Ed Miliband’s plan – announced this weekend – to try and “Make Work Pay” by incentivising businesses to pay the Living Wage is one that should be welcomed. Anything that has the potential to pull people away from poverty wages and help them receive a wage upon which they can have a decent standard of living should be pursued and encouraged. But if I’m completely honest, something about the plan leaves me cold – mostly because it’s not bold enough. As I wrote last year:
“If we accept that the National Minimum Wage still leaves people living in abject poverty – and it does – then why are we willing to accept that as a legal wage floor? If the Living Wage is the level at which people can be reasonably expected to live and support themselves, why don’t we demand that the NMW is set at that level? To do otherwise is to tacitly accept that some will still be employed on poverty wages. I find that difficult to stomach.”
The National Minimum Wage is the lowest amount that we as a society think is acceptable to pay people. But the Living Wage is widely accepted to be the lowest amount that someone can actually live on. That makes a mockery of the Minimum Wage – and all of those trapped in the grey area between the legal minimum and the reality of the cost of living. You want to see a crisis in the cost of living, those driven to payday lenders and food banks? Many of them are paid the minimum wage – a wage that we accept you can’t live on – in the world’s sixth largest economy.
That’s completely and utterly grotesque and – no matter how proud we all are in the labour movement that the minimum wage exists – not a single day goes by that we shouldn’t be disgusted with ourselves for that.
So what Ed Miliband should do – rather than trying to coax employers into slowly but surely adopting the Living Wage (which by his own thesis, some businesses – the predators – may never do) he should cut to the chase and raise the minimum wage to the Living Wage, thus ensuring that no-one in our society is paid a wage on which it is impossible to life. It could even be introduced over a five-year period as Andrew Lewin has suggested. 60% of the public – including 44% of Tory voters – say that they would back a far higher minimum wage even if it caused job losses.
Ah – but there’s the catch isn’t it? No government wants to advocate any hard and fast policy that could hike up unemployment at a time when the economy is only just beginning to heal (and even then, only really for those at the top). The Tory Party spent years scaremongering about the Minimum Wage doing just that, and many are already beginning to make the same arguments against fair pay today.
Except a report published this morning suggests that the overall result of having a statutory Living Wage could be to increase the number of jobs in the economy. Landman Economics – an organisation quoted on the Labour Party’s own press release to justify Miliband’s Make Work Pay plan yesterday – have released a report this morning that states:
“it is unlikely that the extension of the living wage to all UK employees would result in any substantial aggregate employment losses. In fact, it is quite plausible that adopting the living wage on a statutory basis could actually increase overall employment in the UK.”
Howard Reed – formerly of the IFS and IPPR – who wrote the report also argues:
“A statutory living wage would therefore result in an economic ‘win-win’ on a number of levels. It would boost demand and economic growth, reduce earnings inequality, increase the share of wages in national income, and reduce the extent to which the benefit and tax credit system has to prop up low wages to reduce in-work poverty. By insisting on a voluntary approach to extending coverage, current proponents of a living wage are being unnecessarily cautious.”
Cautious is right. Too cautious by far. And whilst some may argue that people organising and working together to obtain the Living Wage from their employers is empowering – and no doubt it is – that’s a luxury that few on minimum wage jobs can afford as they struggle to keep food on the table and put money on the card for the electricity meter. They need the money in their pockets now before the lights go out.
Miliband is moving in the right direction on low pay – and his long-term plan to reset not just the energy markets – but the economy as a whole – would gradually see Britain moving away from being a low wage economy (as opposed to Cameron, who relishes a low wage war with India and China). But if he wants to deal with poverty pay in the most effective way possible, he should announce that a priority for a new Labour government would be abolishing poverty pay, by making the minimum wage the minimum it’s possible to live on, not the minimum we’re willing to pay.