FOR – Chloe Clifford-Astbury

In April 2001 London Citizens – an alliance of schools, trade union branches and community groups – launched a call for a living wage. They argued that low pay affected health, family life, civil engagement and educational achievements. With in-work poverty becoming an increasing concern in the UK, the movement has been gaining momentum, and numerous large-scale employers have implemented living wage policies.

The Living Wage Foundation encourages employers to pay all members of staff at least a living wage, defined as a wage that would allow an individual to meet all the costs of living if they were working full-time. The living wage is independently calculated each year, and is currently set at £7.45 for the UK, and £8.55 for London. The foundation accredits employers who meet this requirement as Living Wage Employers.

Why pay the living wage? The foundation argues that doing so is “good for business, the individual and society”.

A London-based 2009 study, undertaken by economic consultants London Economics, summarised the views of employers on the impact implementing a living wage policy had had on their business. They concluded that employers saw advantages in terms of “recruitment and retention, improved worker morale, motivation, productivity and reputational impacts of being an ethical employer”.

Lower rates of staff turnover meant a significant saving on recruitment and induction training for two thirds of employers, while the majority of firms reported reduced rates of absenteeism and sick leave. Furthermore, 80 per cent of employers thought the living wage policy had enhanced the quality of employees’ work. 75 per cent of employees also perceived their own work as having improved as a result of the added incentive.

The study concluded that, for most firms, a living wage policy led to a net benefit in terms of business performance.

The advantage to the individual is obvious, with employees receiving substantial financial and welfare benefits. The study found that all employees stated the living wage policy has made them happier in their work and increased their standard of living. The Living Wage Foundation estimates that 45,000 families have been lifted out of poverty as a direct result of the living wage.

Another comment that was frequently made was that the extra money allowed individuals to pay for education and training that would otherwise have been out of their reach.

A study carried out by Queen Mary, University of London also found that 38% of employees whose workplace had implemented a living wage policy were able to buy more goods and save more – both behaviours that are a boon to the economy.

With the obvious benefits in terms of the welfare of employees, and benefits to employers that compensate for the added cost, the living wage seems an obvious choice.

AGAINST – Sam Matthew

The living wage is the wrong way to go about alleviating poverty in Britain. It is economically and morally ill considered as it penalizes joblessness, raises unemployment and encourages the expansion of an unregulated black-market economy.

Proponents of the living wage argue that its is shameful that 6 million workers earn less than the living wage, which is the minimum pay rate required for a worker to provide his or her family with the essentials of life. The rate varies around the UK depending on living costs. It is particularly shameful that rich institutions including Cambridge Colleges are the employers of many of those who earn so little. Those earning so little have a decreased sense of self-worth and are much more likely to be women and migrants. The answer therefore is to legislate to force employers to pay fair wages.

The problems with this approach are threefold. First, while some of the people who earn below the living wage are employees of by big wealthy companies, many are not. For small companies in difficult economic circumstances the obligation to pay more will lead to job cuts and fewer employment opportunities for those who are most in need.

Secondly, by banning those willing and able to work for less, such as those without a family to support, or migrants sending remittances abroad, it will encourage the black market economy, forcing people to work for even less in unregulated working conditions.

Thirdly, government tax revenue is likely to fall as fewer workers are producing taxable products and services. Higher unemployment leads to increased welfare bills.

The solution is to to allow the government to redistribute corporate taxes to the needy after earnings, instead of penalizing companies for employing people. People in need can therefore have the equivalent of the living wage, they will just not have earned all of it themselves (it would be added to their weekly salary through tax credits). Moreover, they can take it without harming people even less fortunate than themselves.

There would remain issues over job satisfaction. However this is as much due to work place conditions and social stigmas as it is income. Improving conditions in the workplace and detoxifying the image of tax credits would be a far more worthy campaign than the creation of a living wage.

A more enlightened approach might be a voluntary living wage, in which companies which able to pay a living wage but fail to do so are named and shamed. However there are difficulties of implementation and very few companies have signed up to recent campaigns.

The living wage is a nice idea, and has value in so far as it raises awareness of the situation of the poorest. However, in practice it prioritizes those in low wage employment above those even less fortunate, above small employees and above the good of the national economy. It does all this when effective measures for transferring money to the low wage section of the work force already exist. The Living Wage is all sound bite and no substance.