The UK’s Living Wage Commission recently issued a report which set out their blueprint for how the Government can lift as many as a million people out of low pay by 2020. It is an ambitious report, based on rigorous analysis of the effects of low pay, and the commission is to be commended for publishing this important paper. However, I think we can go further, writes writes Carole Parkes.
The Government needs to take radical steps to meet this target, and there are a couple of ways it could do this. This matters fundamentally to those being paid less than a living wage, but importantly, because evidence suggests that when businesses pay living wages they enjoy higher productivity, good levels of staff retention, and less absenteeism. Too many employers continue to ignore these business benefits and pay poverty wages. This race for short-term profits over long term success means that far too many people are forced to work long hours and rely on housing benefits, food banks and pay-day loans companies just to survive.
There are therefore very good reasons for the Government to act.
One step the Government should seriously consider is taking a leaf out of its own book on pensions.
Auto enrolment has seen a significant increase in the numbers of people saving for their retirement via workplace pension schemes. Central to the success of this has been the opt-out mechanism. In other words, all employees are automatically enrolled onto a pension unless they actively choose not to be. Why not adopt a similar mechanism when it comes to the living wage? Mandating companies to pay the living wage unless they explicitly choose not to do so, for example if they are a start-ups who cannot afford it, will see far more companies reap the benefits of a more committed workforce and allow far more people to earn a decent living.
The Living Wage Commission also says that it has expectations that the public sector will pay the living wage. But we can take this further – and we already have a law to help us do it. The Public Services Social Value Act of 2012 requires anyone (including private sector companies) bidding for larger public contracts to demonstrate social value. A simple amendment to this act would be to require those bidding for these contracts to pay the living wage. Birmingham City Council has already established a Birmingham Charter, which includes the living wage, as part of its procurement processes. Anyone wishing to tender for their services has to sign up to it. It’s a great precedent to show others that it can be done. But more importantly it should act as a spur to others to realise that it should be done.
Having as many employers as possible signing up to the living wage is imperative. It’s fantastic to see an organisation the size of Nestle commit to it recently, and I hope it’s the start of many more firms doing the same. Why? Because how can it be acceptable to grow profits at the expense of working families and children condemned to working all hours but still reliant on housing and other benefits, and pay day loans companies, simply to survive? The minimum wage simply has not kept up with inflation. Many companies, large and small, that have signed up to the living wage recognise that this doesn’t just make good business sense; it’s the right human decision as well.
As I write I am at the UN headquarters in New York, where governments and major business organisations are meeting to agree the Post 2015 Sustainable Development Goals. Poverty eradication (in the northern as well as the southern hemisphere) is the agreed number one goal for all nations. By its own admission, the UK government’s target of ending child poverty by 2020 will “in all likelihood be missed by a considerable margin” (according to Social Mobility and Child Poverty Commission chief Alan Milburn) – leaving as many as two million children in poverty. Adopting the living wage in the UK would be a ‘game changer’ for these targets. Let us demonstrate that the UN commitments on poverty eradication will be a reality in the UK and not just political rhetoric.
Carole Parkes is Director of Social Responsibility and Sustainability at Aston Business School. She is also the co-editor of a new book, Socially Responsive Organisations – the Challenge of Poverty, published by Greenleaf Publishing