What the Rowntrees taught us about good capitalism

Nestle’s decision to pay its entire UK workforce the Living Wage is to be applauded – but confectioner Joseph Rowntree saw the benefit of offering decent wages more than a century ago, says Shaun Rafferty.

Food giant Nestle, which is based in York on the site of the former Rowntree's confectionery factory, is to pay all its 8,000 staff, agency workers and contractors in the UK the Living Wage.

For anyone who isn’t familiar with the Living Wage, it is based on the amount a person needs to earn to cover the most basic costs of living and is now set at £8.80 an hour in London and £7.65 an hour elsewhere. This brilliant decision closes a 100 year loop in York.

A century ago, the Rowntree's factory was paying all its staff in York a higher-than-market wage. It wasn’t called a Living Wage then. Instead it was described as “productivity wages”.

The Rowntrees were concerned that their employees had enough money to live on, but the decision to pay well was as much about business as it was about social responsibility.

Joseph Rowntree and son Seebohm Rowntree were not socialists. They were good capitalists who valued their commercial success. They believed that with that success came social responsibilities, because successful industry and good employment practices were both central in developing a good society for everyone.

In 1914, Seebohm Rowntree said: “Employers… must be compelled to abandon the false economy of low wages, and the nation need not distrust movements which strengthen the economic position of the workers.”

Of the 30 nations in the Organisation for Economic Co-operation and Development (OECD) in 2009, the UK had a higher proportion of low-paid workers than any other country except the US.

In 2012 UK productivity was 16 per cent lower than the average in the same group of countries. And just over half of the 13 million households in poverty currently contain someone who is working.

At JRF we are researching the role employers can and should play in improving the financial wellbeing of their employees. We also want to understand the links between the increasing number of people in low pay and our economic performance as a nation.

Moral arguments alone won’t change things, so we are working with researchers and employers to demonstrate that there is also a business case for better pay and conditions. But it isn’t just about pay – a range of other good employment practices can improve the financial position of staff and provide measurable benefits to organisations.