Abolishing the minimum wage for trainees has led to a slump in average pay and seen the gender pay gap widen, official data published today shows. BME trainees are among those to have suffered most.
An impact assessment published by the Solicitors Regulation Authority shows that trainees are £560 a year worse off on average after the regulator abolished minimum salary requirements in 2014. In real terms the decline equates to £580.
The data, based on analysis of 33,000 trainee solicitors between 2011 and 2016, also shows that the worst-paid trainees have been the worst hit. The bottom 2% of trainees in salary terms are being paid ’up to’ £13,104 per year, compared to £17,268 per year before the removal - a fall of 24%. For the bottom 5%, the ‘before’ and ‘after’ salaries are £17,675 and £15,406.
The main cause of the average fall, says the SRA, is cuts for trainees whose salary is in the lowest threshold. Black and Asian trainees are more likely to work in firms that pay less, such as sole practices and firms specialising in criminal, litigation or real estate work.
Overall, the mean pay gap between the salaries of black trainees and their white counterparts has fallen from £1,850 to £1,099, but ‘remains significant’.
The fall in pay in these sectors contrasts with a period in which trainee pay for solicitors working at City law firms has remained buoyant. Firms in this category now commonly pay over £40,000. What the SRA calls the ’prime’ tier - salaries falling within the range £35k-£45k - supplies 32% of all training contracts.
Across the profession the mean gender pay gap is £460, an increase of £128 on annual salary since the removal of the minimum wage. The median salary of female trainees (£24,866) is nearly £2,500 less than the median (£27,349) for male trainees. Women earn less regardless of type of firm or region. The regulator said its data ’did not provide evidence as to why there might have been a slight increase in the gap’.
Accentuating the positive, the regulator cites an ’upward trend’ in the number of training contracts for trainees enrolled between January 2011 and December 2016. ’It is difficult to say whether this is due to the removal of the minimum salary or if it reflects an increasing demand for trainees,’ the regulator adds.
The SRA report also stresses that most trainees (75% of respondents) and firms (82%) feel that the change has had a neutral impact. In 2012, when the SRA first decided to abolish the minimum, only half of trainees surveyed said their salaries would allow them to continue training. This had increased to 83% by 2016. Similarly, 55% of trainees felt their salary was too low when asked in 2012, compared with 46% in 2016.
The SRA said today’s data shows that trainees are now ‘significantly more positive’ about salary levels.
When the SRA’s rules came into force minimum salaries were set at £18,590 in central London and £16,650 outside. Had wages risen in kept up in real terms since then the London salary would now be about £19,800, while outside the capital it would stand at around £17,700.
Adele Edwin-Lamerton, solicitor and chair of the Law Society’s Junior Lawyers Division (JLD), said: ‘The SRA’s policy has led to inequalities of gender and race and the JLD would like to know what the SRA plan to do to address this widespread issue.
‘Financial worries are known to be detrimental to mental health. It is clear from the JLD’s recent resilience and wellbeing survey that junior lawyers are suffering with their mental health for a variety of reasons and financial burdens will no doubt have an additional impact’
She added: ‘The rise in the number of training contracts does not necessarily mean that people from low socioeconomic backgrounds are able to access them. Nor is it necessarily attributable to the fact that firms are now only required to comply with minimum pay legislation.’
Paul Philip, SRA chief executive commented: ‘Given the value of legal services to the UK and significant unmet legal need, it is encouraging that the number of trainees continues to grow and that they are more positive about their futures. Although the pay gap between different ethnic groups has reduced since the removal of the minimum salary, it is disappointing that the data again highlights that black and Asian solicitors are more likely to work in firms that pay less.’
The regulator reiterated that salary levels should be set by market forces and the profession itself. Trainees must be paid at least the statutory national minimum wage, which is set at £7.83 an hour for those aged 25 and over and £7.38 for 21-24-year-olds.