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Let’s (Cautiously) Celebrate Living Wage Week

This week sees the Living Wage Foundation celebrate it’s living wage mark and those employers who volunteer to pay their staff the new rates of £9.40 per hour in London and £8.25 in the rest of the country. Over a relatively short period of time, the idea of paying workers enough so that they can sustain a decent standard of living has captured the public’s imagination; surely there’s no greater testament to the policy’s popularity than Boris Johnson being chosen to announce its increase?

The living wage now has competition though, in the form of the National Living Wage. Both may purposely have similar names but they are fundamentally different. Whereas the Living Wage Foundation’s mark is calculated as a ‘real’ living wage, the National Living Wage will be set by the Low Pay Commission based upon what it believes the economy can manage to sustain. Although a higher national minimum wage of £7.20 per hour rising to £9 is welcome, planned changes to tax credits would act to reduce its real value for many. Should these reforms go ahead, the Living Wage Foundation has intimated that it would adjust its living wage to reflect any loss in income experienced by workers.

The very reason for the government’s theft of the living wage mark points to a serious problem seldom raised by its proponents; why should an employer choose to pay more than the living wage when it’s promoted as an accepted amount to pay? One should be fairly sceptical when KPMG, a company paid to save others money, is conducting research on the economic benefits of paying workers the living wage. This critique points towards a problem that is becoming increasingly common in countries with statutory minimum wages; minimum wages are no longer floors but rather ceilings above which workers find it very difficult to negotiate higher pay.

In order not to fall victim of its own success, the living wage should be seen not as an end in itself, as it’s often portrayed in the mainstream media, but rather as the minimum level at which pay should be set. Another proposed Conservative reform plays an important role in this suggestion. In order for the spillover effects from increases in the living wage to be felt beyond the bottom of the wage distribution, a strong system of industrial relations is necessary; the government’s Trade Union Bill is thus a danger to potential wage equality.

The Living Wage Foundation’s living wage has without a doubt been a success – over 2,000 employers have committed themselves to paying their employees fairly. But so much more can be made of the popular support that it has so far gained. Synergies between collective bargaining and the living wage must be explored; greater engagement between trade unions and the Living Wage Foundation is essential for securing sustainable rather than one-off pay rises for the lowest paid. Few would disagree that an estimated 6 million workers deserve more than the previous living wage mark of £7.85 per hour.