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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Want to know how you really behave as a doctor? Watch yourself on video

There is nothing quite like watching oneself at work to spur development – and videos can help us understand patients, too.

One of the most useful tools I have as a GP trainer is my video camera. Periodically, and always with patients’ permission, I place it in the corner of my registrar’s room. We then look through their consultations together during a tutorial.

There is nothing quite like watching oneself at work to spur development. One of my trainees – a lovely guy called Nick – was appalled to find that he wheeled his chair closer and closer to the patient as he narrowed down the diagnosis with a series of questions. It was entirely unconscious, but somewhat intimidating, and he never repeated it once he’d seen the recording. Whether it’s spending half the consultation staring at the computer screen, or slipping into baffling technospeak, or parroting “OK” after every comment a patient makes, we all have unhelpful mannerisms of which we are blithely unaware.

Videos are a great way of understanding how patients communicate, too. Another registrar, Anthony, had spent several years as a rheumatologist before switching to general practice, so when consulted by Yvette he felt on familiar ground. She began by saying she thought she had carpal tunnel syndrome. Anthony confirmed the diagnosis with some clinical tests, then went on to establish the impact it was having on Yvette’s life. Her sleep was disturbed every night, and she was no longer able to pick up and carry her young children. Her desperation for a swift cure came across loud and clear.

The consultation then ran into difficulty. There are three things that can help CTS: wrist splints, steroid injections and surgery to release the nerve. Splints are usually the preferred first option because they carry no risk of complications, and are inexpensive to the NHS. We watched as Anthony tried to explain this. Yvette kept raising objections, and even though Anthony did his best to address her concerns, it was clear she remained unconvinced.

The problem for Anthony, as for many doctors, is that much medical training still reflects an era when patients relied heavily on professionals for health information. Today, most will have consulted with Dr Google before presenting to their GP. Sometimes this will have stoked unfounded fears – pretty much any symptom just might be an indication of cancer – and our task then is to put things in proper context. But frequently, as with Yvette, patients have not only worked out what is wrong, they also have firm ideas what to do about it.

We played the video through again, and I highlighted the numerous subtle cues that Yvette had offered. Like many patients, she was reticent about stating outright what she wanted, but the information was there in what she did and didn’t say, and in how she responded to Anthony’s suggestions. By the time we’d finished analysing their exchanges, Anthony could see that Yvette had already decided against splints as being too cumbersome and taking too long to work. For her, a steroid injection was the quickest and surest way to obtain relief.

Competing considerations must be weighed in any “shared” decision between a doctor and patient. Autonomy – the ability for a patient to determine their own care – is of prime importance, but it isn’t unrestricted. The balance between doing good and doing harm, of which doctors sometimes have a far clearer appreciation, has to be factored in. Then there are questions of equity and fairness: within a finite NHS budget, doctors have a duty to prioritise the most cost-effective treatments. For the NHS and for Yvette, going straight for surgery wouldn’t have been right – nor did she want it – but a steroid injection is both low-cost and low-risk, and Anthony could see he’d missed the chance to maximise her autonomy.

The lessons he learned from the video had a powerful impact on him, and from that day on he became much more adept at achieving truly shared decisions with his patients.

This article first appeared in the 01 October 2015 issue of the New Statesman, The Tory tide