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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Meet Anne Marie Waters - the Ukip politician too extreme for Nigel Farage

In January 2016, Waters launched Pegida UK with former EDL frontman Steven Yaxley-Lennon (aka Tommy Robinson). 

There are few people in British political life who can be attacked from the left by Nigel Farage. Yet that is where Anne Marie Waters has found herself. And by the end of September she could well be the new leader of Ukip, a party almost synonymous with its beer-swilling, chain-smoking former leader.

Waters’s political journey is a curious one. She started out on the political left, but like Oswald Mosley before her, has since veered dramatically to the right. That, however, is where the similarities end. Waters is Irish, agnostic, a lesbian and a self-proclaimed feminist.

But it is her politics – rather than who she is – that have caused a stir among Ukip’s old guard. Former leader Paul Nuttall has said that her views make him “uncomfortable” while Farage has claimed Ukip is “finished” if, under her leadership, it becomes an anti-Islam party.

In her rhetoric, Waters echoes groups such as the English Defence League (EDL) and Britain First. She has called Islam “evil” and her leadership manifesto claims that the religion has turned Britain into a “fearful and censorious society”. Waters wants the banning of the burqa, the closure of all sharia councils and a temporary freeze on all immigration.

She started life in Dublin before moving to Germany in her teens to work as an au pair. Waters also lived in the Netherlands before returning to Britain to study journalism at Nottingham Trent University, graduating in 2003. She subsequently gained a second degree in law. It was then, she says, that she first learnt about Islam, which she claims treats women “like absolute dirt”. Now 39, Waters is a full-time campaigner who lives in Essex with her two dogs and her partner who is an accountant.

Waters’s first spell of serious activism was with the campaign group One Law for All, a secularist organisation fronted by the Iranian feminist and human rights activist Maryam Namazie. Waters resigned in November 2013 after four years with the organisation. According to Namazie, Waters left due to political disagreements over whether the group should collaborate with members of far-right groups.

In April 2014, Waters founded Sharia Watch UK and, in January 2016, she launched Pegida UK with former EDL frontman Steven Yaxley-Lennon (aka Tommy Robinson). The group was established as a British chapter of the German-based organisation and was set up to counter what it called the “Islamisation of our countries”. By the summer of 2016, it had petered out.

Waters twice stood unsuccessfully to become a Labour parliamentary candidate. Today, she says she could not back Labour due to its “betrayal of women” and “betrayal of the country” over Islam. After joining Ukip in 2014, she first ran for political office in the Lambeth council election, where she finished in ninth place. At the 2015 general election, Waters stood as the party’s candidate in Lewisham East, finishing third with 9.1 per cent of the vote. She was chosen to stand again in the 2016 London Assembly elections but was deselected after her role in Pegida UK became public. Waters was also prevented from standing in Lewisham East at the 2017 general election after Ukip’s then-leader Nuttall publicly intervened.

The current favourite of the 11 candidates standing to succeed Nuttall is deputy leader Peter Whittle, with Waters in second. Some had hoped the party’s top brass would ban her from standing but last week its national executive approved her campaign.

Due to an expected low turnout, the leadership contest is unpredictable. Last November, Nuttall was elected with just 9,622 votes. More than 1,000 new members reportedly joined Ukip in a two-week period earlier this year, prompting fears of far-right entryism.

Mike Hookem MEP has resigned as Ukip’s deputy whip over Waters’ candidacy, saying he would not “turn a blind eye” to extremism. By contrast, chief whip, MEP Stuart Agnew, is a supporter and has likened her to Joan of Arc. Waters is also working closely on her campaign with Jack Buckby, a former BNP activist and one of the few candidates to run against Labour in the by-election for Jo Cox’s former seat of Batley and Spen. Robinson is another backer.

Peculiarly for someone running to be the leader of a party, Waters does not appear to relish public attention. “I’m not a limelight person,” she recently told the Times. “I don’t like being phoned all the time.”

The journalist Jamie Bartlett, who was invited to the initial launch of Pegida UK in Luton in 2015, said of Waters: “She failed to remember the date of the demo. Her head lolled, her words were slurred, and she appeared to almost fall asleep while Tommy [Robinson] was speaking. After 10 minutes it all ground to an uneasy halt.”

In an age when authenticity is everything, it would be a mistake to underestimate yet another unconventional politician. But perhaps British Muslims shouldn’t panic about Anne Marie Waters just yet.

James Bloodworth is editor of Left Foot Forward

This article first appeared in the 17 August 2017 issue of the New Statesman, Trump goes nuclear