Economic reality means the Living Wage can’t be compulsory. But paying it improves the lives of workers and shows social responsibility, says Shaun Rafferty.
The National Minimum Wage (NMW) is going up in October - by 12p an hour. Despite a bit of grumbling from some employers groups it’s hard to argue that this is a bad thing. The case has been pretty soundly made that an appropriate minimum wage doesn’t create the ‘job-loss-aggedon’ predicted by some when it was introduced in 1999.
Since 2008 the rise in the NMW has constantly been below CPI (Consumer Price Index). In real terms it’s been going down for six years. This year the adult rise is 1.9%, against an inflationary backdrop of 3.2% RPI and 2.8% CPI. You might argue that in the current environment everyone is losing against inflation – this is probably true in most sectors, but a certainty for the low paid. Having said that, the ONS figure for wage growth in March was 1.2%, so the rise is a tiny bit better than it might have been.
So where does the increase in the NMW take the debate on a Living Wage? I think it refreshes it, because frankly NMW even at this new level isn’t close to being a wage anyone can actually live on.
JRF’s research into a Minimum Income Standard shows that even with benefits and tax credits, families on the minimum wage will still be some way off reaching a basic standard of living.
For example, a family of four with a single earner on the minimum wage will only get two-thirds of the way towards reaching the minimum income standard. The out-of-London Living Wage level (£7.45) is calculated using the MIS research and is much closer to providing a basic standard of living.
So why not lobby to have the national minimum wage at the Living Wage level? Because it’s self-defeating. It’s an economic reality that in the current operating environment there are many employers who genuinely couldn’t afford to pay their staff the Living Wage. Taking the position that compulsion is the way forward would almost certainly kill the many thoughtful and progressive discussions going on about low pay (and the wider economic wellbeing of low paid staff) in the board rooms of many employers.
The minimum wage sets a level that nearly everyone regardless of their politics knows is unconscionable for a civilised society to pay below. The Living Wage is an aspiration, a call to employers to think more deeply about the economic welfare of their staff and is one of the ways a progressive employer can choose to discharge their social responsibility to wider society.