Published on September 6th, 2013 |
by Eve Stanger
Image © Darren Hester 2010
Live to Work or Work to Live?
In 1998, amid a snowballing debate about the appropriateness of such a policy, the Labour party introduced the National Minimum Wage Act to change the face of the UK job market. 15 years later and this policy remains to be an integral part of the UK economy. But, as recent figures show that 20% of workers are being paid at a rate that does not meet living wage requirements, many of us are left asking what exactly this means and what hope there is to change this. Unlike the minimum wage, the living wage varies across the country. By taking into account costs of living in or out of London, it gives a figure that reflects the minimum amount that a person needs to earn to cover the most basic costs of living. The Living Wage is about allowing people to live a decent life but it is far from an enforceable law – as is clear by the shocking figures newly released.
The Living Wage Foundation have been campaigning for change, arguing for the need to implement the living wage as law rather than just an option for employers. They even vouch for the benefits of the living wage not just for employees but for employers themselves. Figures from the LWF show that, from those employers that have chosen to take on the living wage, 80% felt that the quality of work undertaken by their employees increased whilst absenteeism fell by 25%. This suggests that, though on the surface the living wage reflects increased costs, in reality it could reflect a real chance for businesses to increase their efficiency and experience for workers. What about the workers themselves? When surveyed 75% of workers felt an increase in work quality and 50% felt more willing to implement change in their work practice.
However it’s clear that there is a long way to go before the living wage will be seen on a national scale, with only a few hundred companies choosing to pay it. As it stands, those companies paying the living wage are largely charities and local governments, with a noticeably low number of firms in sectors such as media as well as across the UK in comparison to London, where 138 of the 277 firms are based.
But with support from company giants such as Aviva, Deloitte and KGMG, why does there seem to be little sign of the living wage becoming law? At figures of £8.55 an hour in London and £7.45 across the UK, it reflects a considerable rise in comparison to the national minimum wage, sitting at £6.31 for over 21s. But, if the minimum wage is designed to protect workers and ensure people have the means to live, surely it is pointless if it doesn’t give workers the income for a decent life? The Labour party have often highlighted their success with the minimum wage, due to the way it improved the lives of millions, so it is unsurprising that Ed Miliband has publically favoured it as a key part of the Labour manifesto for the upcoming election.
But in the meantime, what is the reality for workers being paid at such low rates? Depressingly there is a huge difference between the percentage of men and women – with 25% of women being paid below the living wage in comparison to 15% of men. It is worrying to think that a quarter of female workers are not earning the minimum they need to sustain a way of life that covers basic needs alone. Even more worryingly, there is no sign of this figure decreasing. In reality these figures have only worsened in the last few years, sitting at 18% and 11% just 4 years ago. Clearly something has to be done. Figures from the BBC show that a cocktail of factors, including the recession, inflation and stagnating wage levels have led to annual income per head falling by a considerable 13% over the past few years.
If we deem the living wage to be a solution, should firms be worried about the impact on their company’s profits? Statistics show that in many sectors the difference in pay could be easily absorbed, and thus barely felt, by the companies in question. Some suggest the option of considering firm size when determining if a firm is in a position to give their employees the living wage. But is this really a solution? Surely this would bring in the risk that firms would attempt to sub-contract or restrict employment which would be far from in tune with the aims of the living wage. The key is in convincing the employers about the benefits of higher wages, perhaps this could be achieved by incentivising the move towards the living wage through tax breaks for the companies that offer it. Whilst the needs of the worker are important, it is equally important to avoid losing the loyalty of the firms themselves. These firms are a key part of the UK economy and so we achieve nothing by alienating our business leaders. It’d be easy to assume that the living wage being enforced would have a negative impact on the Treasury – for example if they incentivise it through cuts in National Insurance tax breaks. However, according to an independent think tank’s figures, there could even be 50p saving for every £1 spent on implementing the Living wage. This would be a result of the reduced payments in terms of tax credits and benefits.
Regardless, it is undeniable that these recent statistics have had an impact on how the issue of low pay is addressed by our society. By bringing the debate into the foreground, there is more pressure than ever on employers to take on the living wage as an alternative to the national minimum. Amid this, the debate is growing around the minimum wage itself. The minimum wage should respond to inflation and changes in the cost of living but projections show that the UK is heading towards a minimum wage of £7.20 an hour in 2017/18, equivalent to £6.12 in 2013 prices and to a lower figure than 2005. This creates a worrying landscape for those employed at the minimum wage, unless change is to occur. With the Conservatives and Liberal Democrats also announcing their commitment to attempting to find a suitable way to increase the minimum wage, it is clear that the issue of wages fit to cover living standards is likely to be a key debate in the 2015 election.