Why Labour should introduce a compulsory living wage

Requiring all employers to pay a living wage would stimulate the economy, save the state money and ensure that work always pays.

Ed Miliband has always stopped short of saying Labour would legislate for a living wage, preferring instead to throw his weight behind voluntary adoption of the scheme. But there’s no good reason to be afraid of making it compulsory for all employers to pay a wage large enough to meet the cost of living.

The unemployment costs would be relatively small

Before the National Minimum Wage (NMW) was introduced, it was said that it would significantly increase unemployment as firms would not be able to afford to take on workers. The idea of raising the NMW to a living wage has suffered from similar criticism. But modelling by the National Institute of Economic and Social Research (NIESR) suggests a mandatory living wage of £8.55 in London and £7.45 in the rest of the UK would reduce labour demand by 160,000 jobs. The report’s authors describe this effect as "surprisingly small" - in an active labour force of 32 million this amounts to around a 0.5 per cent increase in unemployment in exchange for millions of workers benefiting from higher wages.

It saves the state a lot of money

Low-wage employment has substantial costs to the public purse, which a living wage would reduce. Housing benefit, which accounts for 11 per cent of the total welfare spend, saw 90 per cent of its new claimants last year in work, and other in-work benefits like Working Tax Credit also effectively subsidise employers who pay a low wage. A living wage would mean the numbers who need these benefits would fall. The Resolution Foundation has calculated that paying all workers a living wage would bring in an extra £3.6bn to the Treasury each year in lower benefits and higher tax receipts. Since many of the workers affected would be in the public sector, the public wage bill would be £1.3bn higher, but there would still be a net increase in revenue of over £2bn to the Treasury, helping to reduce the deficit.

Any unemployment costs could be mitigated

Labour’s current policy to tackle unemployment is to subsidise private sector jobs to provide a compulsory jobs guarantee for all long-term unemployed workers. The stated cost of this policy is £1bn. But with a mandatory living wage bringing in an extra £2bn to the Treasury each year, this programme could be substantially extended – providing a real "employer of last resort" for people who are out of work for shorter periods as well. At the very least the £2bn would more than cover the cost of creating jobs for those projected to be priced out of the labour market, amounting to £12,500 for each of the 160,000 – a rather more extravagant subsidy than the one that would be needed.

It would provide an economic stimulus free to the public purse

One of the problems with the economy is that it is currently demand-constrained. Businesses are not investing, in part because there are fewer people with ready cash to buy their products, which rules out lower yield investment opportunities and dulls the profit motive central to capitalism. One of the reasons for this is depressed wages, which have continued to see substantial real-terms cuts, lagging behind inflation by eight per cent in the last five years. Substantial increases in wages could help lift domestic demand, and a living wage could thus act as a stimulus without a cost to the public purse.

It makes work pay

Political orthodoxy suggests that it’s important to make work pay, or people will opt to live on unemployment benefits. Whether this is true or not, at its core ‘making work pay’ seems a reasonable goal. But making people better off in work than out of work by reducing benefit rates cuts the incomes of the poorest in pursuit of this ideal. By contrast, higher wages incentivise work without harming the unemployed. Iain Duncan Smith’s Universal Credit is supposed to address this by reducing withdrawal rates of benefits, so those who take jobs don’t lose all their benefits instantly. But there are reports he has had problems getting as much Treasury money behind the plan as he’d like. A mandatory living wage, on the other hand, actually brings in money to the Exchequer and would present no such financial obstacles.

Ed Miliband addresses workers at Islington Town Hall on November 5, 2012 in London. Photograph: Getty Images.

Jon Stone is a political journalist. He tweets as @joncstone.

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Fake news sells because people want it to be true

The rise of bullshit, from George Orwell to Donald Trump.

When is a lie not a lie? Recently, the Daily Telegraph reported that university students had demanded that “philosophers such as Plato and Kant” be “removed from [the] syllabus because they are white”. Other outlets followed suit, wringing their hands over the censoriousness of today’s uninquiring young minds. The article generated an extraordinary amount of consternation click bait. Angry responses were written and hot takes were quick-fried and served up by outlets anxious  to join the dinner rush of  ad-friendly disapproval.

It’s a story that could have been designed to press every outrage button of the political-correctness-gone-mad brigade. It has students trying to ban things, an apparent lack of respect for independent thought and reverse racism. It seemed too good to be true.

And it was. In reality, what happened was far less interesting: the student union of the School of Oriental and African Studies (Soas) at the University of London had proposed that “the majority of philosophers on our courses” be from Asia and Africa, and that the Western greats be approached from a “critical standpoint”. Some might consider this a reasonable request, given that critical analysis is a component of most philosophy courses, and Soas has a long tradition of promoting the study of the global South. Yet a story about students declaring Kant irrelevant allows the Telegraph to despair for the youth of today and permits advertisers to profit from that despair.

People didn’t start pumping out this stuff because they decided to abandon journalistic ethics. They did so because such principles are hugely expensive and a hard sell. Even those of us who create and consume news can forget that the news is a commodity – a commodity with a business model behind it, subsidised by advertising. Rigorous, investigative, nuanced content, the sort that pays attention to objective facts and fosters serious public debate, is expensive to create. Talk, however, is cheap.

Fake news sells because fake news is what people want to be true. Fake news generates clicks because people click on things that they want to believe. Clicks lead to ad revenue, and ad revenue is currently all that is sustaining a media industry in crisis. Journalism is casting about for new funding models as if for handholds on a sheer cliff. This explains a great deal about the position in which we find ourselves as citizens in this toxic public sphere.

What has this got to do with Donald Trump? A great deal. This sticky, addictive spread of fake news has fostered a climate of furious, fact-free reaction.

Press outlets give millions of dollars of free coverage to Trump without him having to send out a single press release. The reality TV star is the small-fingered god of good copy. The stories write themselves. Now, the stories are about the threat to the future of journalism from the man who has just entered the Oval Office.

Trump’s first press conference in six months, held at Trump Tower in New York on 11 January, was – by any measure – extraordinary. He did not merely refuse to answer questions about unverified allegations that he had been “cultivated” by Russia. He lost his temper spectacularly with the assembled press, declaring: “You’re fake news! And you’re fake news!”

Trump did not mean that the journalists were lying. His attitude to the press is straight from the Kremlin’s playbook: rather than refute individual accusations, he attempts to discredit the notion of truth in journalism. The free press is a check on power, and Trump likes his power unchecked.

Writing in the Guardian in 2015, Peter Pomarantsev noted of Putin’s propaganda strategy that “these efforts constitute a kind of linguistic sabotage of the infrastructure of reason: if the very possibility of rational argument is submerged in a fog of uncertainty, there are no grounds for debate – and the public can be expected to decide that there is no point in trying to decide the winner, or even bothering to listen.”

If people lose trust in the media’s capacity to report facts, they begin to rely on what “feels” true, and the influence rests with whomever can capitalise on those feelings. Donald Trump and his team know this. Trump doesn’t tell it like it is. Instead, he tells it like it feels, and that’s far more effective.

Fake news – or “bullshit”, as the American philosopher Harry G Frankfurt termed it in a 2005 essay – has never been weaponised to this extent, but it is nothing new. George Orwell anticipated the trend in the 1930s, looking back on the Spanish Civil War. “The very concept of objective truth is fading out of the world,” he wrote. “Lies will pass into history . . . In Spain, for the first time, I saw newspaper reports which did not bear any relation to the facts, not even the relationship which is implied in an ordinary lie . . . In the past people deliberately lied, or they unconsciously coloured what they wrote, or they struggled after the truth, well knowing that they must make many mistakes; but in each case they believed that ‘facts’ existed and were more or less discoverable.”

This is the real danger of fake news, and it is compounded by a lingering assumption of good faith on the part of those who believe in journalistic principle. After all, it’s impossible to prove that a person intended to deceive, and that they didn’t believe at the time that what they said was true. Trump may believe in whatever “facts” he has decided are convenient that day. When he insists that he never mocked a disabled reporter, whatever video evidence may exist to the contrary, he may believe it. Is it, then, a lie?

Of course it’s a lie. People who have no respect for the concept of truth are still capable of lies. However, they are also capable of bullshit – bullshit being a register that rubbishes the entire notion of objective reality by deeming it irrelevant. The only possible response is to insist, and keep insisting, that the truth still means something.

Laurie Penny is a contributing editor to the New Statesman. She is the author of five books, most recently Unspeakable Things.

This article first appeared in the 19 January 2016 issue of the New Statesman, The Trump era