Make the Living Wage Compulsory

While recent rate increases are welcome, the Living Wage Foundation’s voluntary approach to employers is not working, says ERNIE JACQUES.

Living wage demoSandwiched between Halloween and Remembrance Day each year is ‘Living Wage Week’, organised by the Living Wage Foundation. This year, it announced a 25p increase to its London living wage rate to £9.40 per hour and a 40p increase to its national rate to £8.25 for the rest of the UK.

These rates, of course, are not to be confused with George Osborne’s much lower minimum wage premium for staff over 25 to be introduced in April 2016, which the chancellor has re-branded a ‘national living wage’.

The Living Wage Foundation and Citizens UK, with its nationwide community links, should be commended for making the moral, social and economic case for a living wage, and for their work on social inclusion. It is, of course, good news that 70,000 low paid employees in 2,000 businesses and agencies across the UK are to get an immediate pay rise.

But after 14 years of campaigning, some successes and lots of publicity, is the foundation’s voluntary approach making enough progress?

Six million workers, 23% of the workforce, are still paid less than the living wage, up half a million on 2014, the third annual increase in sub-living wage employees in a row. For young adults aged 18 to 24 the situation is even worse as 53% are not paid a living wage.

Meanwhile, there is a growing army of contract workers – cleaners, security personnel, caterers, and others, including many who work for ‘living wage employers’ – for whom the situation is beyond disappointing, with zero hours contracts and poverty wages the norm.

Despite lots of good news stories, oceans of media coverage, high-profile political endorsements and widespread public support, clearly the Living Wage Foundation’s voluntary approach is not working for everyone, and the trajectory of travel appears to be negative.

But perhaps that’s not surprising given the last 40 years of uninterrupted attacks on trade unions and collective bargaining arrangements, plus relentless and ruthless privatisation and outsourcing. Predictably, this has resulted in a massive shift of national income from workers’ wages to the boardroom and shareholders.

Workplace inequality

As a result, workplace inequality is a common experience which more often than not goes unchallenged, leading to an avalanche of living wage jobs being replaced by part-time, zero-hours, minimum-waged and self-employed contracts.

A recent report in the Independent (4/11/2015) outlined how Uber taxi drivers who complained about poor working conditions and unhappiness at earning less than the minimum wage have been threatened with removal from the payroll.

Nationally, hundreds of thousands of workers who have been moved onto self-employed contracts by companies like Amazon and Sport Direct, while employees at private job agencies, care companies and local authorities are often forced to work for rates well below the minimum wage and are dependent on tax credits to survive.

As ever, it is the unorganised, atomised and unskilled who are most vulnerable. Those at the bottom of the pay league take the biggest hit in ways deemed unimaginable when Margaret Thatcher commenced her 1980s neoliberal revolution.

What’s happened at Rowntree’s in York is a classic example of how these negative employment trends have changed companies. Before it was bought by Swiss multinational Nestlé in 1988, Rowntree’s prided itself on paying a living wage and having exemplary employment practices.

But Nestlé wasted little time in restructuring the business, outsourcing work to eastern Europe and, over time, slashing the workforce, terminating contracts of employment and cutting pay. So a company which once employed 10,000 people now has a workforce of 1,500 with many floor staff stuck on zero hours and temporary contracts that pay minimum wages at best.

A different approach

What a very different approach this is from Rowntree’s original Quaker owners who built a thriving business while investing millions (in today’s money, billions) in social and leisure facilities, and established a garden village in New Easwick to house its workforce. It did all this during a time of great austerity. These owners saw their employees as assets, not just a cost and a problem.

My mother, Edith, a single mum with three boys to look after, worked as a cleaner in the Polo Mint department at Rowntree’s after the Second World War. She became a GMB shop steward and when she retired from the firm after 36 years she was a house owner with a living wage pension.

Of course, not all employers did the right thing then, but far fewer do now. Creating an economy where there is a living wage for all will require the Labour Party to change its ways and turn its back on neoliberal economics.

With the support of other anti-austerity parties, it could throw its weight behind a campaign for a statutory system. There would need to be transitory arrangements for small and medium-sized businesses (tax credits), but these would be backed up by no get out clauses and harsh penalties for directors of businesses that abuse the system.

The tax relief would be available for businesses employing 500 people or fewer at the date when the living wage starts. They would initially be paid the difference between the national minimum wage and the lving wage, but the rebate would gradually be reduced to zero over a 10-year transitional period:

Year 1 – 100%
Year 2 – 90%
Year 3 – 80%
Year 4 – 70%
Year 5 – 60%
Year 6 – 50%
Year 7 – 40%
Year 8 – 30%
Year 9 – 20%
Year 10 – 10%

So, after 10 years all businesses would be expected to have factored the living wage into their unit labour costs and business plans.

Apart from these transitional arrangements, there should be no exceptions and really stiff penalties against company directors and agencies tempted to circumvent the living wage.

The more complicated the legislation the more opportunities there are for accountants and job agencies to dream-up clever rouses to circumvent and undermine its spirit and intention.

For example, they would restructure and re-brand national companies as multiple businesses to take advantage of the transitional rebates, or change the status of employees to self-employed, putting them outside the scope of living wage legislation, as routinely happens now with the minimum wage. They might also include tips and other in-work benefits as part of the living wage.

Statutory living wage legislation needs vigorous monitoring because underpayment of the minimum wage is widespread. There is a key role here for the TUC and trade unions, along with community groups, to help monitor compliance and give free legal aid to workers being underpaid.

Experience and the lessons of history have shown that a statutory living wage is unlikely to be achieved without a mass people’s movement that forces our parliamentarians to act. A living wage for all is never going to happen voluntarily.


See also: ‘The Living Wage and Labour’s Future’, and
‘Labour Should Outlaw Zero-Hours Contracts’, by Ernie Jacques.

Read more about Living Wage Week here.