in poverty.

The evidence shows that while Scotland (along with Northern Ireland) has the lowest child poverty rate in the UK at 24% (compared to England 30%, Wales 31%), to meet our statutory 2030 target to have less than 10% of children living in relative poverty, around 140,000 children will have to be lifted out of poverty. 15.2% of employees still earn less than the real Living Wage, although this number has reduced by around a quarter in recent years.

Despite progress in reducing the gender pay gap (reduced from 18% in 2000 to 3.6% in 2021), more women than men still earn less than the real Living Wage. There are significant inequalities in economic and social outcomes including the disability employment gap (35.5 percentage points), and ethnicity pay gap, and a significant gap in healthy life expectancy for those in the most deprived areas (20 years).

We need to ensure everyone in Scotland earns at least the real Living Wage as a minimum. We recognise that we will not tackle Scotland's deep-seated poverty challenges without transforming the sectors where low pay or precarious work are most prevalent. Moreover, we believe that business models that rely on low pay are not sustainable and are incompatible with our vision and strategic direction. We will use all levers at our disposal and will work with business to address this issue. The use of conditionality on Fair Work practices that is enshrined in the bidding process for Scotland's greenports, ensuring that no bidder who cannot demonstrate adherence to Fair Work will win, is a model of how we will roll out these measures.

All the programmes in the strategy are interconnected, while our initiatives on promoting entrepreneurial culture in under-represented groups, community wealth building, and skills investment for working age people in poverty will contribute to a fairer and more equal society, this programme focuses on the opportunities from Fair Work and structural barriers to participation in the labour market.

6.3 Foundations of Success

Our ability to directly effect change in the labour market is limited as long as employment law remains reserved to Westminster. Nevertheless, we have used the powers that we do have to ensure that the economy is fair and inclusive and that people have the skills and capabilities they need to access good jobs. We have done this through our policies on Fair Work Nation, our No One Left Behind approach with Local Government and the third sector and our action plans to tackle the gender and disability pay gaps. Our Young Person's Guarantee will ensure every person aged between 16 and 24 will have the opportunity to study; take up an apprenticeship, job or work experience; or participate in formal volunteering.

Through Fair Work First we are applying Fair Work criteria to public sector contracts and grants to ensure that government funding serves to tackle in-work poverty and low wages by raising the incomes of the lowest paid and improving terms and conditions for all.

We will ensure that Fair Work principles and conditionality form the foundation of our approach to a just transition, starting with the Energy Strategy and Just Transition Plan, the Agriculture and Land Use Plan, and forthcoming regional and sectoral plans.

In August 2021 we launched a Living Hours Accreditation scheme with the Poverty Alliance to drive progress towards security of income and away from in-work poverty. In 2021 we took our commitment further in the Adult Social Care sector by providing funding to take pay for direct carers above the real Living Wage, with a minimum pay floor also set for 2022/23 that continues to go beyond the real Living Wage.

Our first Tackling Child Poverty Delivery Plan (2018-22) set out three key drivers to reducing child poverty, including increasing household incomes from work and earnings, reducing household costs and maximising incomes from social security. It also set out the six priority family types more likely to experience child poverty.^[22]

Our existing employability and wider Fair Work action is a key part of this strategy, supporting parents to access work and to progress within the labour market – supported by holistic employability support, flexible working opportunities, sufficient working hours and payment of the real Living Wage. We will build on this within our next delivery plan to be published in March 2022 to ensure that work offers an effective and sustainable route out of poverty for families.

We believe that a progressive approach to industrial relations and to trade unionism is at the very heart of a fairer, more successful society. Trade unions are key social partners in delivering our economic and social aspirations. Accordingly, we recognise the importance of unions and collective bargaining in raising worker wellbeing and promoting progressive and fair workplace practices. The best Fair Work outcomes will be achieved where employers, workers, unions, government, agencies and third sector work together and take ownership for delivery of Fair Work collectively. In some key sectors this will involve enhancing the capacity to take collective decisions through forums involving employers, workers, unions and other partners negotiating minimum standards on pay, conditions and other aspects of Fair Work infrastructure.

Our Covid Recovery Strategy focuses on the efforts we require to tackle inequality and disadvantage. If our people are secure and have firm foundations then our communities, businesses, economy and society will be more resilient. Our third sector organisations have led the way in adopting innovative, person-centred, holistic services which wrap around families and individuals. The aims of the strategy are to: address the systemic inequalities made worse by Covid; make progress towards a wellbeing economy; and accelerate inclusive person-centred public services.

A Fairer Scotland for Disabled People: Employment Action Plan sets out key actions the Scottish Government will take to reduce the disability employment gap by at least half by 2038. We announced in December 2021 that we are doubling the Scottish Child Payment from April 2022 and we remain committed to extending Scottish Child Payment to children under 16 by the end of 2022. We have also committed to build a system of wraparound school age childcare, offering care before and after school and in the holidays, which will be free to families on the lowest incomes.

6.4 Our Programme of Action

Project 14: Tackle Poverty Through Fairer Pay and Conditions

Who / We will

Government and Public Sector

Apply Fair Work conditionality to grants, requiring payment of real Living Wage, and channels for effective workers' voice by summer 2022, and determine how these conditions can be applied to non-departmental public bodies. Fair Work conditionality will be further extended with clear standards and minimum requirements to cover all forms of Scottish Government support within the limits of devolved competence in line with the landmark agreement with the Scottish Green Party. We will use all levers at our disposal to deliver on this commitment – including the use of grants, reliefs and licencing provisions

Government and Public Sector

Deliver on the commitment to require payment of the real Living Wage in Scottish Government contracts from October 2021, including the forthcoming suite of new construction frameworks, starting with the £600 million Civil Engineering Framework.

Government, Public Sector, Business and Partners

Work with employers and trade unions in sectors where low pay and precarious work can be most prevalent (including leisure and hospitality, and early learning and childcare) to deliver sectoral Fair Work agreements, in partnership with industry and trades unions, that deliver payment of the real living wage, better security of work, and wider "fair work first" standards. We will also promote the benefits of collective bargaining to achieve higher standards of pay, better security of work and greater union representation.

Business and Partners

Build on the findings from the Business Purpose Commission Report in Spring 2022, to inform how businesses can deliver positive impacts on prosperity, wellbeing – including tackling child poverty – and environmental sustainability. This will recognise that businesses which take a long term (inter-generational) view of their stakeholder commitments fare better in times of crisis, including during the pandemic. It will also promote the stakeholder capitalism model with business leaders, encouraging businesses to see employees, communities and citizens as stakeholders as well as consumers and where businesses are rooted in their communities.

Project 15: Eradicate Structural Barriers to Participating in the Labour Market

Who / We will

Government and Public Sector

Set out how we will support parents to increase their incomes from employment as part of cross-government action to deliver upon the ambitious targets set through the Child Poverty (Scotland) Act 2017 within the next Tackling Child Poverty Delivery Plan to be published by the end of March 2022.

Government and Public Sector

Simplify the employability system by implementing No One Left Behind, combining funding streams and transferring investment from national to local governance to enable the delivery of person-centred, place-based integrated support. Fair Start Scotland contracts end in March 2023, offering significant opportunity for further investment through No One Left Behind.

Government and Public Sector

Ensure that Every Contact Counts in delivering an aligned and integrated offer of support for those seeking to move towards, into or progressing within the labour market. In this way we will ensure that individuals and families have access to the advice and services they need to thrive, including housing, health, affordable and flexible childcare and transport offers.

Government and Public Sector

Take further steps to remove barriers to employment and career advancement for disabled people, women, those with care experience and people from minority ethnic groups. We will set these out the forthcoming refreshed 'A Fairer Scotland for Disabled People: Employment Action Plan' and the Gender Pay Gap Action Plan, and a new ethnicity pay gap strategy and plan.

Government and Public Sector

Build on the principles of the Young Person's Guarantee, developing an all age guarantee of support for those most disadvantaged in the labour market, with an initial focus on parents from the six priority family groups at risk of child poverty.

Government and Public Sector

Establish a Centre of Expertise in Equality and Human Rights within Scottish Government, advancing our understanding and embedding equality and human rights within the economic policy-making process, as agreed in the Economy Recovery Implementation Plan.