Is this how a Living Wage might work under Labour?

20th January, 2013 12:45 pm

There’s an interesting report from IPPR and the Resolution Foundation out today (“Beyond the Bottom Line“) that outlines a way in which the Living Wage could be rolled out across the country. As the Observer explained it:

“the creation of “living wage” zones in which a proportion of savings that accrue to the Treasury as a result of the living wage being paid by local public sector employers would be fed back to those local authorities to encourage spreading the living wage into the private sector.

The report suggests that under these “living wage City Deals” local authorities would get the cash on condition that they agreed to work with local businesses to increase wages to living wage levels. Companies could use the money to help them cushion the impact of raising wages or to fund training

The blueprint also says all listed companies should make public how many of their staff are paid below the living wage.”

The report has been welcomed by the party (who called it an “extremely valuable contribution”) which is perhaps unsurprising, as IPPR and the Resolution are both highly regarded by the leader’s office (and by Jon Cruddas too – the authors of this report Kayte Lawton and Matthew Pennycook both contributed to his recent LabourList pamphlet). There’s certainly plenty in the report that is worth flagging up. Having spent a bit of time leafing through it today, here are a few quick thoughts:

A living wage is affordable – The report suggests that a statutory living wage (which I’ve argued for before) would be risky as it could cause job losses – particularly for young low-skilled workers (I still think it’s a good idea, but that’s an argument for another day). It is nonetheless clear that we can have far more extensive Living Wage coverage without any economic damage. The report shows economic costs are surprisingly low and that lots of employers could absorb the cost in various ways.
The government would make billions from a living wage – More coverage for the living wage would benefit the government in the form of higher tax, NI and lower tax credit spending. In total, the government could receive £2.2 billion if the living wage was paid across the board.
The Living Wage is a public sector phenomenon – It needs to break into the private sector where the bulk of low-paid workers are, because otherwise it’s limited (as has been the case in the US).
The Government must tread carefully – the report suggests that political parties need to be careful about government’s role in implementing the Living Wage because the grassroots, community organising aspect of some Living Wage campaigns is a real strength (I wouldn’t disagree – but I still think legislation is necessary, again, an argument for another day). With that in mind, the policy proposals outlined in the report are explicitly geared towards ways in which the state can help and support the campaign rather than the state legislating for everything.
The report chimes with much of Ed Miliband’s thinking around the Living Wage – especially the need for coercion of businesses rather than legislation. With that in mind, I’d be surprised if this report isn’t on the Labour leader’s desk as a blueprint for how the party can implement a Living Wage both in office and from opposition.

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