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On the living wage, large employers must step up to the mark A living wage can work. Here's how
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Eleven years after it was revived by a broad-based community campaign in London's East End, the living wage is now a fixture of our national policy debate. Indeed, few discussions about the ongoing squeeze on living standards are complete without it being floated as a solution. And with good reason: at a time when powerful forces are bearing down on wages at the bottom end of the labour market, the living wage is a rare example of countervailing pressure and one that has already delivered tangible wage gains for thousands of low-paid workers.Eleven years after it was revived by a broad-based community campaign in London's East End, the living wage is now a fixture of our national policy debate. Indeed, few discussions about the ongoing squeeze on living standards are complete without it being floated as a solution. And with good reason: at a time when powerful forces are bearing down on wages at the bottom end of the labour market, the living wage is a rare example of countervailing pressure and one that has already delivered tangible wage gains for thousands of low-paid workers.
Yet in many ways, the concept has generated more heat than light. There is limited understanding of how living wages are calculated, only the most cursory analysis of their possible effects on incomes, employment or employer costs, and little practical sense of what role government should have, if any, in extending living wage coverage.Yet in many ways, the concept has generated more heat than light. There is limited understanding of how living wages are calculated, only the most cursory analysis of their possible effects on incomes, employment or employer costs, and little practical sense of what role government should have, if any, in extending living wage coverage.
A new report from the Resolution Foundation and the Institute for Public Policy Research provides some much-needed illumination as well as a series of practical proposals to take the living wage forward. It makes clear that living wages could be extended to significantly more low-paid Britons without affecting employment and that wider coverage would bring considerable benefits – not least to the public purse.A new report from the Resolution Foundation and the Institute for Public Policy Research provides some much-needed illumination as well as a series of practical proposals to take the living wage forward. It makes clear that living wages could be extended to significantly more low-paid Britons without affecting employment and that wider coverage would bring considerable benefits – not least to the public purse.
Yet it also highlights the scale of the challenge: for all the success of the living wage campaign to date, only 45,000 out of a total of nearly 5 million low-paid workers in the UK – one in five of all employees – have secured a higher wage as a result of a living wage initiative. Securing more rapid progress will require a new realism about the role of living wages in tackling low pay, and efforts focused on where they will be most effective. What then needs to happen?Yet it also highlights the scale of the challenge: for all the success of the living wage campaign to date, only 45,000 out of a total of nearly 5 million low-paid workers in the UK – one in five of all employees – have secured a higher wage as a result of a living wage initiative. Securing more rapid progress will require a new realism about the role of living wages in tackling low pay, and efforts focused on where they will be most effective. What then needs to happen?
First, the government must start to lead by example. It is now nearly three years since David Cameron declared the living wage "an idea whose time had come" yet little has been done to turn words into deeds. There are clear reasons not to create statutory living wage legislation, which would almost certainly impact on employment, and erode the essence of an idea that is rooted in the grassroots mobilisation of low-paid workers and community groups. But national and local government can do much more, such as: paying directly employed staff the living wage – as scores of councils are already doing – wherever possible, using its leverage as a procurer of billions of pounds of private sector services to drive up wages for subcontracted staff, and intervening in innovative ways to support non-state living wage initiatives.First, the government must start to lead by example. It is now nearly three years since David Cameron declared the living wage "an idea whose time had come" yet little has been done to turn words into deeds. There are clear reasons not to create statutory living wage legislation, which would almost certainly impact on employment, and erode the essence of an idea that is rooted in the grassroots mobilisation of low-paid workers and community groups. But national and local government can do much more, such as: paying directly employed staff the living wage – as scores of councils are already doing – wherever possible, using its leverage as a procurer of billions of pounds of private sector services to drive up wages for subcontracted staff, and intervening in innovative ways to support non-state living wage initiatives.
Second, there is an urgent need for the living wage to make meaningful inroads into the private sector, where four in five low-paid workers reside. If living wages become a purely public sector phenomenon (as they have in the United States), the campaign will have failed. In-work support for low earners costs the public purse as much as £4bn a year through in-work cash transfers, so the government has every incentive to amend the UK corporate governance code so that employers whose business models are premised on extensive numbers of low-paid workers can be easily identified. Yet ultimately the onus is on large employers who can easily afford to pay higher wages to step up to the mark. The number of living wage employers continues to grow, proving that even in today's economy there are opportunities for leadership.Second, there is an urgent need for the living wage to make meaningful inroads into the private sector, where four in five low-paid workers reside. If living wages become a purely public sector phenomenon (as they have in the United States), the campaign will have failed. In-work support for low earners costs the public purse as much as £4bn a year through in-work cash transfers, so the government has every incentive to amend the UK corporate governance code so that employers whose business models are premised on extensive numbers of low-paid workers can be easily identified. Yet ultimately the onus is on large employers who can easily afford to pay higher wages to step up to the mark. The number of living wage employers continues to grow, proving that even in today's economy there are opportunities for leadership.
Third, the living wage campaign also has to adapt. There is a world of difference between winning small living wage victories among high-profile finance and legal firms and persuading major, low-paying private sector employers to commit. Meeting this challenge means ensuring that the method by which living wages are calculated is consistent, robust and transparent and that the institutions and governance underpinning the Living Wage Foundation are strengthened. There is, for example, a clear case for bringing the calculation method underlying the London Living Wage into line with that underpinning the UK Living Wage, and for supporting an independent research unit, based in academia or in Whitehall, to conduct rigorous analysis of the costs and benefits of living wages in different sectors of the economy.Third, the living wage campaign also has to adapt. There is a world of difference between winning small living wage victories among high-profile finance and legal firms and persuading major, low-paying private sector employers to commit. Meeting this challenge means ensuring that the method by which living wages are calculated is consistent, robust and transparent and that the institutions and governance underpinning the Living Wage Foundation are strengthened. There is, for example, a clear case for bringing the calculation method underlying the London Living Wage into line with that underpinning the UK Living Wage, and for supporting an independent research unit, based in academia or in Whitehall, to conduct rigorous analysis of the costs and benefits of living wages in different sectors of the economy.
There is no single, simple policy ruse that will ensure all low-paid workers receive a decent wage. But as a rallying cry for decent pay above the national minimum, the living wage is an idea that has caught the imagination of policymakers and the public alike. Its further advance is both possible and desirable. But it cannot be secured through either pure volunteerism or Whitehall diktat. The advance of the living wage will require partnership between business, workers and civil society, and a mixture of approaches drawing on greater transparency, persuasion and public pressure. None of it will be easy – but then nothing worth fighting for ever is.There is no single, simple policy ruse that will ensure all low-paid workers receive a decent wage. But as a rallying cry for decent pay above the national minimum, the living wage is an idea that has caught the imagination of policymakers and the public alike. Its further advance is both possible and desirable. But it cannot be secured through either pure volunteerism or Whitehall diktat. The advance of the living wage will require partnership between business, workers and civil society, and a mixture of approaches drawing on greater transparency, persuasion and public pressure. None of it will be easy – but then nothing worth fighting for ever is.