The Living Wage

Today’s guest post is from Jax, who blogs at Making It Up and tweets as @liveotherwise. She describes herself as “a home educating mother of four, working from home around the children on wordpress websites for small businesses and spending far too much time blogging, and ranting on twitter about inequality.” 


There’s been an awful lot written the last few days about benefit cuts and how it’s the only way to make work pay. On top of that there’s been some suggestion that the government is thinking of cutting the minimum wage. This seems to me bizarre – surely the best way to make work pay is to actually make it pay a decent amount. A fair day’s wage for a fair day’s work or some such. Something like perhaps the living wage?

From Citizens UK:

“The Living Wage is a number. An hourly rate, set independently, every year (by the GLA in London). It is calculated according to cost of living and gives the minimum pay rate required for a worker to provide their family with the essentials of life. In London the current rate is £8.55 per hour. Outside of London the current rate is £7.45 per hour.”

We’re told that in May 2010, David Cameron said the living wage is an idea ‘Whose time has come’.  In 2012 Ed Miliband declared that if Labour get back into government, Whitehall contracts will only go to firms paying the living wage. (The government’s response was that this might break EU law. Sigh.)

But surely, in these times of austerity, increasing pay is an awful idea, and firms just can’t manage it?

Well, I found a report from the Resolution Foundation that thinks they very much can. Comments like “many large firms facing an impact on their wage bill as a result of introducing the living wage of less than one per cent” make it clear that firms claiming they’d be bankrupted are just not telling the truth. There are obvious benefits to increasing pay – increased worker loyalty, less churn, which in turn means less training and recruitment costs. More than that though, the benefit to the country in terms of higher NIC and tax payments, along with a lower tax credit bill means that the authors “estimate that the Treasury would achieve gross savings of around £3.6 billion if the living wage was universally applied”.

Now that seems like a stunningly good idea. They are against legislating for the living wage as they feel that universal requirement for it would result in around 160,000 job losses. And it wouldn’t solve all problems – a number of low paid workers, particularly part timers, would still need tax credits to bump their income up to an acceptable level.

But it would make work pay, return self respect to a large number of people currently tarred with the media and government rhetoric as scroungers and simplify the Universal Credit system which says that those on low pay or working low hours will be monitored and encouraged to increase their income or face sanctions. (Actually, I find that slightly horrifying. Will caring for children be an acceptable reason to work part time? Given that those earning under £10,000 aren’t getting the increased assistance with childcare costs, where’s the incentive for them to even attempt to find work? But couples earning up to £300,000 between them are. Bizarre.)

Is Living Wage the answer? I don’t think it’s the only one. But I think it’s a start.


2 responses

  1. I completely agree with you, Jax. There’s a huge shortfall in this country between what people are earning and what they need to live and, quite frankly, making it a ‘benefits’ issue by making up the shortfall with Tax Credits and such is bizarre in the extreme when, as you’ve illustrated, it needn’t be if everyone was being paid fairly.

    There’s been a bit of a debate raging on my Facebook status since yesterday, which started about Her Unholiness, Maggie Thatcher, and someone made the comment that ‘everyone has the chance to better themselves’, which is true, providing that you win the postcode lottery and can afford to live near decent schools, can afford the prohibitively high tuition fees for higher education and then have a job to go into once you’ve spent a minimum of three years running up debts. This all ties in with your point, as far as I’m concerned, as the job market in the country is dire and we have graduates taking admin roles and working for a pittance, unable to repay loans and grants and wondering why the hell they bothered.

    It’s very easy to see why we have such a culture of disenfranchised youth in this country.

  2. Oh it absolutely would be a start. Big business will always try and find a way around paying workers a fair and decent wage, and however much a role you think the state should or shouldn’t play in the affairs of labour market regulation, I think maintaining a wage floor is absolutely essential.

    Breaking it down, there are two opposing sets of self-interest. The workers want as much pay as possible for their labour, and companies want to pay them as little as possible. Unfortunately, one side has all the power, so it stands to reason that government must step in to ensure a fair level is set. Especially in a climate where there are so few jobs that people will accept or stay in jobs, even where it’s not meeting their minimum financial needs (hence the need for working tax credits).

    You are absolutely right that the welfare ‘burden’ (what rot) would fall in the case of a living wage, but it is after all, business who would pay in the form of a reduction in profit margins. And that wouldn’t wash with shareholders, or the inability to pay top executives exorbitant bonuses. After all, why should they regulate themselves when the taxpayer can subsidise their costs and margins (essentially what we are doing).

    So again, it is simple. Companies need to pay their staff reasonably, with the government ensuring that they do. And much as they protest about not being able to afford it, when it comes being forced to pay out proper wages or scale back operations, I’ll bet you’d find their bluff called.

    As for the interests of the cabinet/ruling classes being allied with big business and not the worker, well, that’s 10 more paragraphs worth…. 😉

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