Home » Posts tagged 'living wage'
Tag Archives: living wage
Ed Miliband’s ‘cost of living speech’ on 5 November 2013
** Check against delivery. **
It is great to be here in Battersea with you today.
Last Friday, I was in my constituency, at the local Citizens Advice Bureau.
And I talked to some people who had been preyed upon by payday lenders.
There was a woman there in floods of tears.
She was in work.
But she took out a payday loan for her deposit so she could rent somewhere to live.
And then disaster followed.
A payday loan of a few hundred pounds became a debt of thousands of pounds.
She still faces bullying, harassment and threats from multiple payday lenders.
Like the young mum I met who described sitting at home with her daughter and seeing an advert on the TV for a payday lender.
She said she was down to the last nappy for her baby.
She took out the payday loan.
And one led to many more, with her ending up spending most of the money she had each week on repayments and charges.
She was so frightened by the harassment she faced that she had given her mobile phone to her mum.
Her mum showed me the phone and told me that she’d had fifteen calls that day.
The woman who worked at the CAB said the problem had got far, far worse in the last couple of years.
She said: “payday lenders are running riot through people’s lives in this community.”
Yesterday Wonga released a film all about themselves.
And last night the boss of Wonga said he was speaking for the ‘silent majority’, who are happy with their service.
But the truth is he wants us to stay silent about a company where in one year alone their bad debts reached £120 million.
An industry in which seven out of ten customers said they regretted taking out a loan.
With half saying they couldn’t pay it back.
Payday lenders don’t speak for the silent majority.
They are responsible for a quiet crisis of thousands of families trapped in unpayable debt.
The Wonga economy is one of the worst symbols of this cost of living crisis.
And as I listened to these stories, my overwhelming thought was: how is this being allowed to happen in Britain, 2013?
Because these stories of payday lenders are just one part of the cost of living crisis facing families across our country.
Low skilled jobs.
Wages that are stagnating.
Predatory behaviour by some companies.
This isn’t just an issue for the lowest paid, it affects the squeezed middle just as much.
A country where a few at the top do well, but everybody else struggles.
This is not just an issue facing Britain.
It is the issue facing Britain.
It is about who our country is run for.
How it is run.
And whether we believe we can do better than this.
I do.
The Nature of the Problem
Now, David Cameron said recently that I wanted to “talk about the cost of living” because I didn’t want to talk about “economic policy.”
So we have a Prime Minister who thinks we can detach our national economic success from the success of Britain’s families and businesses.
He doesn’t seem to realise that there is no such thing as a successful economy which doesn’t carry Britain’s families with it.
And he obviously doesn’t get that the old link between growth and living standards is just broken.
Growth without national prosperity is not economic success.
The first and last test of economic policy is whether living standards for ordinary families are rising.
And the scale of the problem is familiar to millions of people in our country.
The official figures say that on average working people are £1,500 a year worse off than they were at the election.
And it has happened because prices are rising faster than wages.
In 39 out of the 40 months that David Cameron has been Prime Minister.
But the average doesn’t tell you the whole story.
We don’t just need average wages to creep higher than prices.
For people to be genuinely better off, we have to do much better than that.
Ordinary families are hit harder than average by higher prices.
They rely more on expensive basic necessities, like electricity and gas.
And ordinary families do worse than the average when it comes to wage increases.
Because those increases are scooped by a few at the top.
Chief executive pay went up by 7 per cent last year.
When everyone else’s wages were falling.
We can’t just make do and mend.
We need to do much better than we are.
Can Anything Be Done?
And that means we can’t just carry on as we are.
We have to permanently restore the link between growth and living standards for all of Britain’s working people.
This Government can’t do it.
And the reason is because they are wedded to Britain competing in a race to the bottom.
Listen to their silence on our plans for a living wage.
Nothing to say.
On the falling value of the minimum wage.
Nothing to say.
On zero-hours contracts.
Nothing to say.
On the exploitation of low-skill migrant labour which undercuts wages.
Nothing to say.
They’re silent because of what they believe in.
In his speech to the Conservative Party Conference, George Osborne described my argument that they believed in a race to the bottom as something straight out of “Karl Marx” and “Das Kapital.”
No.
He’s wrong.
It is about what is happening in this capital city.
Right here.
And towns and cities across the country.
Right now.
Now, they think that this low wage economy is the best we can do.
Because they believe doing anything about it means intervening in markets in ways that we shouldn’t.
I disagree.
A dynamic market economy, with profitable private sector companies is essential for creating the wealth we need.
But markets always have rules.
The question is: what do those rules allow?
And what do they encourage?
Do they encourage companies to create high-skill, high-wage jobs, as part of a race to the top?
And provide the support they need to do so?
Or do they encourage a race to the bottom of low wages and low skills?
Do the rules mend broken markets?
Or allow some firms to take advantage of broken markets at the expense of everybody else?
All governments set rules for what they want to see.
This Government does intervene in markets but in the wrong way.
They make it easier to fire people.
Water down rights for agency workers.
Turn a blind eye to the failure to pay the minimum wage.
Pushing companies to compete on low wages, low skills and worse terms and conditions.
They introduce tax cuts for the richest.
Defend bonuses for the bankers.
Stand up for a powerful few.
Supporting their belief that wealth will trickle down from those at the top to everybody else.
Don’t believe it when they say they are stepping away, they are stepping in all the time, stepping in to stand up for the wrong people.
High hopes for those at the top.
Low expectations for everyone else.
A race to the bottom.
When what we need is a race to the top.
Dealing with the Cost of Living Crisis: Jobs
To win that race to the top, we are going to earn and grow our way out of this cost of living crisis.
Not by spending money we don’t have.
Because we have to bring the deficit down.
But by building a different kind of economy.
One that really works for working people.
That starts with the jobs our country creates.
David Cameron is still on his lap of honour.
To celebrate how brilliantly he has done.
In the slowest recovery for a hundred years.
We still face a massive challenge of creating jobs in this country.
There are still nearly two and half million people unemployed in Britain and nearly a million young people are still looking for work.
And when we look at the jobs in our economy, too many are low paid, part-time and temporary.
Half of new jobs have been in low paid sectors of the economy.
We have 1.4 million people working part-time when they want full-time work.
More than ever before.
And we’ve got more people in a temporary job because they can’t find a permanent one.
The Tories don’t think we can do anything about it.
They think it is the way we compete with China and India.
But they are wrong.
A Labour government will put all our country’s effort into winning a race to the top.
And that means taking action on both the quantity and quality of jobs that we are creating.
We can only win a race to the top if we transform our vocational education system and apprenticeships in this country, which is what we will do.
We can only win a race to the top if we radically transform the way we support business in every part of our country, with a proper regional banking system learning the lessons of Germany, which is what we will do.
We can only win a race to the top if we support the small businesses that will create the jobs of the future, by cutting business rates, which is what we will do.
We can only win a race to the top if we help parents get back to work and start earning to support their families by extending childcare for working parents to 25 hour a week, which is what we will do.
And we can only win a race to the top with a proper industrial policy, including for environmental jobs, which is what we will do.
All this is about re-engineering the British economy so that we make a difference to the kinds of jobs we create.
You can’t do it if you believe in a race to the bottom.
You can only do it if you believe in a race to the top.
Dealing with the Cost of Living Crisis: Wages
So dealing with the cost of living crisis starts with jobs.
But it is also about wages.
Wages for millions of people have been in decline for far too long.
I am talking about people battling to do the right thing and struggling and struggling.
Hard, honest work, in supermarkets, on building sites, in call centres.
Working harder, for longer, for less.
We have a low pay emergency in this country.
Five million people now paid less than the living wage.
Working for their poverty.
Up at least 1.4 million in just the last four years.
To one in five of all employed workers.
More of Britain’s poor children today are being brought up in working families than in jobless families.
And low wages aren’t just bad for working people.
They cost money in benefits too.
As the country has to subsidise more and more low paid jobs with higher and higher tax credits and benefits.
The government now pays more out on tax credits and benefits to those in work than it does for who are unemployed.
So to those who say we can’t afford to do anything about wages in our country today:
I say we can’t afford not to.
And many businesses now recognise that a low pay economy is bad for them too.
I was in Bristol last Thursday night talking to cleaners who are paid the living wage.
They told how proud to work for a firm like that.
Better pay means lower turnover of staff.
Higher productivity.
So we have to end the scandal of poverty pay in this country.
We would strengthen the minimum wage, which has lost 5 per cent of its value under this government.
We are looking at the case for higher minimum wages in particular sectors of the economy, like financial services, where they can afford to pay more.
And we will go further than that too.
That is why the next Labour government from its first day in office, will offer “make work pay” contracts to employers all over Britain.
It is a simple deal.
For the first year of a Labour government, we will say to every firm:
You start to make work pay, through a living wage.
And we will give you a 12 month tax rebate of 32p for every extra pound they spend.
Make work pay contracts will raise wages, keep the benefit bill down and tackle the cost of living crisis.
It is a good deal for workers, business and the taxpayer too.
And by tackling low pay we won’t just strengthen our economy, we will strengthen our society as well.
It is not good for our country for people to be working 60 or 70 hours a week, doing 2 or 3 jobs, not having time to see their kids.
We will change it.
Under a One Nation Labour government: work will pay.
Dealing with the Cost of Living Crisis: Broken Markets
And tackling the cost of living crisis is also about ensuring markets work for working people.
And that means fixing markets when they are broken.
This power station was built in the 1920s after a Conservative government intervened to fix a broken energy market.
That government, of Stanley Baldwin, knew that if government didn’t fix broken markets, nobody else was going to.
Stanley Baldwin knew it.
John Major seems to understand it.
But David Cameron doesn’t.
His response to Labour’s energy price freeze shows how out of the mainstream he is.
He took issue with the whole idea of government intervention in a broken market.
Ever since, on energy he seems to have had a different policy every day of the week.
But what we know is that we can never expect him to stand up to the energy companies, because they are a large and powerful interest.
It is not who David Cameron is.
It is not what he does.
He stands up to the weak, never to the strong.
For the next eighteen months, people will hear scare stories from the unholy alliance of the energy companies and David Cameron.
The Big Seven.
It will just reinforce in people’s minds who he stands up for.
The six large energy companies.
Not the 60 million people of Britain.
Today, new figures confirm that most of the recent price rises weren’t caused by government levies or by a rise in wholesale prices.
But are the direct result of a broken market.
For the average increase in the price for electricity and gas since 2011, over half went straight to the costs and profits of the companies themselves.
This shows exactly why we need a price freeze now.
Because only a price freeze will protect customers while we re-set the market.
A price freeze until 2017 will happen if Labour wins the election.
A freeze that will benefit 27 million families and 2.4 million businesses.
It is workable and it will happen.
And tomorrow, Parliament will vote on that price freeze.
So Conservative and Liberal Democrat MPs could vote for it now.
And if they line up against it, the British people will know the truth:
This Government is on the side of the big energy companies not hard-pressed families.
And our price freeze until 2017 will pave the way for us to radically improve the energy market for the long term.
We will publish an Energy Green Paper for:
A regulator that can cut unjustified price rises.
A ring fence between the generation and supply businesses of the energy companies, so there is proper transparency.
Forcing energy companies to trade the energy they produce in the open market.
And a new simple tariff structure that people can understand.
So we will change the way the energy market works.
In a way that will provide long-term confidence for investors and a better deal for consumers.
And we will mend other markets that aren’t working in the public interest.
Opening up competition in banking.
A cap on the cost of credit in payday lending.
Proper regulation of our train companies.
Ending unjustified charges and fees in the private rented sector.
And new social tariffs in the water industry.
The Conservative Party defends broken markets and the few people that profit from them.
I am proud that the Labour Party stands up for markets that work for working people.
The next general election will offer a big choice.
A choice about whether we tackle the cost of living crisis or shrug our shoulders.
A choice about whether we run a race to the top or a race to the bottom.
A choice about whether we reform broken markets or defend them.
A choice about how we succeed as a country.
Above all, the choice will be about who our country is run for.
There is a Tory vision for Britain that has low expectations for what most people should be able to expect.
Payday lenders can prey on the vulnerable.
Millions of families see stagnating living standards.
Energy companies can just carry on as they are, ripping off consumers.
My vision is different.
We can run Britain in a different way.
Different from the past.
Building a different future for our country.
Where ordinary people feel the country is run for them.
In their interests.
And for their future.
Earning our way to a better standard of living.
Sharing rewards fairly.
And making markets work for people, not the other way round.
Britain can do better than this.
And that’s what One Nation Labour will do.
Together
Ed Miliband will need to engage a different spirit in 2015, seventy years after that needed for 1945. The Conservatives have become the presentational unit of multinational corporates, and many citizens of the United Kingdom resent this. Whereas instead decades ago, the Unions could be validly criticised as ‘holding the county’ to ransom, now it is the bankers. There is no proof for any ‘trickle down’ effect, where allowing millionaires to keep more of their income and wealth benefits the county at large. David Cameron strikingly did not win the General Election in 2015, meaning that he has been reliant on the Liberal Democrats ditching any principles to vote for legislation which is clearly totally illiberal, such as secret courts. Rather than working in the national interest, the Conservatives and the Liberal Democrats have been operating entirely in their own self-interest, doggedly pursuing policies which serious commentators have long criticised for being a perfect recipe for producing economic turmoil. Members of this Coalition confront serious issues with extreme arrogance and disregard for the facts, as demonstrated by Baroness Shirley Williams and Lord Clement-Jones in the recent section 75 NHS regulations debate in the House of Lords.
Labour has been blasted for not having any policies. This changed today, but don’t expect the BBC to cover any of them well, in the same vein as how they totally ignored the changes in legal aid and the NHS the point of absolute ridicule. Labour’s idea of a “Jobs Bill”, which introduces a Compulsory Jobs Guarantee, a paid job for every adult who is out of work for more than two years, is a serious way of addressing the problem of youth unemployment. Generally, unemployment has been creeping up under this Coalition, and the only reason there are so many in employment is that they are many more with very little employment rights, doing short term contract work to try to pay the bills. There is absolutely no economic case for the tax cut for millionaires, but the political case of nudging them into voting for a discredited Coalition is quite potent. The idea of requiring large firms getting government contracts to have an active apprenticeships scheme that ensures opportunities to work for the next generation is a very attractive one, and is very much in keeping with an idea very popular in the United States of making corporates behave like ‘responsible corporate citizens’. Indeed, Ed Miliband introduced this idea to an unconvinced general public in his now famous Labour Party Conference speech of September 2010 on ‘responsible capitalism'; this was clearly before we’d all even heard of ATOS and welfare benefits, corporates and phone hacking, fires, explosions and collapses in Texas and Bangladesh.
Also, a “Banking Bill” is much needed. The aim of this is to reate a real British Investment Bank on a statutory basis, at arms length from government and with proper financing powers to operate like a bank. One of the persistent criticisms of the current government, which Nick Clegg had criticised of Labour in 2010 but subsequently totally failed to address himself, is the issue of how to get banks lending to small businesses. Project Merlin is well known, and the purpose of this intended legislation by Labour is to support small and medium sized businesses, including across the regions of the UK through regional banks. Labour intends to provide a general backstop power so that if there is not genuine culture change from the banks they can be broken up, to put in place a “Code of Conduct” for bankers, and to toughen up generally the criminal sanctions against those involved in financial crime. Furthermore, Labour’s idea of an “Immigration Bill” is very noteworthy, given how Gordon Brown was caught famously unawares by Gillian Duffy in the now famous “Bigotgate” incident. Labour intends to double the fines for breaching the National Minimum Wage and give local councils the power to take enforcement action over the national minimum wage, extend the Gangmasters Licensing Authority to other sectors where abuse is taking place, and change NMW regulations to stop employers providing overcrowded and unsuitable tied accommodation and offsetting it against workers’ pay.
There is now a crisis in social housing, not least because the Thatcher government sold off valuable social housing stock during her period of government. However, unfortunately, we can’t ‘turn back the clock’ to his very socially divisive period for the UK. The economy has become too much on the side of exploitative private landlords, and Labour intends to introduce a national register of landlords, to allow local authorities to root out and expel rogue landlords, including those who pack people into overcrowded accommodation. Labour also intends to tackle rip-off letting agents, ending the confusing, inconsistent fees and charges, and to seek to give greater security to families who rent and remove the barriers that stand in the way of longer term tenancies. Labour fundamentally does not know to what extent the UK will be recovering by the time of the General Election in 2015. The public are already sick to the back teeth of the trite “the economy is healing” pathetic PR by the Coalition, particularly since the economy WAS healing in May 2010 before the Coalition totally destroyed it. Labour’s proposed “Finance Bill” would reintroduce a 10p rate of income tax, paid for by taxing mansions worth over £2m, stop immediately the cut to the 50p rate of income tax for those on the highest incomes to reverse cuts to tax credits, reverse the Tory-led Government’s damaging VAT rise now for a temporary period – a £450 boost for a couple with children, and provide a one year cut in VAT to 5% on home improvements, repairs and maintenance – to help homeowners and small businesses. Courageously, Labour intends to put in place a one year national insurance tax break for every small firm which takes on extra workers, helping small businesses to grow and create jobs
There is a growing feeling that the economy is fundamentally imbalanced towards the interests of shareholders in fragmented oligopolies, rather than the concerns of the general public. Labour wishes to introduce a Bill where it would abolish Ofgem and create a tough new energy watchdog with the power to force energy suppliers to pass on price cuts when the cost of wholesale energy falls. This would be a very popular move with many in the general public, not just traditional Labour voters. This legislation would require the energy companies to pool the power they generate and to make it available to any retailer, to open the market and to put downward pressure on prices, and force energy companies to put all over-75s on their cheapest tariff helping those benefiting to save up to £200 per year. The railway industry is another fiasco of the utterly discredited privatisation doctrine of the Conservatives. Labour intends to apply ‘strict caps’ on fare rises on every route, and remove the right for train companies to vary regulated fares by up to 5 per cent above the average change in regulated fares, and to introduce a new legal right for passengers to the cheapest ticket for their journey. Finally, many members have become increasingly irritated by the propensity of the Conservatives to call pensions ‘welfare payments’. Labour now has concrete plans to tackle the worst offending pension schemes by capping their charges at a maximum of 1 per cent; and to amend legislation and regulation to force all pension funds to offer the same simple transparent charging structure so that consumers know the price they will be paying before they choose a particular scheme.
So finally we are getting a sense of the direction of travel of Labour, and this is in stark contrast to the hapless ipeptidude and incompetence of the Liberal Democrats, UKIP and the Conservatives.
The legal case for "the living wage"
It’s actually very bold, and fits in completely with the “One Nation” philosophy of Ed Miliband and Labour. It could even be one of the first Acts to be proposed by a Labour government in 2015/6, and has profound implications.
The “living wage” has a focus on the wage rate that is necessary to provide workers and their families with a basic but acceptable standard of living. It is an hourly rate set independently and updated annually, and calculated according to the basic cost of living in the UK. Employers currently can choose to pay the Living Wage on a voluntary basis; the UK Living Wage is calculated by the Centre for Research in Social Policy, but the London Living Wage is calculated by the Greater London Authority. This minimum standard of living is socially defined (and therefore varies by place and time) and is often explicitly linked to other social goals such as the fulfilment of caring responsibilities.
Uniquely for opposition policies, the Living Wage enjoys cross-party support, with public backing from the Prime Minister and the Leader of the Opposition. That said, the main beneficiary of the living wage is the Treasury, and this is obviously critical for it to be implemented at a time of austerity (but so was the £2bn NHS reorganisation). Financial gains from the living wage will arise from higher income tax payments, higher national insurance contributions and reduced spending on in-work benefits. This has a number of important implications.
On a visit to Islington in north London last year to discuss how Labour councils across Britain have succeeded in implementing the living wage, Ed Miliband described the living wage as an idea “whose time has come”. “The next step is to help more people, including workers in the private sector, have the dignity of earning a living wage. This is one way we can begin building a One Nation economy where prosperity is fairly shared, because it is only by coming together that we can succeed as a country.”
Background
The concept of the “living wage” has roots in various cultural, religious and philiosophical traditions. The modern UK Living Wage Campaign was launched by members of London Citizens in 2001. The founders were parents in the East End of London, who wanted to remain in work, but found that despite working two minimum wage jobs they were struggling to make ends meet and were left with no time for family and community life. In 2005, following a series of successful Living Wage campaigns and growing interest from employers, the Greater London Authority established the Living Wage Unit to calculate the London Living Wage. The Living Wage campaign has since grown into a “national movement”, and Ed Miliband has often talked about how he wishes Labour to be seen as a movement and not just a political party. Local campaigns began emerging across the UK offering the opportunity to involve many more employers and lift many more thousands of families out of working poverty. In 2008 the Centre for Research in Social Policy funded by the Joseph Rowntree Foundation began calculating a UK wide Minimum Income Standard (MIS) figure. In 2011 Citizens UK brought together grass roots campaigners and leading employers from across the UK, working closely with colleagues on the Scottish Living Wage Campaign inparticular, to agree a standard model, for setting the UK Living Wage outside of London. At the same time, following consultation with campaigners, employers who support the Living Wage and HR specialists, Citizens UK launched the Living Wage Foundation and Living Wage Employer mark. Since 2001 the campaign has impacted over 45,000 employees and put over £210 million into the pockets of some of the lowest paid workers in the UK.
The rationale for the living wage clearly merits scrutiny. It has much popular support, and thus, as far as Labour and the Unions are concerned, consitute a clear “vote winner”. In a recent article in the Telegraph, a newspaper not known for its significant Labour sympathies, Jeremy Warner described that, “the potential negatives from such a policy are almost too numerous to list – surging inflation, higher immigration, rising unemployment, a growing black economy, and so on. These alone might appear to kill the idea stone dead. Yet all these adverse consequences could quite easily be countered, and it is a fact that the great bulk of internationally competitive business in Britain already pays living wages. It is in the low-skilled, service areas of the economy that the problem largely lies.” Interestingly, Heller Clain (2007) (J Labor Res (2008) 29:205–218) had previously argued that living wage legislation produces statistically significant differences in poverty outcomes (but that minimum wage legislation does not), with empirical evidence, and provided a clear argument concerning costs and demand how this is most likely to have arisen.
“Beyond the bottom line: the challenges and opportunities of a living wage” (IPPR)
A critical development has been the publication of “Beyond the bottom line: The challenges and opportunities of a living wage” by the IPPR, authors Matthew Pennycook and Kate Lawton (20 January 2013). This provided much detail, with The Living Wage Foundation having already established three critical functions of theirs. It offers accreditation to employers that pay the living wage, or those committed to an agreed timetable of implementation, by awarding the ‘Living Wage Employer’ mark. It also provides advice and support to employers implementing the Living Wage including best practice guides; case studies from leading employers; model procurement frameworks; access to specialist legal and HR advice. Finally, it provides a forum for leading employers to publicly back the Living Wage. We work with Principal Partners who bring financial and strategic support to the work.
Does it need an Act of parliament?
The National Minimum Wage Act 1998 created a minimum wage across the United Kingdom. It was a flagship policy of the Labour Party in the UK during its 1997 election campaign, and is still pronounced today in Labour Party circulars as an outstanding gain for ‘at least 1.5 million people’. The policy was opposed by the Conservative party at the time of implementation, who argued that it would create extra costs for businesses and would cause unemployment. The Conservative party’s current leader (and Prime Minister), David Cameron, said at the time that the minimum wage “would send unemployment straight back up”. However, in 2005, Cameron stated that “I think the minimum wage has been a success, yes. It turned out much better than many people expected, including the CBI.” It is now Conservative Party policy to support the minimum wage.
Indeed, “the living wage” has some prominent supporters.
The IPPR indeed argue that are clear reasons not to legislate for a statutory living wage including the fact that the living wage should not be seen as a replacement for the minimum wage. It there is argued that the minimum wage is based on an empirical judgment about employment effects and is agreed through a social partnership model, allowing a mandatory, statutory approach. However, the living wage reflects standards of living and prices and does not take account of employment effects. Advancing the living wage therefore requires an incremental approach, which can also bring wider benefits by mobilising low-paid workers who lack traditional forms of representation. The question for policymakers is the extent to which the state can support a campaign rooted in civil society.
The IPPR instead recommended that government amends the UK corporate governance code to require listed companies to publish the proportion and number of their staff paid below the living wage, and legislate for this if necessary. This indeed is a very sensible idea, if Ed Miliband and Labour include it as part of a raft of measures in corporate governance which could encourage ‘responsible capitalism’, which thus far has been lacking regulatory teeth. It’s possible that “the living wage” is in fact a practical mechanism of delivering “predistribution“, the thesis articulated elegantly by Professor Joseph Hacker but which people dare not mention in polite public. As part of Labour’s policy review, the party is considering ways to make the rate, which is more than £1 higher than the legal adult minimum wage, the new norm. Listed companies who do not pay the living wage could be “named and shamed” through new corporate governance proposals, and Whitehall contracts could be limited to firms that pay their workers at the new hourly rate. This would be entirely in keeping of the description of a “moral economy” advanced by Jon Cruddas discussing rebuilding Britain, a “new Jerusalem“: “Markets require reciprocity for efficiency and productivity. Together they establish trust, relationships and a sense of stewardship at the heart of transactions. It is a moral economy that can be expressed through co-operative and mutual forms of ownership, and internalised in the culture of business through employee involvement in the governance of firms. In return for their commitment to the company, employees can have a voice on salary levels, improving productivity and business strategy.”
There are though, some might say, good reasons why living wage legislation should enter the statute books in some form, corresponding to the passing of any laws in our jurisdiction. These are namely to protect an individual from harm including employment exploitation, to contribute towards a framework of the rules needed for a society to live and work together, to ensure an enforceable mechanism through which justice can been served, to “punish” people as necessary, and to maintain social order (such as prevention of poverty). It is obviously important that any laws we introduce are not incompatible with European laws, and the current indications are that the “minimum wage is (not) always incompatible with EU procurement rules. There are however obligations to treat all bidders equally, fairly and transparently and in a non-discriminatory way in any procurement process.” Specifically, the European Commission has provided clarification on the issue in 2009, stating that living wage conditions “must concern only the employees involved in the execution of the relevant contract, and may not be extended to the other employees of the contractor”. However, this perspective is to treat law as an administrative process, free from social values and judgments, as discussed by LJ Laws for example in the context of human rights. By enacting a formal law on the living wage could be a strong signal that the law is not merely an error-corrective mechanism for market values, what Prof Michael Sandel at Harvard calls ‘markets mitigating governance’ as a technocratic process done through cost benefit analyses, but that the law is in fact designed ‘for the public good’, encouraging citizenship, civic values and solidarity. Sandel conceptualises this striving for the public good as a necessary reaction to the approaches of Thatcher, Reagan and indeed New Labour, which had generated a sense of ‘market triumphalism’, but points out readily that under such administrations this had had a destructive effect on rich and poor people living further apart in society. This indeed can be easily seen in the UK with the rich becoming even richer.
One Nation Economy
Trade unions are still a significant part of the culture of UK, not least because they serve to protect workers and employees against scrupulous employers. In the trade union movement, UNISON has had noteworthy success in offering practical advice about how citizens can “win the winning wage”. Ed Miliband has made it no secret that he does not wish to see a divide between ‘private sector’ and ‘public sector’, in that we all contribute to one unitary UK economy. This has been reflected in how Miliband has provided hints about trying to make trade unions also relevant to the public sector. Encouraging a ‘living wage’ could be a way of getting more people involved in the Union movement, which Miliband has openly warned should not be seen as the “evil uncle” of Labour. The IPPR report indeed cites: “The greatest successes in securing the living wage have been made through bottom-up processes of organising and campaigning. These processes have sought to involve low-paid workers directly in the struggle to improve their own wages, as well as building broader alliances with a diverse mix of unions, faith organisations and community groups.”
As the forerunner to a ‘one nation economy’, local and regional initiatives have consolidated a number of improvements in pay for nearly 45,000 low-paid workers. In addition to the nine local authorities that have been formally accredited as living wage employers, a growing number of private sector employers have introduced living wage agreements including Barclays, KPMG, Deloitte, Linklaters and Lloyd’s of London. More widely, living wage initiatives have reshaped social norms around wages and in-work poverty and have refocused attention on the role that decent pay above the national minimum can play in raising living standards, alongside remedial redistribution through tax credits and in-work benefits. This, alongside the fact that a national minimum wage has already been acted in the UK, is significant when noted with an observation from Heller Clain 2012 (Atl Econ J (2012) 40:315–327) about how experiences of implementation of the “living wage” in the US: “Ceteris paribus, the strength of the community sentiment in support of living wage legislation may be lessened, where the state government has already adopted policies aimed at raising the incomes of the working poor. For example, there may be less motivation to enact living wage legislation where the state has already enacted a statewide minimum wage higher than the federal level.”
There are clear benefits which have been experienced by adopters of “the living wage”. An independent study of the business benefits of implementing a Living Wage policy in London found that more than 80% of employers believe that the Living Wage had enhanced the quality of the work of their staff, while absenteeism had fallen by approximately 25%. A major economic rationale is that paying UK workers a “living wage” would save the Treasury more than £2bn a year by boosting income tax receipts and reducing welfare spending, according to a joint research by the Resolution Foundation and the Institute for Public Policy Research. They found gross earnings would rise by £6.5bn if employees were paid a living wage – an estimate, above the statutory minimum hourly rate, of what workers must earn to meet basic needs. There is, additionally, a much wider elegant narrative at play here. It has been recognised by anyone other than George Osborne and his colleagues that ‘underconsumption’ has been a major factor in why the UK economy has been failing latterly (parallel with decreased levels of tax receipts, even predating the current financial crash). Indeed, starting with Malthus and Ricardo in the nineteenth century, economists had long debated the viability of ‘underconsumption’ as a cause of cyclical depressions. This is now recognised in the economic press, for example “the increasing attention to consumer demand among businessmen merged with a related trend in economics: the rise of institutional economics … A key element, though, was the conviction that economists needed detailed, quantitative, empirical studies of consumer behavior (sic) and existing markets, encompassing everything from focused psychological or sociological analyses to expansive, aggregative surveys of household income, prices, and family expenditures.” (Stapleford, Labor History, Vol. 49, No. 1, February 2008, 1–22)
The IPPR are mindful that many small and medium-sized firms are likely to struggle with the costs of implementing the living wage if a significant proportion of their staff are low paid. They recommend the government should explore using the architecture of City Deals to create ‘living wage city deals’, drawing forward future tax and benefit savings from paying local government workers the living wage and devolving this money to support private sector businesses in transitioning to the living wage. So far, two thirds of employers reported a significant impact on recruitment and retention within their organisation. 70% of employers felt that the Living Wage had increased consumer awareness of their organisation’s commitment to be an ethical employer.
One Nation Society
It’s clear that the arguments for “the living wage” are not just economic, as discussed above, but also are profoundly relevant to a sense of soldiarity and “civic duty” inherent in a “one nation society”, Living wage initiatives grounded in forms of community organising seek to increase the bargaining power of workers who lack access to more traditional forms of representation such as through trade union structures. It furthermore can easily be argued that, beyond their ability to lift wages and living standards, living wage initiatives have the potential to empower low-paid workers, many of whom lack voice and power in the workplace and in wider society. Many living wage initiatives, both in the US and UK, have sought to mobilise low earners directly rather than campaigning on their behalf, by organising workers and communities through a process described as ‘community organising’ or ‘community unionism’. Indeed, here in the UK, the Living Wage campaign was launched in 2001 by parents in East London, who were frustrated that working two minimum wage jobs left no time for family life. The causes of poverty are complex and in order to improve lives there should be a package of solutions across policy areas. The Living Wage can be part of the solution. Over 45,000 families have been lifted out of working poverty as a direct result of the Living Wage.
This is fundamentally a point to do with “cohesion” of our society. It has been patently obvious that New Labour failed monumentally on “inequality”. in its quest for market triumphalism, described above. There is a sense of Ed Miliband ‘righting a wrong’ here, in addressing the societal problem of inequality, and if Miliband can achieve this he will have succeeded in a crucial area where Blair had failed.
Conclusion
Boris Johnson appears superficially laid the groundwork for “the living wage” in London, but credit that the overall Conservative-led admininstration has led the way on employment justice can only massively dampened for a number of diverse reasons. The cross-party support is described above, but it is conceded that, in the US, “a larger population and greater local support for Democratic presidential candidates are significantly linked to a greater likelihood of adopting living wage legislation and a greater speed in adopting living wage legislation.” (Heller Clain, 2012) And yet, the “living wage” may not be necessarily partisan, although one has no idea what the Liberal Democrats wish to advance following June 2015, and would nicely fit into the framework which Ed Miliband has already provided. I expect it will be a major, if not the, major campaigning issue for Labour in 2015, and could be one of the first things an incoming Labour government would legislate for in some form. The monumental research of IPPR, the Living Wage Foundation, numerous corporates and the trade unions will have contributed greatly to the success of this initiative, as will have Ed Miliband of course.
One Nation: there is a strong rationale for "the living wage" and for it to be enshrined in law in some form
It’s actually very bold, and fits in completely with the “One Nation” philosophy of Ed Miliband and Labour. It could even be one of the first Acts to be proposed by a Labour government in 2015/6, and has profound implications.
The “living wage” has a focus on the wage rate that is necessary to provide workers and their families with a basic but acceptable standard of living. It is an hourly rate set independently and updated annually, and calculated according to the basic cost of living in the UK. Employers currently can choose to pay the Living Wage on a voluntary basis; the UK Living Wage is calculated by the Centre for Research in Social Policy, but the London Living Wage is calculated by the Greater London Authority. This minimum standard of living is socially defined (and therefore varies by place and time) and is often explicitly linked to other social goals such as the fulfilment of caring responsibilities.
Uniquely for opposition policies, the Living Wage enjoys cross-party support, with public backing from the Prime Minister and the Leader of the Opposition. That said, the main beneficiary of the living wage is the Treasury, and this is obviously critical for it to be implemented at a time of austerity (but so was the £2bn NHS reorganisation). Financial gains from the living wage will arise from higher income tax payments, higher national insurance contributions and reduced spending on in-work benefits. This has a number of important implications.
On a visit to Islington in north London last year to discuss how Labour councils across Britain have succeeded in implementing the living wage, Ed Miliband described the living wage as an idea “whose time has come”. “The next step is to help more people, including workers in the private sector, have the dignity of earning a living wage. This is one way we can begin building a One Nation economy where prosperity is fairly shared, because it is only by coming together that we can succeed as a country.”
Background
The concept of the “living wage” has roots in various cultural, religious and philiosophical traditions. The modern UK Living Wage Campaign was launched by members of London Citizens in 2001. The founders were parents in the East End of London, who wanted to remain in work, but found that despite working two minimum wage jobs they were struggling to make ends meet and were left with no time for family and community life. In 2005, following a series of successful Living Wage campaigns and growing interest from employers, the Greater London Authority established the Living Wage Unit to calculate the London Living Wage. The Living Wage campaign has since grown into a “national movement”, and Ed Miliband has often talked about how he wishes Labour to be seen as a movement and not just a political party. Local campaigns began emerging across the UK offering the opportunity to involve many more employers and lift many more thousands of families out of working poverty. In 2008 the Centre for Research in Social Policy funded by the Joseph Rowntree Foundation began calculating a UK wide Minimum Income Standard (MIS) figure. In 2011 Citizens UK brought together grass roots campaigners and leading employers from across the UK, working closely with colleagues on the Scottish Living Wage Campaign inparticular, to agree a standard model, for setting the UK Living Wage outside of London. At the same time, following consultation with campaigners, employers who support the Living Wage and HR specialists, Citizens UK launched the Living Wage Foundation and Living Wage Employer mark. Since 2001 the campaign has impacted over 45,000 employees and put over £210 million into the pockets of some of the lowest paid workers in the UK.
The rationale for the living wage clearly merits scrutiny. It has much popular support, and thus, as far as Labour and the Unions are concerned, consitute a clear “vote winner”. In a recent article in the Telegraph, a newspaper not known for its significant Labour sympathies, Jeremy Warner described that, “the potential negatives from such a policy are almost too numerous to list – surging inflation, higher immigration, rising unemployment, a growing black economy, and so on. These alone might appear to kill the idea stone dead. Yet all these adverse consequences could quite easily be countered, and it is a fact that the great bulk of internationally competitive business in Britain already pays living wages. It is in the low-skilled, service areas of the economy that the problem largely lies.” Interestingly, Heller Clain (2007) (J Labor Res (2008) 29:205–218) had previously argued that living wage legislation produces statistically significant differences in poverty outcomes (but that minimum wage legislation does not), with empirical evidence, and provided a clear argument concerning costs and demand how this is most likely to have arisen.
“Beyond the bottom line: the challenges and opportunities of a living wage” (IPPR)
A critical development has been the publication of “Beyond the bottom line: The challenges and opportunities of a living wage” by the IPPR, authors Matthew Pennycook and Kate Lawton (20 January 2013). This provided much detail, with The Living Wage Foundation having already established three critical functions of theirs. It offers accreditation to employers that pay the living wage, or those committed to an agreed timetable of implementation, by awarding the ‘Living Wage Employer’ mark. It also provides advice and support to employers implementing the Living Wage including best practice guides; case studies from leading employers; model procurement frameworks; access to specialist legal and HR advice. Finally, it provides a forum for leading employers to publicly back the Living Wage. We work with Principal Partners who bring financial and strategic support to the work.
Does it need an Act of parliament?
The National Minimum Wage Act 1998 created a minimum wage across the United Kingdom. It was a flagship policy of the Labour Party in the UK during its 1997 election campaign, and is still pronounced today in Labour Party circulars as an outstanding gain for ‘at least 1.5 million people’. The policy was opposed by the Conservative party at the time of implementation, who argued that it would create extra costs for businesses and would cause unemployment. The Conservative party’s current leader (and Prime Minister), David Cameron, said at the time that the minimum wage “would send unemployment straight back up”. However, in 2005, Cameron stated that “I think the minimum wage has been a success, yes. It turned out much better than many people expected, including the CBI.” It is now Conservative Party policy to support the minimum wage.
Indeed, “the living wage” has some prominent supporters.
The IPPR indeed argue that are clear reasons not to legislate for a statutory living wage including the fact that the living wage should not be seen as a replacement for the minimum wage. It there is argued that the minimum wage is based on an empirical judgment about employment effects and is agreed through a social partnership model, allowing a mandatory, statutory approach. However, the living wage reflects standards of living and prices and does not take account of employment effects. Advancing the living wage therefore requires an incremental approach, which can also bring wider benefits by mobilising low-paid workers who lack traditional forms of representation. The question for policymakers is the extent to which the state can support a campaign rooted in civil society.
The IPPR instead recommended that government amends the UK corporate governance code to require listed companies to publish the proportion and number of their staff paid below the living wage, and legislate for this if necessary. This indeed is a very sensible idea, if Ed Miliband and Labour include it as part of a raft of measures in corporate governance which could encourage ‘responsible capitalism’, which thus far has been lacking regulatory teeth. It’s possible that “the living wage” is in fact a practical mechanism of delivering “predistribution“, the thesis articulated elegantly by Professor Joseph Hacker but which people dare not mention in polite public. As part of Labour’s policy review, the party is considering ways to make the rate, which is more than £1 higher than the legal adult minimum wage, the new norm. Listed companies who do not pay the living wage could be “named and shamed” through new corporate governance proposals, and Whitehall contracts could be limited to firms that pay their workers at the new hourly rate. This would be entirely in keeping of the description of a “moral economy” advanced by Jon Cruddas discussing rebuilding Britain, a “new Jerusalem“: “Markets require reciprocity for efficiency and productivity. Together they establish trust, relationships and a sense of stewardship at the heart of transactions. It is a moral economy that can be expressed through co-operative and mutual forms of ownership, and internalised in the culture of business through employee involvement in the governance of firms. In return for their commitment to the company, employees can have a voice on salary levels, improving productivity and business strategy.”
There are though, some might say, good reasons why living wage legislation should enter the statute books in some form, corresponding to the passing of any laws in our jurisdiction. These are namely to protect an individual from harm including employment exploitation, to contribute towards a framework of the rules needed for a society to live and work together, to ensure an enforceable mechanism through which justice can been served, to “punish” people as necessary, and to maintain social order (such as prevention of poverty). It is obviously important that any laws we introduce are not incompatible with European laws, and the current indications are that the “minimum wage is (not) always incompatible with EU procurement rules. There are however obligations to treat all bidders equally, fairly and transparently and in a non-discriminatory way in any procurement process.” Specifically, the European Commission has provided clarification on the issue in 2009, stating that living wage conditions “must concern only the employees involved in the execution of the relevant contract, and may not be extended to the other employees of the contractor”. However, this perspective is to treat law as an administrative process, free from social values and judgments, as discussed by LJ Laws for example in the context of human rights. By enacting a formal law on the living wage could be a strong signal that the law is not merely an error-corrective mechanism for market values, what Prof Michael Sandel at Harvard calls ‘markets mitigating governance’ as a technocratic process done through cost benefit analyses, but that the law is in fact designed ‘for the public good’, encouraging citizenship, civic values and solidarity. Sandel conceptualises this striving for the public good as a necessary reaction to the approaches of Thatcher, Reagan and indeed New Labour, which had generated a sense of ‘market triumphalism’, but points out readily that under such administrations this had had a destructive effect on rich and poor people living further apart in society. This indeed can be easily seen in the UK with the rich becoming even richer.
One Nation Economy
Trade unions are still a significant part of the culture of UK, not least because they serve to protect workers and employees against scrupulous employers. In the trade union movement, UNISON has had noteworthy success in offering practical advice about how citizens can “win the winning wage”. Ed Miliband has made it no secret that he does not wish to see a divide between ‘private sector’ and ‘public sector’, in that we all contribute to one unitary UK economy. This has been reflected in how Miliband has provided hints about trying to make trade unions also relevant to the public sector. Encouraging a ‘living wage’ could be a way of getting more people involved in the Union movement, which Miliband has openly warned should not be seen as the “evil uncle” of Labour. The IPPR report indeed cites: “The greatest successes in securing the living wage have been made through bottom-up processes of organising and campaigning. These processes have sought to involve low-paid workers directly in the struggle to improve their own wages, as well as building broader alliances with a diverse mix of unions, faith organisations and community groups.”
As the forerunner to a ‘one nation economy’, local and regional initiatives have consolidated a number of improvements in pay for nearly 45,000 low-paid workers. In addition to the nine local authorities that have been formally accredited as living wage employers, a growing number of private sector employers have introduced living wage agreements including Barclays, KPMG, Deloitte, Linklaters and Lloyd’s of London. More widely, living wage initiatives have reshaped social norms around wages and in-work poverty and have refocused attention on the role that decent pay above the national minimum can play in raising living standards, alongside remedial redistribution through tax credits and in-work benefits. This, alongside the fact that a national minimum wage has already been acted in the UK, is significant when noted with an observation from Heller Clain 2012 (Atl Econ J (2012) 40:315–327) about how experiences of implementation of the “living wage” in the US: “Ceteris paribus, the strength of the community sentiment in support of living wage legislation may be lessened, where the state government has already adopted policies aimed at raising the incomes of the working poor. For example, there may be less motivation to enact living wage legislation where the state has already enacted a statewide minimum wage higher than the federal level.”
There are clear benefits which have been experienced by adopters of “the living wage”. An independent study of the business benefits of implementing a Living Wage policy in London found that more than 80% of employers believe that the Living Wage had enhanced the quality of the work of their staff, while absenteeism had fallen by approximately 25%. A major economic rationale is that paying UK workers a “living wage” would save the Treasury more than £2bn a year by boosting income tax receipts and reducing welfare spending, according to a joint research by the Resolution Foundation and the Institute for Public Policy Research. They found gross earnings would rise by £6.5bn if employees were paid a living wage – an estimate, above the statutory minimum hourly rate, of what workers must earn to meet basic needs. There is, additionally, a much wider elegant narrative at play here. It has been recognised by anyone other than George Osborne and his colleagues that ‘underconsumption’ has been a major factor in why the UK economy has been failing latterly (parallel with decreased levels of tax receipts, even predating the current financial crash). Indeed, starting with Malthus and Ricardo in the nineteenth century, economists had long debated the viability of ‘underconsumption’ as a cause of cyclical depressions. This is now recognised in the economic press, for example “the increasing attention to consumer demand among businessmen merged with a related trend in economics: the rise of institutional economics … A key element, though, was the conviction that economists needed detailed, quantitative, empirical studies of consumer behavior (sic) and existing markets, encompassing everything from focused psychological or sociological analyses to expansive, aggregative surveys of household income, prices, and family expenditures.” (Stapleford, Labor History, Vol. 49, No. 1, February 2008, 1–22)
The IPPR are mindful that many small and medium-sized firms are likely to struggle with the costs of implementing the living wage if a significant proportion of their staff are low paid. They recommend the government should explore using the architecture of City Deals to create ‘living wage city deals’, drawing forward future tax and benefit savings from paying local government workers the living wage and devolving this money to support private sector businesses in transitioning to the living wage. So far, two thirds of employers reported a significant impact on recruitment and retention within their organisation. 70% of employers felt that the Living Wage had increased consumer awareness of their organisation’s commitment to be an ethical employer.
One Nation Society
It’s clear that the arguments for “the living wage” are not just economic, as discussed above, but also are profoundly relevant to a sense of soldiarity and “civic duty” inherent in a “one nation society”, Living wage initiatives grounded in forms of community organising seek to increase the bargaining power of workers who lack access to more traditional forms of representation such as through trade union structures. It furthermore can easily be argued that, beyond their ability to lift wages and living standards, living wage initiatives have the potential to empower low-paid workers, many of whom lack voice and power in the workplace and in wider society. Many living wage initiatives, both in the US and UK, have sought to mobilise low earners directly rather than campaigning on their behalf, by organising workers and communities through a process described as ‘community organising’ or ‘community unionism’. Indeed, here in the UK, the Living Wage campaign was launched in 2001 by parents in East London, who were frustrated that working two minimum wage jobs left no time for family life. The causes of poverty are complex and in order to improve lives there should be a package of solutions across policy areas. The Living Wage can be part of the solution. Over 45,000 families have been lifted out of working poverty as a direct result of the Living Wage.
This is fundamentally a point to do with “cohesion” of our society. It has been patently obvious that New Labour failed monumentally on “inequality”. in its quest for market triumphalism, described above. There is a sense of Ed Miliband ‘righting a wrong’ here, in addressing the societal problem of inequality, and if Miliband can achieve this he will have succeeded in a crucial area where Blair had failed.
Conclusion
Boris Johnson appears superficially laid the groundwork for “the living wage” in London, but credit that the overall Conservative-led admininstration has led the way on employment justice can only massively dampened for a number of diverse reasons. The cross-party support is described above, but it is conceded that, in the US, “a larger population and greater local support for Democratic presidential candidates are significantly linked to a greater likelihood of adopting living wage legislation and a greater speed in adopting living wage legislation.” (Heller Clain, 2012) And yet, the “living wage” may not be necessarily partisan, although one has no idea what the Liberal Democrats wish to advance following June 2015, and would nicely fit into the framework which Ed Miliband has already provided. I expect it will be a major, if not the, major campaigning issue for Labour in 2015, and could be one of the first things an incoming Labour government would legislate for in some form. The monumental research of IPPR, the Living Wage Foundation, numerous corporates and the trade unions will have contributed greatly to the success of this initiative, as will have Ed Miliband of course.
