The Living Wage: an idea whose time has come

Even Boris Johnson sees the benefits. 

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Every political argument has two sides. With the Living Wage though, it’s quite simple. People either choose to pay a wage it is possible to live on, or they choose to offer poverty pay which the state currently tops up in order that families can make ends meet.

KPMG’s report The Living Wage: an economic impact assessment published this weekend ahead of the formal announcement of the new rates today got headlines about the increase to around six million people in the UK paid below a Living Wage. Beyond the headlines, however, it is a valuable contribution to the debate about a voluntary versus a mandatory Living Wage, finding that if businesses and government paid it there would be a net benefit to government in welfare savings. The money saved, which KPMG estimates to be £1.7bn, could be used to help employers facing the sharpest increase in wage costs. The overall figure saved in benefits is higher but KPMG also estimates that the additional cost to the government of paying at least the living wage would be £2.9bn.

As the biggest corporate sponsor of the Living Wage Foundation, KPMG has long been associated with the voluntary approach and, indeed the report outlines the cost of universal voluntary adoption (£11.1bn or 1.3 per cent of the national wage bill).

There has been a steady stream of household names signing up on a voluntary basis with recent successes including Premier League football clubs, Lidl and Ikea. However despite some victories, poverty pay is on the increase.

In a way, the Chancellor’s actions in July’s budget may unintentionally – on his part at least - lead to a shift in the debate.   When the ‘National Living Wage’ is phased in from next April, it’s starting level will be over £2 lower than the new rate for the current London Living Wage (£9.40) and over a pound less than the new UK rate (£8.25). When Osborne cynically attempted to steal the Living Wage mantle he gave employers a get-out clause and will potentially – and probably - discourage employers from paying a true living wage. In this context, and given KPMG at least appears to believe the economic sky won’t fall in if the minimum wage is set at a genuine living wage rate, it seems increasingly likely the debate and campaign will shift towards making the National Living Wage do what it says on the tin.

The truth is the Living Wage is about much more than a branding exercise. There is no dignity in work if work does not pay enough to live on, or if the only way you can increase your income is to work longer hours which many people in low paid work are already doing.

The Tories nationally are out of step with the population on this. For all his faults the Mayor of London, Boris Johnson gets it. Or at least he gets that there is popularity to be gained by appearing to vocally support the London Living Wage. Sadly, while that skin deep support might extend to press releases, it doesn’t translate into anything more than token gesture actions.

Take the Mayor’s recent letter writing campaign to get businesses to pledge to pay the London Living Wage. Despite writing to over 50 businesses only three have signed up. Not that they were heavily pushed. Other than a generic letter it seems the Mayor’s drive to actually promote the Living Wage died a quick death. No surprise then that Boris Johnson’s time in office has seen the percentage of people paid below the LLW rise from 13 per cent to 19 per cent and the number of jobs paying below it rise from 569,000 to over 917,000.

It is hard work getting people to sign up to the Living Wage and it will take political will and determination for the voluntary approach to work against the rising tide of low pay.

Boards and shareholders are generally still more interested in their dividends more than the take-home pay of their cleaners or catering staff, and there isn’t yet a widespread ‘fair trade’ consumer movement on fair pay. It is simply unrealistic to assume that businesses are going to start acting more altruistically and sign up in significantly greater numbers than they already have.

For a politician who is easily bored, it is not surprising Boris Johnson’s efforts have been lacklustre and for a Chancellor who appears to think changing the definition is the way to tackle poverty or low pay, it is unlikely that he will voluntarily make the Living Wage an actual living wage without pressure.

Encouragingly, for those of us on the left who have believed for some time that the argument that a mandatory living wage will unleash disaster is simply wrong-headed, it appears that one of the countries accountancy giants may be starting to come to that conclusion too. Although KPMG stops short of making this a recommendation, the report shifts the debate significantly.

Where KPMG lead, others will surely follow and as the first paragraph in their report states: “What’s not to like?”

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