The living wage campaign shows we can remake the moral economy – there has never been a more timely endeavour

By Jane Wills

The notion of a living wage first emerged in the industrial heartlands of Britain during the 1870s. As the burgeoning labour movement developed the capacity to bargain over their share of pie, workers’ representatives started to demand a living wage.

Sidney and Beatrice Webb argued that the early trade unions and the growing socialist movement began to replace the ‘doctrine of supply and demand’ with the ‘doctrine of a living wage.’ Workers were collectivising and in so doing, they sought payment for their labour sufficient to live. At the most basic, workers were arguing for the wages that would allow them to buy the food, shelter and clothing needed for themselves and their families to live. Rather than being exposed to the vagaries of the market – the laws of supply and demand – workers were agitating for minimum standards that would allow them the means to survive.

Fast forward more than a hundred years and the contemporary resonances of this argument are striking. At a time when the economy has collapsed and our politicians are frantically trying to stave off disaster by plugging the gaps in the dyke, the demand for the living wage is spreading again.

There is a desperate need to rethink the structure of the economy and the distribution of wealth. The London living wage campaign – in tandem with similar developments in other parts of the world – has been doing just that. There are many public and private sector organisations that can and should pay a living wage and here are five reasons why we need a living as well as the national minimum wage.

Firstly, the NMW has been set at a level determined by the market rather than the real cost of life. The wage reflects what the market will bear rather than what is actually required to live. At its present level of £5.73 an hour, a worker earns £230 for a 40 hour week (just under £12,000 a year) before stoppages.

But recent research funded by the Joseph Rowntree Foundation has confirmed that even a single person with no dependents, living in council housing, needs £13,400 a year before tax to afford a basic, but acceptable standard of living in the UK. This equates to £6.88 an hour, well above the NMW.

London’s own living wage rate is currently £7.45 an hour – worth just over £15,000 a year before stoppages – but even this is calculated on the basis of full benefit take up. Without means tested benefits, the London living wage comes to as much as £9.60 an hour – almost twice the National Minimum Wage.

Many workers in London earn well below the living wage rate. The GLA puts the figure at about 1 in 5 or 400,000 people. These workers are clearly not earning the money they should. Many will have dependents to support and they may not have the luxury of other working adults in the family.

Recent research has also found that the majority of workers doing these jobs are migrants to the UK. Many of them are doing the jobs precisely because they are migrants and don’t have access to the benefit system. Many work long hours, take up second or third jobs and share their accommodation with others. I will never forget interviewing one woman from the Caribbean who cleaned at Canary Wharf from 9pm at night, then cleaned a hospital every morning and then managed to look after some elderly people in the evening before returning to clean. This woman had a Herculean appetite for work, sleeping only at the weekend and always falling asleep on the tube going home. She was my age, with a young son at home, and she had had a stroke during the previous year.

Secondly, the current situation involves a huge subsidy to very wealthy employers. While subcontracting – and the attendant competition for contracts – has kept margins and wages low for key services and workers alike, it is the clients who have really benefited.

It is easy to blame the contractors, but many of them are forced into a downward spiral of competition for tenders that makes it impossible to offer better wages even if they wanted to. In contrast, large private companies – some of them posting eye-watering profits and not paying tax – have saved money by subcontracting their catering, cleaning and security operations and/or by sourcing their goods from suppliers abroad.

Low paid workers have been sweated in the interests of these companies and where eligible, the state has assisted by topping up their pay to reflect their real needs. The migrant division of labour also means that the clients are subsidised by the investment of Governments in poorer nations as well.

Thirdly, it is important to note that while similar practices are deployed in the public sector to save money, they simultaneously contradict the core aims of the bodies involved. The public sector is designed to improve the collective good in some way – to improve the health of the nation, to foster community cohesion, to educate future generations – and yet, by supporting employment systems that perpetuate low pay and poor conditions of work, these organisations are creating many of the problems they purport to prevent. Hospital cleaners who don’t get sick pay and go to work when they are sick; people who have young children at home and yet work two jobs in care and hospital cleaning so they can put food on the table, miss out on homework and life after school.

Improving the quality of low paid employment – and efforts to tackle the effects of subcontracting in particular – would contribute to the core goals of social inclusion, ending child poverty and re-skilling the nation. Experience at Queen Mary suggests that it would also improve the quality of the work that is done.

This relates to a fourth issue – and this is probably the most important matter of all. The combination of subcontracting and state intervention to set minimum standards makes it much easier for employers to avoid their moral responsibility for the conditions of work. Subcontracting means that many large private and public bodies have no relationship with the people on whom they depend. The absence of an employment contract severs any moral contract between ‘real employers’ and workers. This divorce between those who generate wealth and those who accumulate it is critical to the moral malaise in our society today. It would do the masters of the universe a great deal of good if they had to recognise and respect the low paid workers on whom their wealth depends.

Fifthly and finally, the prevalence of subcontracted capitalism means that the people who have a direct interest in challenging low pay have little power to change it. In relationships of subcontracted capitalism, those with the real power over the contracting process – the ultimate employers of all those involved in any particular supply chain or business operation – are generally not accessible to those doing the work. Even if workers did get organised, join a union and improve their terms and conditions of work, they would likely price themselves out of a job. Effectively recalibrating the terms and conditions of employment requires that workers get to the ‘real employers’ at the top of contracting chains and that wages are taken out of competition in the labour market at large. In so doing, there is scope to improve the employment conditions associated with the routine manual jobs on which we all depend – and which are so critical to British as well as foreign-born workers today.

London Citizens launched a living wage campaign in April 2001. This has spread successfully across the city to encompass almost 6000 workers, in more than 27 organisations, redistributing more than £20 million back to the poor. With echoes to the past, this campaign is the product of a broad coalition and part of a wider set of demands for housing, community safety and a regularisation for irregular migrants. The living wage campaign has proved it is possible to remake the moral economy of the city at large. There has never been a more timely endeavour.