As a Conservative MP, I believe that lower taxes stimulate growth and jobs, that smaller government is invariably better government and that governments must “ensure that work always pays” by making sure those in work are better off than those on benefits. I also believe in hard work. Yet, for too many people in our society, a hard day’s work no longer means a fair day’s pay.
Ever since the financial crash of 2008, the topic of “pay” has been dominated by the pay of those at the top. From golden hellos to golden handshakes, the discussion has often ignored those at the bottom. I sit on the advisory board of the High Pay Centre, alongside the Green MP, Caroline Lucas, and the TUC general secretary, Frances O’Grady. At the High Pay Centre, we have been making the case for corporate responsibility and pay restraint in the boardroom. It is now time for us to make the case for fairer pay at the bottom, too.
Britain is a country in which some workers earn so little that the government has to step in and provide aid. That is the system of tax credits we have; a subsidy by any other name and a £4bn one at that. How and why did we let it become acceptable for a full-time job not to pay enough to live on? The living wage isn’t just a wonkish idea – it’s the political world catching up with many Britons’ reality.
When the national minimum wage was adopted in 1998, many were sceptical. The fear was that it might hit the number of jobs available. There is ample evidence to show this is not the case. For instance, in 2012 the Institute for Social and Economic Research at the University of Essex studied the minimum wage and “found almost no evidence of significant adverse impacts on employment”. Today, the minimum wage is supported by all three mainstream parties and rightly so. Yet, for many, the minimum wage does not represent a fair wage.
There are some who have the same scepticism about the living wage – that it could penalise business and hold back growth. It may just be the old socialist in me but when did it become a hindrance rather than a duty for a business to look after its employees? The days of William Armstrong and Joseph Rowntree building houses for their workers and ensuring a decent standard of living may belong in a bygone age but surely some of those principles should still apply?
Some businesses already embrace the principle. In the US, the wholesale retail giant Costco has broken the mould: it pays its staff $11.50 an hour (£7.50), compared to the federal minimum wage of $7.25 (under £5). Costco’s chief executive, Craig Jelinek, made the point succinctly: “We know it’s a lot more profitable in the long term to minimise employee turnover and maximise employee productivity, commitment and loyalty.”
Businesses and organisations that have committed to paying the living wage include everyone from the big corporate beasts such as Deloitte and Barclays to Aquila Way, a housing association in Gateshead, north-east England. I have met with some of these accredited firms and they all talk of improved morale and productivity. One firm increased staff retention in one department by 65 per cent.
If those on the right won’t listen to the arguments of an old left-winger such as me, then, at the very least, they should listen to the HR director of Barclays, Dominic Johnson, who says “it makes sense for business”. The living wage doesn’t just work for business, it makes sense for the government, too. IPPR and the Resolution Foundation have found that even if only those employers that could easily afford to – the so-called “non-low-wage employers” – paid the living wage, the savings to the Treasury each year would be in the hundreds of millions. This would be the result of increased tax receipts, increased National Insurance contributions and savings on benefits such as tax credits.
Yet even enthusiasts have to accept that there remains a lack of detailed analysis of the effects of a living wage on individual sectors. I will be working hard to ensure that the government takes seriously the conclusions of the Living Wage Commission, chaired by John Sentamu, the Archbishop of York. It is vital that we monitor the economic effects of the living wage and demonstrate the benefits and the negatives of paying a living wage.
David Cameron was right when he said that here “is an idea whose time has come”. The living wage started off as a belief and became a campaign. It is now time for us in Westminster to return to our constituencies and make the case for our individual businesses to start paying the living wage.
Guy Opperman is the Conservative MP for Hexham