Living wage – coming to a city near you

The challenges are real, but the living wage chimes with the public mood.

The last time a letter left on a desk caused such a stir it involved an exchange between two senior politicians about the future of the country’s finances. This time the note was from a group of Whitehall cleaners to Iain Duncan Smith asking him to make good on his commitment to make work pay and make his department, DWP, a living wage employer. The fact that it so caught the public mood says something about how the question of low pay has risen in salience.  

This is in no small part due to the success of the living wage campaign, a grass-roots movement formed just over a decade ago, to push for a decent wage – above the minimum wage - for workers. It has helped shine a light on the rising problem of in-work poverty. In an era when there are many structural forces bearing down on low pay – from shifts in technology and trade to the continued demise of collective bargaining and the real terms falls in the minimum wage - the momentum behind the campaign for a living wage is a rare example of at least some countervailing pressure.

Yet for all the verve and campaigning success it is still the case that only a relatively small number of people are getting paid a higher wage as a result of working for a living wage employer. For example, in London it is estimated that around 650,000 employees are paid less than the London living wage (£8.30 per hour) yet only around 10,000 have gained an accredited living wage since 2005. Look at the national picture, where a total of six million employees are being paid less than a living wage, and the scale of the low pay challenge becomes clear.

None of which is to say that progress has not been made - thousands of low-paid workers will attest to the difference a living wage has made to their lives – just that the living wage faces a difficult set of challenges as it comes of age.

First, there is the need for the living wage to reach out beyond the public sector and the select parts of the private sector (relatively small numbers of high-profile financial and legal firms) where it currently resides into more mainstream employers. So it is timely that a new report  from the Resolution Foundation and IPPR estimates the impact on the wage bill of large firms across different sectors and challenges some prevailing assumptions. In key sectors like banking, construction, food production and communications - where roughly a million people in total work below the living wage – the typical impact of paying a living wage on the wage bill of large employers is pretty modest at around 1% (and that assumes a knock-on effect on wage differentials for those earning above the living wage).

Average firm-level wage bill increase in different sectors

Source: Resolution Foundation

Of course, the precise cost of a living wage will vary from employer to employer but figures of this size should be absorbable.

Second, is the need to make real progress beyond London where the campaign has traditionally been anchored. The US experience shows how campaigns can move quickly from one city to another, as was the case when the living wage movement first succeeded in securing a higher wage floor in Baltimore in the early 1990s and then quickly spread elsewhere. In the UK we’ve seen the emergence of many new city initiatives over the last year or so - Sheffield, York, and Newcastle have all set up Fairness Commissions following on from the experience in Islington - with the aim of promoting fairer pay across local public and private sectors. It remains to be seen what these processes will achieve but so far it appears that a healthy degree of civic competition is proving a useful spur – and the newly expanded base of Labour-led authorities is only likely to generate more interest.

Third, is the need to ensure that being ambitious about the potential of the living wage doesn’t mean being unrealistic about tax credits. Contrary to what many think (though not the main campaign groups) the living wage is nowhere near high enough to ensure a typical household with children can live independently of state support: indeed the level of the living wage has always been premised on full take-up of in-work tax credits. If it didn’t then the London living wage, for example, would rise from £8.30 an hour to an eye-popping £10.40.  

Finally, there is an unresolved conundrum, both for campaigners and sympathetic politicians, as to the role government should play in expanding coverage of the living wage. This is about philosophy as much as policy. Pure voluntarism, which has been the essence of the campaign to date, may well mean relatively slow progress. Too much statism, for instance through calls for legislation – effectively replacing the minimum wage with a living wage – or expensive tax incentives for employers, would, however, contravene the character of the living wage campaign which has been rooted in a civic process to get employers to take responsibility themselves for paying a decent wage on ethical grounds.  The chasm that exists between relying on moral suasion on the one hand, and top down legislation on the other, needs to be better explored.

While these challenges are real, they all arise from rare success. The living wage is an idea that chimes with the times, allied to a label that works, rooted in a progressive argument that doesn’t rely primarily on more state spending. And that puts it in a very small category indeed.

Many working in key sectors like construction are working below the living wage. Photograph: Getty Images

Gavin Kelly is a former adviser to Downing Street and the Treasury. He tweets @GavinJKelly1.

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The SNP thinks it knows how to kill hard Brexit

The Supreme Court ruled MPs must have a say in triggering Article 50. But the opposition must unite to succeed. 

For a few minutes on Tuesday morning, the crowd in the Supreme Court listened as the verdict was read out. Parliament must have the right to authorise the triggering of Article 50. The devolved nations would not get a veto. 

There was a moment of silence. And then the opponents of hard Brexit hit the phones. 

For the Scottish government, the pro-Remain members of the Welsh Assembly and Sinn Féin in Northern Ireland, the victory was bittersweet. 

The ruling prompted Scotland’s First Minister, Nicola Sturgeon, to ask: “Is it better that we take our future into our own hands?”

Ever the pragmatist, though, Sturgeon has simultaneously released her Westminster attack dogs. 

Within minutes of the ruling, the SNP had vowed to put forward 50 amendments (see what they did there) to UK government legislation before Article 50 is enacted. 

This includes the demand for a Brexit white paper – shared by MPs from all parties – to a clause designed to prevent the UK reverting to World Trade Organisation rules if a deal is not agreed. 

But with Labour planning to approve the triggering of Article 50, can the SNP cause havoc with the government’s plans, or will it simply be a chorus of disapproval in the rest of Parliament’s ear?

The SNP can expect some support. Individual SNP MPs have already successfully worked with Labour MPs on issues such as benefit cuts. Pro-Remain Labour backbenchers opposed to Article 50 will not rule out “holding hands with the devil to cross the bridge”, as one insider put it. The sole Green MP, Caroline Lucas, will consider backing SNP amendments she agrees with as well as tabling her own. 

But meanwhile, other opposition parties are seeking their own amendments. Jeremy Corbyn said Labour will seek amendments to stop the Conservatives turning the UK “into a bargain basement tax haven” and is demanding tariff-free access to the EU. 

Separately, the Liberal Democrats are seeking three main amendments – single market membership, rights for EU nationals and a referendum on the deal, which is a “red line”.

Meanwhile, pro-Remain Tory backbenchers are watching their leadership closely to decide how far to stray from the party line. 

But if the Article 50 ruling has woken Parliament up, the initial reaction has been chaotic rather than collaborative. Despite the Lib Dems’ position as the most UK-wide anti-Brexit voice, neither the SNP nor Labour managed to co-ordinate with them. 

Indeed, the Lib Dems look set to vote against Labour’s tariff-free amendment on the grounds it is not good enough, while expecting Labour to vote against their demand of membership of the single market. 

The question for all opposition parties is whether they can find enough amendments to agree on to force the government onto the defensive. Otherwise, this defeat for the government is hardly a defeat at all. 

 

Julia Rampen is the editor of The Staggers, The New Statesman's online rolling politics blog. She was previously deputy editor at Mirror Money Online and has worked as a financial journalist for several trade magazines.