Research and analysis

Executive summary

Published 7 October 2024

This report presents findings from an international evidence review commissioned by the Department for Work and Pensions (DWP) to investigate policies and approaches to in-work progression in high-income countries other than the UK. The objective of the study was to present available evidence on how other countries have approached the issue of in-work progression to generate learning that might be transferable to the UK.

For the purpose of this study, in-work progression was defined as ‘raising in a sustainable way, an individual’s labour market earnings.’ However, to reflect the fact that progression can occur in a myriad of ways, this review also looked at other outcomes, including building skills, removing practical and financial constraints to progression, and improving job security. All of these intermediary outcomes may ultimately lead to higher pay.

This study was guided by 6 broad research topics that were underpinned by 14 different research questions. To answer these questions, 3 main methods were used: a targeted literature review to set out the policy context (Chapter 2), a rapid evidence assessment (REA) to identify and examine relevant policies and programmes (Chapter 3), and case studies featuring a deeper assessment of interventions identified in the review (Chapter 4). To ensure that the most current evidence was included, the rapid review was restricted to a search for results since 2014. The appendixes detail the methodology and inclusion and exclusion criteria applied in the search.

Progression and low pay: how the UK compares internationally

Chapter 2 provides a brief overview of how the UK compares to other countries in terms of low pay and progression. While international comparisons of low pay and progression can vary due to definitional and data issues, most sources identify the UK as a country with a large share of low-paid workers. While the UK has a strong record on moving people back into work, less support exists for people in low paid work, and research suggests that people in the UK often get trapped in a ‘low pay, no pay’ cycle.^{[footnote 1]}

A 2015 report examined how the UK compares to other EU countries across 4 different types of progression: earnings, hours, occupational, and contractual progression.^{[footnote 2]} While there is significant variability between countries across the different measures, in terms of earnings progression from low pay the UK is at the lower end of the distribution, ranked just 19th out of 22 countries.

Rapid Evidence Assessment: reviewing international progression policies Chapter 3 presents the results of the REA, which explored what other countries have done to address issues of low progression and low pay. A search of academic and grey literature ^{[footnote 3]} databases (2014 to 2019) yielded 630 sources, the titles and abstracts of which were screened, and 30 sources were selected for more detailed review. Of these, 17 sources focused on one or more specific progression-related interventions (23 interventions in total). The sources identified constituted a mix of levels of robustness, ranging from evaluations to survey data and policy reviews. Comparing the interventions for their effectiveness was limited by the methodological weakness, and any conclusions presented in this report can therefore only be seen as indicative.

The REA classified studies using a framework developed by McKnight et al. (2016), who identify 6 different categories of interventions: 1) education and training (18 programmes were reviewed in this category); 2) career coaching or counselling (16 programmes); 3) reducing labour supply constraints (5 programmes); 4) design of tax and in-work benefit systems (4 programmes); 5) employer-focused initiatives (4 programmes); and 6) statutory minimum wages (no programmes reviewed in this category).The majority of sources investigating in-work progression policies and/or interventions identified by this review were from the US. Other countries included Germany, the UK, Czech Republic, France, Japan, Lithuania, Netherlands, Spain and Sweden.

Of those studies that did reach a sufficient standard of evidence, the evidence base was strongest in terms of education and training and career coaching or counselling interventions. Reviewed studies included sectoral or industry focused training and job coaching interventions (principally from the US), and interventions to improve access to education and training for particular vulnerable subgroups (for example, single mothers and young people with disabilities in the US or insecure workers in Japan). These studies generally found positive impacts from training and coaching interventions, albeit often not across all outcome measures and all sites where the intervention was delivered.

Conversely, the evidence base was weakest in relation to policies related to wage floors, employment legislation, and reducing labour supply constraints. This was largely a result of a lack of evidence rather than directly negative findings from these interventions. No studies were identified and reviewed looking at the impact of wage floors. And while a number of interventions included provisions around reducing labour supply constraints (for example, providing funding for childcare or transport), study designs meant that it was not possible to isolate the impact of these forms of support on earnings progression.

Case studies: effective and promising policies and interventions

Chapter 4 delves deeper into a few selected interventions. This chapter reviews 3 case studies with a moderate to strong standard of evidence, and which have relevance to the UK context. These studies are:

• WorkAdvance, USA – Sector-focused training and coaching provided to unemployed and low-paid adults

• New York City Sector Focused Career Centres (SFCCs), USA – Sectoral employment programme supporting entry into 3 industries with good progression prospects

• WeGebAU, Germany – Government funded training provision for low-skilled employees, SME employees, and older workers.

The existing evidence shows that WorkAdvance participants were more likely to be employed than the control group, and in 3 out of 4 evaluated sites, participants had higher earnings (at 3-year follow-up), with the size of impact varying across sites. An evaluation of Sector-Focused Career Centers in New York City found that participants in NYC earned $5,300 more on average than matched participants in non-sector specific programmes. Finally, the German WeGebAu was found to have a positive impact on pay for low-skilled workers, but not for older workers (over 45) working in small and medium enterprises (SMEs). However, the existing evidence suggests that participation in the programme led to improved job stability and delayed retirement for older workers. Chapter 4 provides details on the key features of each intervention.

To provide a broader overview of the existing landscape, Chapter 4 further offers shorter summaries of 4 other interventions that seem promising, but where there is limited evidence of their effectiveness available thus far. These include firm-provided training for flexible and part-time workers in Japan; the ‘prime d’activité’ (or ‘activity bonus’), an in-work benefit in France; regulation of Temporary Agency Workers in Germany to equalise pay and conditions after 9 months; and the Women’s Economic Stability Initiative (WESI), which provides coaching and financial assistance to single mothers in the United States.

Summary

In summary, the report illustrates that in-work progression is a new and complex policy area that requires a holistic response, of which pay progression is just one piece of the puzzle. Based on the sources reviewed for this study, the following list presents the main points:

• The international evidence base is limited, but a number of countries are experimenting with different approaches: There are a number of US programmes that have reached a high standard of evidence, and this provides the UK with relevant information about what might work in the UK context. Outside of the US the evidence base is far weaker, but there are examples of countries using a range of approaches (for example subsidising training, and reforming in-work benefit systems) that could support progression.

• The evidence is mixed on who benefits most from progression interventions: The variability of interventions and study designs and general weakness of much of the evidence base means that a detailed understanding of which population subgroups benefit the most from progression interventions is not currently possible. However, there is evidence from a number of studies about the differential impacts on more or less disadvantaged groups. Again, however, the evidence is mixed. A number of studies suggest that more disadvantaged groups see the biggest gains – although the evaluation of New York’s Sector Focused Career Centers finds the reverse to be true.

• Achieving sustainable impacts on progression is difficult: Where well- evidenced studies do exist they often find that impact is not observed across all outcomes or locations. This suggests that achieving sustainable impact in this area is hard and can be heavily dependent on the context.

• A lot of the existing evidence centres on training interventions: The interventions reviewed in this report suggest that sector-specific approaches to training might be more successful than generic ones.

• The role of employers: In addition, the role of support and buy-in from employers are regularly included as critical success factors for progression interventions, which makes models that support ‘dual customer’ approaches an attractive option. Some of the contextual evidence from the targeted literature review also shows that the wider regulatory environment can play a key role in promoting quality employment and training, and supporting demand-side enablers of progression.

• The importance of quality employment: Providing an environment that is conducive to ensuring access to secure and high-quality employment is key to improving conditions for the low paid.

1. Hendra, R., Riccio, J.A., Dorsett, R., Greenberg, D.H., Knight-Hierro, G., Phillips, J., Robins, P.K., Vegeris, S., Walter, J., Hill, A., Ray, K. and Smith, J., (2011). ‘Breaking the low-pay, no-pay cycle: Final evidence from the UK Employment Retention and Advancement (ERA) demonstration.’ DWP Research Report No 765. ↩

2. Thompson, S. and Hatfield, I. (2015). ‘Employee Progression in European Labour Markets.’ Institute for Public Policy Research. ↩

3. The term ‘grey literature’ commonly refers to sources that are not produced by commercial publishers and may include research reports, working papers, policies, presentations, or reports produced by government departments, academics, business or industry. ↩