By Guest
Donald Hirsch is head of income studies at the centre for research in social policy at Loughborough university.
Last week the Guardian published the article below in its opinion section and online. Like a lot of articles of this kind, it attracted strong online feelings, with opposite views coming from people who think that £7.14 an hour – my proposed living wage level outside London (the London version has been set at £7.60) – is far to low, and those who condemn any attempt to fix minimum wages which they say would destroy jobs.
My main point is to try to determine some kind of basline of acceptable pay rates below which we think people will have an inadequate standard of living. This is just what it says, a MINIMUM. SInce everyone’s different, it will not meet everyone’s needs by any means. But at least it will meet the needs of some people, which is more than you can say of the £5.80 legal minimum. So such a living wage would be an advance. And the key point of the research I’ve been involved in is that it’s not me who’s making this judgement but groups of members of the public who have discussed in great depth what a family needs in a minimum budget.
Is it too much to ask that we at least try to move towards this kind of wage as a baseline?
So here’s what I said in the article (reproduced with kind permission from the Guardian)
Sympathetic obituarists of New Labour will struggle to identify in its legacy a true step forward for social justice: it has certainly put this concept back on the political agenda, yet social inequalities remain as great in many respects as those inherited in 1997. Yet one of the most striking developments of the past 10 years has been the emergence of a concept resonant of old Labour and the cause of the trade unions – a living wage.
In 1999 Labour delivered on one of its few remaining commitments to the unions by introducing the national minimum wage, but set it at the very low level of £3.60 an hour. It has risen by a third in real terms since, and is now accepted by employers and the Conservatives who initially opposed it. More strikingly, a strong movement has grown up for a wage floor set not just at the level considered by the Low Pay Commission to be economically viable for employers, but at a higher level designed to sustain a socially acceptable standard of living.
The Living Wage campaign has scored some extraordinary successes, most famously by recruiting London mayor Boris Johnson as a supporter. City Hall and a number of boroughs are guaranteeing staff a wage of £7.60 an hour, rather than the current £5.80 minimum. David Cameron’s head of strategy, Steve Hilton, is also a convert, though said to be struggling to convince colleagues.
These initiatives are not just creating havens of decently paying public employment funded by the taxpayer. Living wages are being specified for private firms bidding for public contracts, and being adopted by high profile employers like KPMG and Barclays for their own contracted workers. Paying a living wage is becoming a symbol of responsible corporate behaviour at a time when firms need to show they have values that connect their executives with the rest of the human race.
However, while it makes a nice slogan, a “living wage” can only thrive in the long term if people are convinced that it’s what it says on the box – that is, what people genuinely need as a minimum to live on. New evidence gives robust support to a wage level substantially higher than the present minimum. Detailed research by Loughborough University’s Centre for Research in Social Policy, supported by the Joseph Rowntree Foundation, looks at what things people need to buy in order to afford a minimum socially acceptable standard of living. This is based not, as in past calculations, on judgements made by experts, but on what things groups of ordinary people agree are required as a minimum in Britain today.
This Minimum Income Standard, published annually since 2008, has been used to calculate a living wage requirement, which comes out at £7.14 an hour nationally (compatible with a higher figure for expensive places such as London). While people with different-sized families require different amounts, £7.14 is enough, with the help of tax credit support, to cover the estimated minimum both for singles and for families with one or two children, assuming a modest rent (with upward adjustments possible to cover higher-rent areas). Almost nobody gets their basic needs covered by the existing minimum wage of £5.80.
Campaigners and experts who recently met to consider a national figure for a living wage agreed that £7.14 is the best available, and it will be used as a common figure across the country. The annual minimum wage uprating announcement, later this month, is likely to be only a few pence above the current £5.80, leaving a big shortfall. In the near future, the government will be cautious about increasing burdens on employers in a fragile jobs market.
Yet the campaign for a living wage has been skilfully handled, and is a long way from old-style trade union tactics of banging one’s fist and demanding a higher statutory minimum. Its advocates aim in the first instance to build new norms among responsible employers, not to force sudden, unaffordable pay rises on small businesses. With support in local government spreading, there could be growing pressure on central government to give the living wage some endorsement, at least as a voluntary benchmark.
An attraction for any government in the years ahead of making the living wage a tool for social justice is that it shares the funding burden between a damaged public purse and a recovering private sector. Nor is such a policy, intelligently applied, likely to be as expensive, overall, as it might sound. Companies and councils often find that treating their lowest-paid workers better brings important paybacks, including greatly reduced staff turnover. And the public cost is offset by a reduced bill for in-work benefits and tax credits. So the net cost can be tiny when set against the benefit to society of recognising that workers need a minimum income to live with dignity in modern Britain.
This post is part of Community Links and Church Action on Poverty‘s project looking at working age poverty, contributing to the European Year Against Poverty