Time for a Living Wage

A major investigation into the living wage gets under way today with the first meeting of the Living Wage Commission, of which I am very honoured to be a Commissioner.  That it comes the day after SSE Energy – parent company of Swalec – announced that it is to join the growing ranks of UK private and public sector Living Wage employers is all the better.  

The Commission’s role is to look at the potential implications of a Living Wage for Britain’s five million low paid workers. Commissioners will research and assess evidence on the value of the Living Wage, barriers to its implementation and how these could be overcome. 

The Living Wage is not a new idea – it dates back to the nineteenth century – but it gained popularity in the 2000s as a result of community activists in London.  Now standing at £7.45 an hour, some 20% higher than the National Minimum Wage, the Living Wage has most recently been argued (in a report by the New Policy Institute for the Joseph Rowntree Foundation) to be one of the most important ways in which poverty in Wales could be reduced.  

So why aren’t Wales’s Ministers introducing the Living Wales throughout the nation?

Well, despite its apparent attractions, since being appointed to the Commission I have identified whole series of concerns – some without foundation, and some which the Commission will need to investigate. So here goes:

1. It will cost jobs

The idea that the Living Wage will cost jobs is a faint echo of the argument that the Minimum Wage would lead to a loss of jobs.  Suffice to say that the Minimum Wage did no such thing, and there is no reason to suppose that the Living Wage would lose jobs either. Clearly there is a point at which hourly pay rates increase the wage bill to a point where employers will shed jobs – but it is not inevitable that that point is below the level of the Living Wage. So the jury is out on that one.

2. Increases in pay are offset by loss of benefits

The argument here is that workers would be no better off if their pay rose because they would lose benefits.  It is true that workers do suffer a very high ‘claw-back’ in benefits as their pay rises, and some detailed work needs to be done to find out how this might operate in practice. That said, this must be the only occasion on which you will hear officials argue for dependence on social security benefits rather than on self-reliance and responsibility – normally the mantra.  Certainly most people would rather live off their own earnings than state handouts.  

3. The Living Wage doesn’t help women

Calculations of the precise amount of the Living Wage make certain assumptions about the size of different kinds of household and how much paid work is done. Inevitably these can be questioned, for example large families will not be as well off as small families, nor should it be assumed that women are always the part-time worker in a household.  My own view is that the increase in income and economic independence that the Living Wage would bring women offsets the downsides, although this too will need to be explored further.

All this and more will be considered by the Commission in the next 12 months – watch this space for more.

Postscript: A briefing on the Living Wage in Wales, covering the impact on businesses, employees and public finances, is available for members in the members’ area.

Victoria Winckler is Director of the Bevan Foundation. The Commissioners are unpaid – Victoria’s salary and expenses for participating in the Commission are covered by the generosity of members and donors to the Foundation. Please give £10 to help us with this important work.