tag:theconversation.com,2011:/africa/topics/national-living-wage-26174/articlesNational Living Wage – The Conversation2021-06-02T11:04:32Ztag:theconversation.com,2011:article/1610122021-06-02T11:04:32Z2021-06-02T11:04:32ZLiving wage: Ireland wants to be world’s leader – but could crush small businesses<p>COVID-19 has brought the living wage debate back into focus, particularly since <a href="https://www.unison.org.uk/news/article/2021/04/public-service-workers-arent-fooled-by-this-aprils-pay-rise/">many essential workers</a> are the lowest paid in society. Numerous major companies such as <a href="https://retailtechinnovationhub.com/home/2021/5/1/ikea-recommits-to-paying-uk-living-wage-foundation-rates">Ikea</a> and <a href="https://www.corporateknights.com/channels/workplace/unilever-to-support-living-wage-and-diverse-suppliers-16212438/">Unilever</a> <a href="https://www.livingwage.org.uk/accredited-living-wage-employers">now pay</a> a living wage, as does the <a href="https://www.gov.scot/publications/scottish-public-sector-pay-policy-2021-2022-revised/pages/2/#:%7E:text=The%20Scottish%20Government%20recognises%20the,earn%20%C2%A325%2C000%20or%20less.">Scottish government</a>.</p>
<p>Ireland, however, could soon go one step further. The Irish <a href="https://www.breakingnews.ie/ireland/work-begins-to-replace-minimum-wage-with-living-wage-in-ireland-1111739.html">government has tasked</a> its Low Pay Commission with examining how a living wage could be introduced across the republic. Due to report later in the year, the Commission could enable Ireland to become the first nation to require all businesses to pay a true living wage, raising all wages from the minimum wage of €10.20 (£8.81) an hour to €12.30 (£10.61) an hour. </p>
<p>As in many countries, the living wage is currently optional in Ireland, with some employers such as <a href="https://www.irishtimes.com/business/retail-and-services/lidl-ireland-commits-to-paying-staff-latest-living-wage-increase-1.4086434">Lidl</a> and <a href="https://www.irishmirror.ie/news/irish-news/aldi-living-wage-ireland-2020-21345449">Aldi</a> making a virtue out of paying it. A republic-wide living wage sounds laudable from the perspective of workers’ entitlements, particularly at a time of <a href="https://theconversation.com/inflation-might-well-keep-rising-in-2021-but-what-happens-after-that-161461">rising inflation</a>. On the other hand, Irish business groups <a href="https://www.independent.ie/business/irish/business-group-criticises-the-timing-of-living-wage-debate-40319185.html">argue that</a> the timing is poor considering how businesses have been hit by the pandemic. </p>
<p>While many elsewhere will be watching closely to see how this develops, there is a danger of going too far. The living wage can have unintended consequences and detract from better ways in which government policies can improve people’s living standards. </p>
<h2>The living wage so far</h2>
<p>The concept of the living wage originates from the 19th century, when it was championed by the likes of the <a href="https://www.vatican.va/content/leo-xiii/en/encyclicals/documents/hf_l-xiii_enc_15051891_rerum-novarum.html">Catholic Church</a> to address the appalling working and living conditions caused by industrialisation. The campaign has been back on the agenda <a href="https://www.eurofound.europa.eu/observatories/eurwork/industrial-relations-dictionary/living-wage">since the 1990s</a> in developed countries such as the US, UK, Canada and Ireland, mainly because having a job is no guarantee of making ends meet.</p>
<p>More recently, the debate has been attracting greater attention in poorer countries too. The Global Living Wage Coalition is active in <a href="https://www.globallivingwage.org/">40 countries</a>, including Pakistan, Peru, South Africa and Nigeria. </p>
<p>While there are many good living wage initiatives <a href="https://www.globallivingwage.org/">around the world</a>, the UK currently leads the way with its <a href="https://www.gov.uk/national-minimum-wage-rates">national living wage</a> of £8.91 per hour for 23 and overs. This is less than the £9.50 that <a href="https://www.livingwage.org.uk/what-real-living-wage">living wage campaigners argue</a> for, and which is paid by the likes of Ikea, but the national rate is <a href="https://employeebenefits.co.uk/national-living-wage-10-50-2024/#:%7E:text=Budget%202020%3A%20Chancellor%20of%20the,of%20median%20earnings%2C%20by%202024.&text=Sunak%20also%20stated%20that%20the,21%20and%20over%20by%202024.">set to</a> rise to £10.50 by 2024. The disparity between government policy and campaigner demands reflects the fact that it’s tricky to define the living wage, with different criteria producing different rates. </p>
<h2>Benefiting who?</h2>
<p>Ireland has the <a href="https://www.rte.ie/brainstorm/2020/0402/1127997-low-paid-workers-ireland-gig-economy-coronavirus-pandemic/">third worst rate</a> of low pay in the EU. Rental costs have doubled in the past decade and childcare costs are among the highest in the OECD. Although income tax is low for low-paid workers, an <a href="https://www.oecd.org/statistics/how-s-life-23089679.htm">OECD report</a> from March 2020 found nearly half of Irish workers were three pay cheques away from poverty (compared to around one third of UK workers). </p>
<p>Since then, Ireland’s National Economic & Social Council has <a href="http://files.nesc.ie/nesc_background_papers/c19-2-how-we-value-work.pdf">found that</a> COVID-19 has made many poor jobs more valuable to society, but also worse in the sense that they often can’t be done remotely and tend to carry a higher risk of infection. </p>
<p>But if this is the context for Ireland’s proposed living wage, what will it achieve? The UK’s <a href="https://www.livingwage.org.uk/">Living Wage Foundation</a> promotes the many benefits to business from paying a living wage, including increased employee retention, decreased absenteeism and better quality of output. Nonetheless, these benefits are only attainable if a living wage is affordable to employers: of the <a href="https://www.livingwage.org.uk/accredited-living-wage-employers">nearly 8,000</a> living wage employers in the UK, many are Britain’s largest firms. </p>
<p>For smaller businesses, it may not be affordable. A 2019 report by <a href="https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/852510/The_impact_of_the_NLW_on_businesses_-_retail_and_hospitality_in_two_English_cities.pdf">Sheffield University Management School</a> on the impact of introducing the national living wage in retail and hospitality in parts of the UK identified various negative knock-on effects for workers. These included leavers not being replaced, increased use of variable hours contracts, replacing older workers with younger ones and increasing the number of part-time workers at the expense of full-timers.</p>
<p>Fast-forward to Ireland in 2021 and business association IBEC is <a href="https://www.independent.ie/business/personal-finance/property-mortgages/ibec-blasts-living-wage-as-fundamentally-flawed-concept-as-it-increases-by-20c-to-1170-35898541.html">claiming that</a> introducing a living wage, particularly for entry-level jobs, will pose a significant barrier to employing young people, the main recipients of low wages. IBEC argues that the proposed living wage is being calculated on excessively high housing and rental costs, and with little consideration of geography, sector, enterprise size or employers’ ability to pay.</p>
<p>Critics also argue that when you raise wages, you inevitably lose jobs. As a result, small firms are liable to be driven out of the market. For example, President Joe Biden’s proposal to raise the US federal minimum wage from US$7.25 (£5.11) per hour to US$15 (£10.58) was <a href="https://www.cbo.gov/system/files/2021-02/56975-Minimum-Wage.pdf">recently forecast</a> to cost 1.4 million jobs by 2025. </p>
<p>Even without the living wage, the Irish Small Firms Association’s recent <a href="https://www.sfa.ie/Sectors/SFA/SFA.nsf/vPages/News%7Esmall-business-sentiment-rises-in-second-half-of-2020-25-01-2021/$file/SFA+Small+Business+Sentiment+Survey+winter2020.pdf">sentiment survey</a> identified increased business costs as one of the biggest risks to continued survival for small businesses. </p>
<h2>The verdict</h2>
<p>Introducing a fair living wage is an important way of improving worker outcomes. Clearly, however, if set too high, it may badly hinder small businesses and end up making life harder (albeit a little wealthier) for those who keep their jobs. If Ireland wants to become the world’s first genuine living wage nation, it therefore needs to proceed cautiously. </p>
<p>Also, focusing on pay alone will not fix the problems associated with low pay. Giving workers a greater voice, better regulation of the gig economy and other societal measures such as better public services and sustained efforts to reduce income inequality are all important too. </p>
<p>The same is at least as true for the quality of people’s jobs. At the <a href="https://www.consilium.europa.eu/en/press/press-releases/2021/03/24/main-messages-from-the-tripartite-social-summit-24-march-2021/">EU’s Social Summit</a> in March, heads of government committed to creating quality jobs and new industries, while the <a href="https://b1g1.com/sustainable-development-goals-guide">UN Sustainable Development Goals</a> encourage all countries to promote prosperity while protecting the planet. As governments spend heavily to create green industries for the future, the decent jobs that this promises to create should be one of the key motivations for doing so.</p><img src="https://counter.theconversation.com/content/161012/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Maeve O'Sullivan does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Ireland is looking at imposing a living wage on all employers.Maeve O'Sullivan, Assistant professor of Decent Work & Human Resource Management, University of GalwayLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1423322020-07-08T16:32:50Z2020-07-08T16:32:50ZSummer statement: Tory benefits policy under coronavirus is finally beginning to help the poorest<p>As Rishi Sunak <a href="https://www.theguardian.com/world/live/2020/jul/08/uk-coronavirus-live-sunak-to-set-out-jobs-plan-and-stamp-duty-holiday">announces that</a> the government will pay the wages of hundreds of thousands of young adults for 25 hours a week over six months, it’s worth remembering that this will be on a minimum wage more than a quarter higher than it was five years ago. </p>
<p>A full-time worker aged 21 now earns a minimum of £16,000 a year, up from £12,700 in 2015. Five years ago to the day, George Osborne, presiding over a healthier economy, <a href="https://www.bbc.co.uk/news/uk-politics-33437115#:%7E:text=George%20Osborne%20has%20used%20his,the%20%C2%A36.50%20minimum%20wage.">announced from</a> the same dispatch box a dramatic reversal of the Tories’ caution about minimum-wage rates. His national living wage for over-25s, initially set at £7.20 and <a href="https://www.gov.uk/national-minimum-wage-rates">now at £8.72</a>, has been accompanied by steep increases in the minimum wage for younger workers.</p>
<p>But two key issues will be important in the months and years ahead to avoid a situation where efforts to avoid <a href="https://www.cityam.com/coronavirus-labour-crisis-so-far-10-times-worse-than-2008-says-oecd/">mass long-term unemployment</a> lead to a further <a href="https://www.jrf.org.uk/report/what-has-driven-rise-work-poverty">increase in working poverty</a>, which has grown alarmingly despite increases in the minimum and living wage. </p>
<p>The first is to see through the government’s plan to “<a href="https://www.sajidjavid.com/news/chancellors-speech-unleash-britains-potential">end low pay</a>”, involving an extension of the national living wage to younger groups – those under 25 are <a href="https://www.gov.uk/national-minimum-wage-rates">only eligible</a> for the (lower) minimum wage. Ending low pay will require a determined focus on achieving Sunak’s ambition of creating “good-quality” jobs, by making sure they are well paid and secure. </p>
<p>The second is to abandon once and for all the idea that minimum wage increases allow swingeing cuts in tax credit and universal credit top-ups to low-income working families. This was Osborne’s plan in 2015 – more pay, less working “welfare” – but it was always flawed. The problem is that better minimum wages produce relatively modest income gains, which don’t reach families with slightly better hourly pay but low earnings due to part-time hours. Any gains can be outweighed by even a modest percentage cut in the tax credits on which families depend. </p>
<h2>Five dark years</h2>
<p><a href="https://theconversation.com/osbornes-living-wage-wont-spare-low-income-families-from-cuts-44438">I pointed this out</a> in The Conversation the day after the original announcement, and enough backbench Tories agreed with me to cause Osborne to cancel his immediate cuts to tax credits, which would have withdrawn them more sharply from workers as their earnings rose. Yet he stuck with the freezes in benefits, tax credit rates and universal credit, which have continued to undermine the value of working incomes. </p>
<p><a href="https://cpag.org.uk/sites/default/files/files/Austerity%20Generation%20FINAL.pdf">The impact</a> on struggling working families put paid to Theresa May’s mantra of helping the “just about managing”. So Anneliese Dodds, the shadow chancellor, was <a href="https://labourlist.org/2020/07/today-britain-should-have-had-a-back-to-work-budget-dodds-full-speech/">understandably sceptical</a> about Rishi Sunak’s declaration in the summer statement that he is “helping the poorest most”. At the very least, he will need to demonstrate this with actions not words.</p>
<p>So far, there has been a start of a retreat from austerity in benefits policy. This year, not only have the freezes on benefits ended, but working tax credit and universal credit rates have risen (temporarily) by £1,000 a year more than inflation, in response to the coronavirus crisis. Coinciding with the 6% increase in the national living wage to £8.72, this has raised the net income for a family with parents working on low pay considerably – as long as they maintain their previous working hours (of which more later).</p>
<p>So where does this leave working incomes relative to family needs?</p>
<p>My team at Loughborough University has just launched the 2020 results of our <a href="https://www.jrf.org.uk/report/minimum-income-standard-uk-2020">minimum income standard</a> (MIS), which calculates to what extent benefits and wages are keeping families out of poverty. This year’s data incorporates fresh research on what members of the public people say is required for an acceptable standard of living. </p>
<p>While we have not yet been able to incorporate in this research the new patterns of living seen since lockdown (which are in any case changing by the day), our results reflect how important it is for households to be able to afford to access current technologies supporting their everyday lives, both for practical tasks and for social participation. The dawning of the age of Zoom, with remote working, remote schooling and remote socialising, has hugely reinforced these findings.</p>
<p>But another feature of our findings relates directly to the policy challenges of supporting working incomes in order to allow families to have decent lives. The minimum income standard allows us to track whether people on minimum wages have enough to make ends meet. </p>
<h2>Designing a post-austerity world</h2>
<p>In 2008, when we started this research, tax credits got families almost to the MIS level, but by 2019, even helped by higher pay, they were falling well short. For example, a lone parent working full time to support two children had more than 20% less disposable income than they needed.</p>
<p>In 2020, for the first time in over a decade, state support for working families and minimum hourly pay are rising simultaneously. This has boosted working incomes so that it is now possible for the first time for a dual-earner family, with a full-time and a part-time working parent, to have disposable income around the minimum level with the help of universal credit. Lone parents still fall short, but by only 8% if they work full time and get universal credit. </p>
<p>Of course, this does not mean that families are thriving. Limited working hours often play a greater role in producing low household income than low rates of hourly pay, and many families are now out of work, or on shorter hours than six months ago. Nevertheless, Rishi Sunak has demonstrated something that George Osborne never accepted: increases in state help can complement decent wages in raising the prospects of families with low earnings.</p>
<p>People like the footballer <a href="https://theconversation.com/marcus-rashford-black-lives-matter-and-a-british-premier-who-is-out-of-his-league-140998">Marcus Rashford</a> have helped shine a spotlight on the struggle faced by those on low incomes, and not just during the time of COVID-19. This has highlighted the case for improved support for such families, on a permanent not just a temporary basis. </p>
<p>In the months and years ahead, as Britain works to reduce its suddenly high rates of unemployment and underemployment, a renewed commitment to paying adequate benefits to people whose incomes are falling short could become one of the benign legacies of 2020.</p><img src="https://counter.theconversation.com/content/142332/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Donald Hirsch receives funding from the Joseph Rowntree Foundation, is a member of the Labour Party and co-author of The Living Wage from Agenda Publishing.</span></em></p>Shadow chancellor Anneliese Dodds was understandably sceptical of Rishi Sunak’s claims to be “helping the poorest the most”, but Tories are moving in the right direction.Donald Hirsch, Professor of Social Policy, Loughborough UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1398002020-06-02T14:13:39Z2020-06-02T14:13:39ZBeyond clapping for key workers – here’s how to give them the pay rise they deserve<p>At 8pm every Thursday night for the last ten weeks, huge numbers of people across the UK took to their doorsteps or windows and clapped, or banged pots and pans to celebrate the country’s key workers. These are the people who, when it comes down to crunch time, are essential for the rest of us to carry on. People working in health, care, emergency services, food retail and security, have put their own safety and often that of family members at risk to keep the country functioning. </p>
<p>These jobs have been revealed as those of the highest social value in the country. That’s why we applaud. </p>
<p>What is striking, though, is that for the most part <a href="https://theconversation.com/coronavirus-shows-key-workers-need-better-pay-and-protection-heres-what-has-to-change-137037">they are low paid</a>. Many are minimum wage or just above. Others, in nursing and emergency services for example, are poorly paid, given the skill levels involved.</p>
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<a href="https://theconversation.com/coronavirus-shows-key-workers-need-better-pay-and-protection-heres-what-has-to-change-137037">Coronavirus shows key workers need better pay and protection – here's what has to change</a>
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<p>In economic terms, the market gives these jobs a low valuation. Markets value jobs highly when the skills they involve are scarce and they produce high financial returns for the businesses that employ them. Doing something for the greater good often comes with a pay penalty. </p>
<p>As some people will want to do certain work because of its social value, not just because of the pay, this allows firms (and often charities) to recruit, retain and motivate staff at lower wages. This is sometimes referred to as the intrinsic motivation of the job <a href="https://ideas.repec.org/a/bla/randje/v38y2007i3p714-732.html">rather than financial motivation</a>. If jobs are less attractive, because of the danger involved for instance, wages tend to be higher as a compensating pay differential. But markets do not value simply doing good.</p>
<p>In the near future, the risk associated with these jobs may put off some people and push wages up. But the stronger influence will be the impact of the coronavirus recession <a href="https://www.bbc.co.uk/news/business-52566030">that is underway</a>. Unemployment will spike <a href="https://www.resolutionfoundation.org/press-releases/ending-the-job-retention-scheme-too-soon-risks-a-second-surge-in-unemployment/">when the government furlough scheme ends</a>. </p>
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<span class="caption">The economy is reeling from coronavirus.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/uk-cafe-close-down-under-coronavirus-1680988837">Shutterstock</a></span>
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<p>Mass unemployment always hits the entry level jobs that require no qualifications and experience particularly hard. This is simply because of the high competition for jobs, as the unemployed try and re-enter the labour market. This then leads to a reduction in wages in lower paid jobs, down to the minimum wage. </p>
<p>Public sector wages tend to be driven down by another factor, which is the government deficit. When governments have no money, public sector pay gets squeezed. So the pay prospects for the UK’s key workers, with their essential service and commitment to the public, is not good.</p>
<h2>Change is possible</h2>
<p>If the nation wanted to do something about this, it could. The public sector is of course under the control of government and NHS staff and others could be rewarded for their service. Equally, minimum wages can and might well be raised as a result of government policy. Not only would this benefit many key workers, though of course other low paid workers would see pay rise too. </p>
<p>The government could go even further. In many countries there are higher minimum wages set for certain industries or occupations. The UK only has minimum wage variation based on age, but Germany, Australia and New Zealand, to name a few, vary their minimum wages by sector. In Australia, for example, they set higher minimum wages by sector, <a href="https://www.actu.org.au/our-work/policy-issues/modern-awards">taking into account quaifications and experience</a>. </p>
<p>Another way to increase pay for key workers is through requiring a licence for certain jobs. Many, of course, already require this – from doctors to heavy goods vehicle (HGV) lorry drivers – often out of concern for public safety. A recent addition to these groups has been security staff, who now require a Security Industry Authority licence to work. </p>
<p>This requires training across a number of units and passing a criminal records check. It’s not particularly onerous to gain but does, importantly, restrict the numbers that will apply for jobs and this raises pay. </p>
<p>It is not hard to imagine that social and child care, along with nursing assistants, could be licensed (as of course are nurses), requiring some basic qualifications and training. Moving these occupations onto a more professional footing, while also recognising career advancement routes, would be a practical method to recognise and reward many key workers. </p>
<p>In other areas it will be hard to do more than have higher minimum wages, though. Ultimately, Britain must decide if it’s prepared to back its applause – and the country’s key workers – with money.</p><img src="https://counter.theconversation.com/content/139800/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Paul Gregg does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Many key workers are among the UK’s lowest paid.Paul Gregg, Professor of Economic and Social Policy, University of BathLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1267172019-11-14T10:32:44Z2019-11-14T10:32:44ZUK election 2019 could deliver the country’s first real living wage<figure><img src="https://images.theconversation.com/files/301540/original/file-20191113-77305-b7ray8.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">A real living wage would make a big difference to those on low pay.</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/hands-holding-british-pound-coin-small-369962102">Shutterstock</a></span></figcaption></figure><p>The din of political parties outbidding each other <a href="https://theconversation.com/both-the-conservatives-and-labour-are-stretching-spending-rules-but-lack-vision-for-the-countrys-future-126784">on promises to spend more</a> on the NHS, education, transport infrastructure and housing has echoes of pre-austerity and even pre-Thatcher times. In a less familiar but no less noisy competition, both main parties are trying to persuade voters that they are committed to raising living standards by promising a significant rise to the minimum wage. We could well see a transformative assault on low pay in the UK.</p>
<p>As recently as 2015, the hourly national minimum wage was just £6.50. Today, for over-25s, it is £8.21. Promising to raise and extend this national living wage, as it’s now called, the Tories <a href="https://www.theguardian.com/uk-news/2019/sep/30/conservatives-pledge-raise-national-living-wage-by-2024">have a target of £10.50 an hour</a>, paid to all over-21s, by 2024. Labour pledges £10 for all over-16s next year. These promised increases – to up to 40% in real terms above the 2015 level – represent a striking new feature of UK politics.</p>
<p><a href="https://www.agendapub.com/books/18/the-living-wage">The UK came late to minimum wages</a>, with the first national minimum wage introduced only in 1999. That was 30 years after France, 65 years after the US, and around a century after Australia and New Zealand. </p>
<p>Labour and the unions had feared a national minimum would undermine the collective bargaining system whereby pay deals were negotiated in individual occupations and sectors. Free-market Conservatives criticised public interference in the labour market and <a href="https://theconversation.com/how-the-old-idea-of-the-living-wage-has-been-embraced-by-the-political-establishment-78635">opposed the minimum wage at its inception</a>. Yet 20 years later, their rhetoric promises nothing less than to <a href="https://vote.conservatives.com/news/sajid-javid-speech">“end low pay altogether”</a>.</p>
<p>In trying to understand this phenomenon, it is worth asking where this new politics of pay is coming from, what exactly the present promises mean, and where it is all going.</p>
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Read more:
<a href="https://theconversation.com/how-the-old-idea-of-the-living-wage-has-been-embraced-by-the-political-establishment-78635">How the old idea of the living wage has been embraced by the political establishment</a>
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<h2>The switch to a ‘living’ wage</h2>
<p>The national minimum wage introduced in 1999 was set at a low level designed only to tackle extreme low pay. Over the next 15 years, policies to raise this level were predominantly cautious, guided by a desire not to make hiring people unaffordable and thus reduce the number of jobs. Any increase was subject to Low Pay Commission advice on what increases were safe in these terms. </p>
<p>But falling real pay in the early 2010s became associated with a crisis in living standards. So the campaign for a Living Wage at a higher level than the statutory minimum started gaining political traction. </p>
<p>This was supported by <a href="https://www.lboro.ac.uk/research/crsp/mis/thelivingwage/">our research at Loughborough University</a>, which shows clearly that the national minimum wage is not enough to provide a minimum living standard that’s considered acceptable by the general public. The “real living wage” now paid voluntarily by <a href="https://www.livingwage.org.uk/accredited-living-wage-employers">over 5,000 accredited employers</a>, is based on this research. Its new levels, just announced, are £10.75 in London and £9.30 outside.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/301543/original/file-20191113-77338-192xxtu.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/301543/original/file-20191113-77338-192xxtu.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/301543/original/file-20191113-77338-192xxtu.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=360&fit=crop&dpr=1 600w, https://images.theconversation.com/files/301543/original/file-20191113-77338-192xxtu.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=360&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/301543/original/file-20191113-77338-192xxtu.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=360&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/301543/original/file-20191113-77338-192xxtu.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=452&fit=crop&dpr=1 754w, https://images.theconversation.com/files/301543/original/file-20191113-77338-192xxtu.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=452&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/301543/original/file-20191113-77338-192xxtu.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=452&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="attribution"><a class="source" href="https://www.livingwage.org.uk/news/real-living-wage-increases-2019-20">Living Wage Foundation</a></span>
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<p>After the 2015 election, the then chancellor, George Osborne, transformed the politics of minimum wages by <a href="https://www.gov.uk/government/topical-events/budget-july-2015">announcing the national living wage</a>. It brought a substantial increase in the compulsory minimum for over-25s, which <a href="https://obr.uk/docs/dlm_uploads/July-2015-EFO-234224.pdf">moves the UK</a> from paying an internationally below-average minimum rate to one of the world’s highest, relative to average pay. </p>
<p>This reversal for the Conservatives was driven by a desire to address living standards, while actually cutting public spending. The latter was proposed through cuts to tax credits paid to low-income workers, arguing that they would need these less if pay improved. <a href="https://www.jrf.org.uk/report/will-2015-summer-budget-improve-living-standards-2020#jl_downloads_0">These sums did not add up</a>, and fierce criticism of tax credit cuts caused some of them to be reversed. Nonetheless, the pledge to raise minimum pay for over-25s, from about 52% of median pay in 2015 to 60% in 2020, is being kept.</p>
<p>Even without cuts, the policy <a href="https://obr.uk/docs/dlm_uploads/July-2015-EFO-234224.pdf">is projected to save the Treasury money overall</a>. Paying people more brings a boost to tax receipts and reduces tax credits through the means test. Such savings would be limited if an increased minimum were adequately followed through in more public funds for low-paid sectors such as social care (<a href="http://ftp.iza.org/dp11474.pdf">which has not happened</a>). Nevertheless, it’s politically attractive to have a policy that makes people better off without having to raise more public money.</p>
<h2>Be careful of politics</h2>
<p>Of the present commitments, Labour’s £10 in 2020 pledge bears a closer resemblance to a true living wage, since it is in principle linked to our “real living wage” calculation based on living costs. The Conservatives’ targets are linked to median pay rather than living costs, rising from 60% to two thirds of the median in the coming parliament. Both versions involve bold ambitions that could bring the minimum wage at least to the level of the “real living wage” outside London.</p>
<p>This new willingness to raise people’s living standards, largely at the expense of employers, rests on dropping qualms about the potentially damaging effects on employment rates. Two decades of research for the Low Pay Commission, which advises the government on the minimum wage, backs this up. It shows largely negligible effects so far of the minimum wage on the number of jobs available. </p>
<p>The economist who reviewed this issue for the government, Arindrajit Dube, is <a href="https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/844350/impacts_of_minimum_wages_review_of_the_international_evidence_Arindrajit_Dube_web.pdf">cautiously optimistic</a> that raising it further will not have adverse effects on jobs. But he also warns that it must be monitored in case there are.</p>
<p>Whichever policy is introduced involves a crucial competition between political commitment and economic realism. The louder the political promises, the harder it will become to show caution where needed. Significantly, Conservative chancellor, Sajid Javid set his £10.50 target at the latest party conference, a month before Dube’s review gave it the amber light. Shadow chancellor, John McDonnell first called for a compulsory minimum based on a “real living wage” <a href="https://www.bbc.co.uk/news/business-37470492">three years ago</a>, and has been highlighting this policy ever since.</p>
<p>You may expect that, as the person who leads the work used to calculate the real living wage, I would welcome unreservedly a commitment to make it compulsory. Yet just as Dube is cautious about unconditional targets from an economic perspective, I am cautious from the point of view of politics and policy. </p>
<p>The living wage movement has made extraordinary strides. But the biggest thing that could set it back, or even kill it, would be clear-cut evidence that it is destroying jobs. So whichever party wins the election, preventing the new national living wage from rising to damaging levels may be the single most important ingredient in permanently ending low pay in the UK.</p>
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<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/300094/original/file-20191104-88372-xpdf2e.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/300094/original/file-20191104-88372-xpdf2e.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=140&fit=crop&dpr=1 600w, https://images.theconversation.com/files/300094/original/file-20191104-88372-xpdf2e.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=140&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/300094/original/file-20191104-88372-xpdf2e.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=140&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/300094/original/file-20191104-88372-xpdf2e.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=176&fit=crop&dpr=1 754w, https://images.theconversation.com/files/300094/original/file-20191104-88372-xpdf2e.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=176&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/300094/original/file-20191104-88372-xpdf2e.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=176&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<p><em><a href="https://theconversation.com/uk/newsletters/the-daily-newsletter-2?utm_source=TCUK&utm_medium=linkback&utm_campaign=TCUKGE2019&utm_content=GEBannerA">Click here to subscribe to our newsletter if you believe this election should be all about the facts.</a></em></p><img src="https://counter.theconversation.com/content/126717/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Donald Hirsch receives funding from the Joseph Rowntree Foundation, is a member of the Labour Party and co-author of The Living Wage from Agenda Publishing.</span></em></p>Promised increases from both sides are a striking new feature of UK politics and could be transformative for many.Donald Hirsch, Professor of Social Policy, Loughborough UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1148672019-04-08T13:52:45Z2019-04-08T13:52:45ZNational living wage is not enough to fix Britain’s low-pay problem – here’s why<figure><img src="https://images.theconversation.com/files/268098/original/file-20190408-2931-1uzequ2.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Not much for an hour's work.</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/hand-british-pounds-coins-uk-currency-384451150">Claudio Divisia / Shutterstock</a></span></figcaption></figure><p>The legal minimum wage is vital for regulating low pay and preventing exploitation. But it is insufficient on its own to reduce poverty for working people and protect living standards. It is also contradicted by broader Conservative government policies which are causing income inequality, debt, and weak collective representation, which are detrimental for working people.</p>
<p>On April 1, about 1.6m workers received a 4.9% rise in the <a href="https://www.gov.uk/national-minimum-wage-rates">National Living Wage</a>. This is the compulsory minimum wage for workers aged 25 plus, and it increased from £7.83 to £8.21 per hour. Workers under 25 received lower minimum wage rises (which some suggest discriminates against younger people). Rates are recommended by the <a href="https://www.gov.uk/government/organisations/low-pay-commission/about">Low Pay Commission</a>, whose remit is to reduce low pay without adverse impacts on employment and the economy.</p>
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<a href="https://images.theconversation.com/files/267841/original/file-20190405-180036-1kaqo8n.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/267841/original/file-20190405-180036-1kaqo8n.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/267841/original/file-20190405-180036-1kaqo8n.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=337&fit=crop&dpr=1 600w, https://images.theconversation.com/files/267841/original/file-20190405-180036-1kaqo8n.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=337&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/267841/original/file-20190405-180036-1kaqo8n.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=337&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/267841/original/file-20190405-180036-1kaqo8n.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=423&fit=crop&dpr=1 754w, https://images.theconversation.com/files/267841/original/file-20190405-180036-1kaqo8n.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=423&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/267841/original/file-20190405-180036-1kaqo8n.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=423&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="attribution"><a class="source" href="https://www.nhf.info/public/images/nmw-chart-2019-a.jpg">NHF</a></span>
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<p>The government is aiming to increase the national living wage to 60% of median earnings by 2020, depending on economic conditions. It is a remarkable transformation – given that Conservatives opposed the minimum wage when Labour introduced it in <a href="https://www.politics.co.uk/reference/national-minimum-wage">1999</a> – that Tory Chancellor <a href="https://www.personneltoday.com/hr/spring-statement-minimum-wage-review-and-early-apprenticeship-reforms/">Philip Hammond</a> endorses minimum wage targets rivalling the highest <a href="https://www.eurofound.europa.eu/publications/article/2019/minimum-wages-in-2019-first-findings">European comparators</a>. </p>
<p>Predicted <a href="https://www.gov.uk/government/news/low-pay-commission-publishes-research-on-the-effects-of-the-minimum-wage-on-employment-and-automation">job losses</a> due to the minimum wage have not occurred. But the <a href="https://www.sheffield.ac.uk/polopoly_fs/1.358671!/file/JRF-informal-economy-and-poverty.pdf">informal economy</a>, where employers and the “self-employed” operate outside of government regulation, has grown and some smaller firms, especially, find it challenging to pay the national living wage. Arguments that minimum wages give the low-paid higher disposable income and benefit the economy, seem accurate. But there are serious problems with <a href="https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/645462/Non-compliance_and_enforcement_with_the_National_Minimum_Wage.pdf">enforcement, non-compliance and underpayment</a>. </p>
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Read more:
<a href="https://theconversation.com/how-the-old-idea-of-the-living-wage-has-been-embraced-by-the-political-establishment-78635">How the old idea of the living wage has been embraced by the political establishment</a>
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<h2>The ‘real living wage’</h2>
<p>Yet the national living wage is arguably not a real living wage. Statutory minimum wages are inadequate to address working poverty and living costs. Through its <a href="https://www.livingwage.org.uk/">Living Wage Foundation</a>, Citizens UK introduced a voluntary “real living wage”. The foundation recommends this real living wage by annually calculating what workers need to afford basic living costs like housing, bills and food. The voluntary wage is higher than the misleadingly rebranded “national living wage” introduced by then chancellor George Osborne in 2016. In May 2019, the real living wage increases by 2.9% to £9 outside London and 3.4% to £10.55 in London. </p>
<p>Over 5,000 employers voluntarily pay it and are accredited by the Living Wage Foundation. These include public sector organisations like some councils and universities, as well as private sector companies like insurers Aviva, retailer Ikea, Nationwide building society, and <a href="https://theconversation.com/how-footballs-richest-clubs-fail-to-pay-staff-a-real-living-wage-74347">some football clubs</a>. </p>
<p>Many employers view it as ethical. And research also shows a <a href="https://www.cipd.co.uk/Images/employers-and-the-real-living-wage_2017-responding-to-civil-regulation_tcm18-39491.pdf">business case</a> for paying the real living wage. This matters for establishing examples of good employers.</p>
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<a href="https://images.theconversation.com/files/268123/original/file-20190408-2935-1n81dph.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/268123/original/file-20190408-2935-1n81dph.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/268123/original/file-20190408-2935-1n81dph.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=360&fit=crop&dpr=1 600w, https://images.theconversation.com/files/268123/original/file-20190408-2935-1n81dph.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=360&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/268123/original/file-20190408-2935-1n81dph.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=360&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/268123/original/file-20190408-2935-1n81dph.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=452&fit=crop&dpr=1 754w, https://images.theconversation.com/files/268123/original/file-20190408-2935-1n81dph.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=452&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/268123/original/file-20190408-2935-1n81dph.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=452&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="attribution"><a class="source" href="https://www.livingwage.org.uk/what-real-living-wage">Living Wage Foundation</a></span>
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<h2>Deep deficiencies</h2>
<p>Conservative party policy relies too heavily on the national living wage as a single economic measure to address living standards. It is also undermined by other policies that hurt people in low-paid work and increase inequality.</p>
<p>As established, legal minimum wages alone are insufficient for what many people <a href="https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/earningsandworkinghours/articles/nationallivingwageearnersfallshortofaveragefamilyspending/2018-03-28">need to live</a>. This is because austerity policies have forced <a href="https://theconversation.com/austerity-has-pushed-the-uks-poorest-households-further-into-debt-heres-how-113383">people to take on more debt</a> and essentials like housing, energy and <a href="https://www.thetimes.co.uk/article/privatisation-put-50bn-on-cost-of-running-railway-study-claims-v7nvxkrgc">transport</a> <a href="https://www.bbc.co.uk/news/election-2017-39933817">have risen</a> – partly due to public services being privatised and outsourced, as well as <a href="https://www.newstatesman.com/politics/economy/2017/10/privatisation-rip-has-gone-long-enough-and-public-knows-it">excessive profiteering</a>. </p>
<p>This has been compounded by <a href="https://theconversation.com/failures-and-u-turns-the-conservative-partys-record-on-welfare-56634">welfare cuts</a>, including the <a href="https://theconversation.com/skint-britain-response-to-series-about-life-on-universal-credit-shows-government-is-still-not-listening-112089">Universal Credit debacle</a>, since 2010. Raising minimum wages to tackle working poverty is like placing a plaster on an open wound when living costs have risen and the <a href="https://www.theguardian.com/global/2018/oct/28/future-welfare-state-cuts-care-health-education">welfare state</a> and public services are being eviscerated.</p>
<p>Low pay is symptomatic of deeper systemic deficiencies in the UK economy and <a href="https://theconversation.com/listening-to-employees-ideas-could-solve-uks-productivity-slowdown-100114">poor comparative productivity</a>. Cost competition dominates business strategy; notably service sector employers with large quantities of poor quality low-skilled jobs. <a href="https://www.cipd.co.uk/knowledge/work/job-quality-value-creation/measuring-job-quality-report">Job quality</a>, not just quantity, needs attention. </p>
<p>Stark <a href="https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/earningsandworkinghours/bulletins/lowandhighpayuk/2018">regional pay inequalities</a> also exist: the proportion of low-paid employee jobs in the UK’s regions is double that of London. The UK badly requires proper regional industrial strategy, not only encompassing manufacturing, but a <a href="https://neweconomics.org/campaigns/green-new-deal">Green New Deal</a> and the <a href="https://theconversation.com/new-focus-on-the-foundations-of-the-uks-economy-might-help-poorest-regions-post-brexit-111132">foundations of the economy</a>. This could increase fair pay and decent work.</p>
<h2>Rebuild collective bargaining</h2>
<p>Minimum wage legislation only establishes an individual minimum pay floor. But many employers interpret it as a pay ceiling – something they pay, to meet regulation, but won’t go above. Declining trade union membership substantially limits the power of employees to negotiate higher wages and other benefits.</p>
<p><a href="https://www.tuc.org.uk/blogs/oecd-says-collective-bargaining-best-way-deliver-better-work">Collective bargaining</a> and other institutions like <a href="https://theconversation.com/wage-councils-could-address-endemic-pay-inequality-in-the-uk-economy-102682">Wage Councils</a> need strengthening and rebuilding so that power is distributed more evenly in British workplaces. Most workers don’t have enough power individually to bargain wages above the legal minimum. Plus, trade unions play a crucial role in <a href="https://www.ippr.org/files/2018-08/1535639099_prosperity-and-justice-ippr-2018.pdf">boosting productivity</a>.</p>
<p>Thus, Britain still has a low pay problem. For many, real wages (adjusted for inflation) are no higher <a href="https://www.ifs.org.uk/publications/13073">than before the 2008 financial crisis</a>. Low pay is <a href="https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/earningsandworkinghours/bulletins/lowandhighpayuk/2018">defined</a> as two thirds of median hourly earnings, which is £8.52 at the moment. The proportion of low-paid employee jobs measured by weekly earnings was 27.3% in 2018. Large numbers of workers are clustered at or just above national living wage thresholds. </p>
<p>So while statutory minimum wages are vital for regulating low pay, they do not provide a real living wage. They are an insufficient response from the government to inequalities that are caused by deeper structural issues with the UK economy and political choices associated with <a href="https://www.huffingtonpost.co.uk/entry/why-we-badly-need-trickle-up-economics-to-boost-workers_uk_5b058e63e4b0b22f55b90f16?guccounter=1">“trickle-down economics”</a> and <a href="https://www.theguardian.com/news/2017/aug/18/neoliberalism-the-idea-that-changed-the-world">neoliberalism</a>. The UK is increasingly now a low-tax, deregulated, market economy. Unless these causes of low pay are targeted by <a href="https://www.ippr.org/cej">radically alternative policies</a>, income inequalities will persist.</p><img src="https://counter.theconversation.com/content/114867/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Tony Dobbins receives funding from the British Academy and Leverhulme Trust. </span></em></p>The legal minimum wage is vital for regulating low pay and preventing exploitation. But it is insufficient on its own to reduce poverty for working people.Tony Dobbins, Professor of HR Management & Employment Relations, University of BirminghamLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1026822018-09-05T10:32:18Z2018-09-05T10:32:18ZWage Councils could address endemic pay inequality in the UK economy<p>The UK has an endemic <a href="https://www.gov.uk/government/news/low-pay-and-progression-in-the-labour-market">low-pay</a> culture. A new report backed by business leaders and the Archbishop of Canterbury says Britain’s <a href="https://www.theguardian.com/business/2017/sep/05/uk-economic-model-archbishop-of-canterbury">economic model is “broken”</a> and produces widespread inequality. Around <a href="https://www.jrf.org.uk/blog/tuesday%E2%80%99s-spring-statement-opportunity-right-wrong-work-poverty">8m people</a> in poverty now live in working households. Many workers are trapped in low-skilled, precarious jobs, with poor wages and working conditions. </p>
<p><a href="http://www.research.mbs.ac.uk/ewerc/Portals/0/Documents/Comparative-Report-Reducing-Precarious-Work-v2.pdf">“Precarious work”</a> has expanded to include <a href="https://theconversation.com/uk/topics/zero-hour-contracts-13632">zero-hour</a> contract staff, agency and gig economy workers with uncertain hours, volatile earnings and job insecurity. But workers with permanent jobs also struggle to make ends meet as living costs bite. </p>
<p>The UK desperately needs a more robust system to lift standards and protect low earners and those who may feel marginalised and whose rights are virtually non-existent. This is where Wage Councils could come in.</p>
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<p>Despite the national minimum wage (for 16- to 24-year-olds) and national living wage (for over-25s) rates, many people in low paid sectors struggle with rising living costs. It has been <a href="https://www.livingwage.org.uk/news/news-living-wage-foundation-welcomes-pay-rise-uk%E2%80%99s-poorest-workers-urges-employers-go-further">estimated</a> that those earning the national living wage still need to work an additional six weeks a year to cover basic expenses. The government recently identified <a href="https://www.independent.co.uk/news/uk/home-news/minimum-wage-companies-pay-least-list-uk-government-a8433936.html">240 organisations</a> violating these rates including hairdressers, pubs, care homes and sports clubs. </p>
<p><a href="https://www.livingwage.org.uk/living-wage-foundation">The Living Wage Foundation </a> now encourages employers to pay workers a higher living wage of £8.75 an hour (or £10.20 in London). This living wage aims to give workers basic, but acceptable, living standards. Over 4,400 UK organisations pay it, but on a voluntary basis. <a href="https://www.emeraldinsight.com/doi/full/10.1108/ER-04-2017-0083">Research shows living wage</a> regulation can uplift earnings, improve community mobilisation and support better corporate responsibility. </p>
<h2>What are Wage Councils?</h2>
<p>There is a case for Wage Councils to help address in-work poverty in low paid sectors (such as retail, hospitality, hairdressing, social and health care, childcare and cleaning). A Wage Council would be made up of industry (employer and union) and independent members. They would have statutory powers to monitor minimum/living wage rates, health and safety and other working conditions.</p>
<p>Wage Councils are not new. <a href="http://researchbriefings.files.parliament.uk/documents/SN06897/SN06897.pdf">Trade Boards</a> were established under the Trade Boards Act 1909, to set minimum wages for sweated trades like tailoring, where workers worked long hours for little pay. Trade Boards became known as Wage Councils under the <a href="http://shura.shu.ac.uk/18742/1/RHargreaves_2017_LLMR_DevelopmentsofMinimum.pdf">Wages Councils Act 1945</a> and their powers expanded to regulate pay, hours and holidays for various sectors. </p>
<p>The act was repealed by Margaret Thatcher’s <a href="http://www.legislation.gov.uk/ukpga/1986/48/pdfs/ukpga_19860048_en.pdf">Wages Act 1986</a>, which decreased Wage Council power and scope. Thatcher promoted pay flexibility, profit-related pay and decentralised pay bargaining. John Major’s <a href="https://www.legislation.gov.uk/ukpga/1993/19/contents">Trade Union Reform and Employment Rights Act 1993</a> then abolished most of the surviving Wage Councils. </p>
<p>Labour recently pledged to reinstate the <a href="https://www.theguardian.com/environment/2018/jul/22/labour-promises-reinstate-agricultural-wages-board">Agricultural Wages Board</a> in England to set minimum pay levels and other working conditions for farmers – as <a href="https://beta.gov.wales/sites/default/files/publications/2018-06/agricultural-wages-guidance.pdf">still exist</a> in Wales, Scotland and <a href="https://www.daera-ni.gov.uk/articles/awb-agricultural-rates-pay-orders-and-reports">Northern Ireland</a>. These boards comprise independent members, and employee (union) and employer (farmer) representatives. They set minimum wages and sick pay/holiday entitlements and offer a template for Wage Councils for other lower paid sectors. </p>
<h2>A voice for the disenfranchised</h2>
<p>Wage Councils are democratic and efficient bodies. They could yield societal benefits by reducing in-work poverty and providing a voice for disenfranchised groups. They can expose the widening worker-executive pay discrepancies more efficiently than <a href="https://www.gov.uk/government/news/uks-biggest-firms-will-have-to-justify-pay-gap-between-bosses-and-their-workers">recent legislation</a> by forcing CEOs in large companies to justify their salaries. </p>
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<span class="caption">Workers in the gig economy would benefit from having representatives on a Wage Council.</span>
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<p>If they were introduced, it is likely that worker productivity would increase in line with the <a href="http://blog.press.princeton.edu/wp-content/uploads/2013/10/camerer-chapter-16.pdf">“fair wage effort hypothesis”</a> which explains that if a pay discrepancy exists which workers perceive as unfair, then workers may simply withdraw their effort. Research by the employers’ body, the CIPD, found that <a href="https://www.cipd.co.uk/about/media/press/110117financialwellbeing">one-in-four</a> employees perform poorly at work because of financial concerns. This can lead to less cooperation among workers, low productivity, and bad employee behaviour in response to a lack of empowerment and resources to contest inequality. </p>
<p>Wage Councils could support the goals of broader <a href="http://www.research.mbs.ac.uk/ewerc/Portals/0/Documents/human-development-report.pdf">socioeconomic</a> human development in line with the <a href="http://www.ilo.org/global/topics/sdg-2030/lang--ja/index.htm">International Labour Organisation’s objective</a> to “promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all”. </p>
<p>Income inequality can hamper durable economic growth and may fuel a financial crisis as <a href="https://blogs.imf.org/2017/02/22/the-imfs-work-on-inequality-bridging-research-and-reality/">low-medium</a> income households engage in excessive borrowing. <a href="https://www.imf.org/en/News/Articles/2015/09/28/04/53/soint061412a">Economists</a> have argued that income inequality was a fundamental driver of the financial crash. </p>
<p>These councils may even help address the UK’s <a href="https://www.theguardian.com/commentisfree/2017/oct/29/the-guardian-view-on-the-productivity-puzzle-blame-low-pay">dilemma</a> over how to raise productivity. They would support workforce engagement by providing a voice to marginalised workers on the fringe of the labour market in lower paid sectors.</p>
<p>They may also reduce tax subsidies for in-work benefits like tax credits. Citizens UK research estimated that taxpayers are subsidising the low-pay culture in big businesses to the tune of <a href="http://www.citizensuk.org/taxpayer">£11 billion</a> a year. </p>
<p>Wage Councils could help deliver a fairer deal for the low paid but they need a proper system of enforcement which would enable them to take meaningful action against employers who violate the conditions they set down. They must also be combined with other sustainable economy initiatives, such as creating more <a href="https://www.theguardian.com/society/2018/may/07/why-a-jobs-guarantee-would-benefit-us-all">good quality</a> and secure jobs. </p>
<p>It is now time government and policy makers began looking at how to use the Agricultural Wages Board as a template for a national Wage Councils policy. These councils would benefit workers, employers and society and help repair the UK’s “<a href="https://www.theguardian.com/business/2017/sep/05/uk-economic-model-archbishop-of-canterbury">broken</a>” economic model.</p><img src="https://counter.theconversation.com/content/102682/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The UK desperately needs a more robust system to lift standards in low paid sectors and protect workers.Emma Sara Hughes, Lecturer in HRM, University of LiverpoolTony Dundon, Professor of HRM & Employment Relations, University of ManchesterLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/785652017-06-01T08:59:57Z2017-06-01T08:59:57ZYoung people are right to feel hard done by – pay discrimination for under 25s is legal<figure><img src="https://images.theconversation.com/files/171688/original/file-20170531-25664-o8qzvo.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Young people don't have a right to equal pay. </span> <span class="attribution"><a class="source" href="https://www.flickr.com/photos/duncan/7645920232/sizes/l">duncan/flickr</a>, <a class="license" href="http://creativecommons.org/licenses/by-nc/4.0/">CC BY-NC</a></span></figcaption></figure><p>Many of the university students graduating in the coming months are likely to feel short-changed when they start looking for jobs. Until they reach their 25th birthdays, and regardless of their qualifications, the minimum hourly rate they can be paid is £7.05 gross. That is 45p an hour less than the absolute minimum payable to someone 25-years-old and over, for the same job. The rates are even lower for those under 21 and under 18. </p>
<p>This is because the <a href="http://www.legislation.gov.uk/ukpga/2010/15/schedule/9">law</a> allows age discrimination in minimum wages – but only for the low-paid. The exemption doesn’t apply if the person is earning over the National Living Wage (NLW) – introduced by the Conservatives in 2016. Yet, <a href="https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/604442/A_rising_floor_-_the_latest_evidence_on_the_National_Living_Wage_and_youth_rates_of_the_minimum_wage.pdf">as of April 2017</a>, 8.5% of the workforce is on one of the minimum rates. </p>
<p>A National Minimum Wage was introduced in 1998 by the Labour government to fulfil a <a href="http://www.politicsresources.net/area/uk/man/lab97.htm">manifesto pledge</a> to tackle low pay and poverty. From the outset, distinctions were made for rates for apprentices, but the adult rate applied to those over 21 and not in full-time education.</p>
<p>When, in the face of a mounting campaign for a higher living wage, the Conservative government introduced the NLW in 2016, it decided to exclude under 25-year-olds and create a new age band for 21-24 year olds. Those over 25 saw an increase of 4.3% in the minimum wage while under 25s saw 3.2%. The NLW is a <a href="https://www.gov.uk/government/news/summer-budget-2015-key-announcements">commitment</a> to phase in a significant wage increase for those above 25 with a target of £9 an hour by 2020. </p>
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<h2>Where the parties stand</h2>
<p>Three of the main parties have picked up the issue in their election campaigning. The <a href="http://www.labour.org.uk/index.php/manifesto2017/fair-deal-at-work">Labour Party manifesto</a> promises to raise the minimum wage to the level of the NLW for all workers over 18. The <a href="https://www.greenparty.org.uk/green-guarantee/our-promise-to-young-people.html">Green Party</a> will proceed by scrapping age-related wage bands and raising the national minimum wage to living wage levels for all. The <a href="https://www.snp.org/manifesto">Scottish National Party</a> manifesto is the most far-reaching and supports the Real Living Wage of <a href="https://www.livingwage.org.uk/what-is-the-living-wage">£8.45</a> for all adults over 18. </p>
<p><a href="http://www.libdems.org.uk/liberal-democrats-manifesto-2017-general-election-launch">The Liberal Democrats manifesto</a> vows to promote the adoption of the living wage but is silent on the exclusion of under-25s from it. <a href="https://www.conservatives.com/manifesto">The Conservatives</a> have pledged to increase the NLW to 60% of median earnings by 2020 and thereafter by the rate of median earnings – but there is no proposal to include under-25s. <a href="http://www.ukip.org/manifesto2017">The UKIP Manifesto</a> says it will enforce the living and national wages and increase the number of minimum wage inspectors. It says nothing about the under-25 exclusion. </p>
<h2>Is the discrimination justified?</h2>
<p>Although it has not yet faced a legal challenge, the under-25 exclusion could yet be challenged in court for unjustified age discrimination. An EU <a href="http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:32000L0078:en:HTML">equality directive</a> on this issue is still applicable while the UK remains part of the EU. It allows countries to legislate for age discrimination, but only where the discrimination fulfils a legitimate aim. Justification of discrimination must be specific and based on evidence.</p>
<p>In his July 2015 budget speech, the then-chancellor, George Osborne, gave no reason for the NLW applying only to working people over 25. <a href="https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/482910/BIS-15-481-NMW-interim-evidence-2015.pdf">A government evidence document</a> published that autumn was more specific and justified excluding workers under 25 in “order to maximise the opportunities for younger workers to gain … experience”. </p>
<p>The government receives annual advice about pay from the <a href="https://www.gov.uk/government/organisations/low-pay-commission">Low Pay Commission</a> which considers evidence from the labour market. In its <a href="https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/575634/10583-LPC-National_Living_Wage_WEB.pdf">autumn 2016 report</a>, the commission found that the NLW had started to have an inflationary effect on median pay but that this effect was less pronounced for the under-25s. While noting an increase in employment for the 21 to 25 age group, it said that more younger workers were being hired. It didn’t explicitly say so, but it’s possible that this is because they were cheaper for employers to hire. </p>
<p>Since the Brexit vote, there are already <a href="http://uk.businessinsider.com/indeed-com-fall-eu-citizens-looking-for-work-britain-2017-3">reports</a> of fewer takers for low-pay jobs that had previously been sought by young EU citizens. If this continues, it’s possible that a less crowded labour market may actually remove one of the arguments in favour of a lower minimum rate – because there will be fewer young workers competing for jobs, though this would depend in turn on the state of the economy. </p>
<p>Labour market policy generally and justifications for discrimination specifically must be constantly reviewed in light of changing social conditions. The exclusion does not look cogent and the evidence underpinning it could well change. <a href="https://www.eurofound.europa.eu/sites/default/files/ef1703en.pdf">In Europe,</a> only Greece and the UK draw the line at 25. </p>
<p>Since the election was called, 1.05m 18- to 24-year-olds <a href="http://www.telegraph.co.uk/news/2017/05/19/important-young-people-vote/">have registered to vote</a>. Equal access to the NLW for those among them in low pay or risking it may not be the only issue they consider at the ballot box on June 8, but it may be one of them.</p><img src="https://counter.theconversation.com/content/78565/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Sandhya Drew does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Until you reach 25, employers can pay you less than your older colleagues.Sandhya Drew, Associate Tutor in Public, Employment and Equality Law, University of SurreyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/779712017-05-18T15:28:18Z2017-05-18T15:28:18ZLabour and the Conservatives offer two different routes to a ‘living’ wage<p>A competition among political parties to promise a more attractive minimum or “living” wage is new to British elections. The National Minimum Wage (NMW) is now nearly 20 years old, but Labour in power was always cautious about its level. The Conservatives, meanwhile, initially opposed it. </p>
<p>But a burgeoning living wage movement and a perceived “living standards crisis” help explain a new bidding war. In the 2015 election, Labour promised to raise the NMW to <a href="http://www.labour.org.uk/page/-/BritainCanBeBetter-TheLabourPartyManifesto2015.pdf">£8 an hour</a> by 2020; trumped by the Conservatives’ £9 in <a href="https://www.gov.uk/government/news/summer-budget-2015-key-announcements">the subsequent budget</a>, and now Labour’s £10 <a href="http://www.labour.org.uk/page/-/Images/manifesto-2017/Labour%20Manifesto%202017.pdf">manifesto pledge</a>. </p>
<p>Since the minimum wage was £6.50 just two years ago, all these promises, if followed through, will have a substantial impact in changing Britain’s low pay culture. But what is the difference between the two main party promises now on offer? And as policies, are they sustainable or reckless?</p>
<p>The most obvious difference in the manifesto pledges is that Labour promises £10 by 2020 (a 33% increase from 2017) and <a href="https://www.conservatives.com/manifesto">the Conservatives</a> promise 60% of median pay which is <a href="https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/604442/A_rising_floor_-_the_latest_evidence_on_the_National_Living_Wage_and_youth_rates_of_the_minimum_wage.pdf">projected</a> to be £8.75 by 2020. This is a 17% increase, and less than the £9 pledged in 2015, because median pay is forecast to grow more slowly than previously expected. </p>
<p>But two crucial factors beyond the crude rate promised will influence how the “living wage” debate plays out in the next few years: the basis for setting and raising it, and the ages of workers to whom it applies.</p>
<h2>How it’s set</h2>
<p>In setting the rate, the Conservatives have opted to peg the National Living Wage (NLW – a rebranded NMW for over-25s) to average pay. On the one hand, this belies its branding as a “living” wage. Unlike the voluntary, accredited <a href="https://www.livingwage.org.uk/">Living Wage</a> which is derived from <a href="http://www.minimumincomestandard.org/">our research</a> at Loughborough University and based on what people actually need for a minimum living standard, the Conservatives’ NLW has no reference to living costs. </p>
<p>But the commitment to raise the minimum from <a href="https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/571631/LPC_spring_report_2016.pdf">52% to 60% of median pay</a> – and to keep it there – does mark a bold departure in sharing the fruits of future growth. Indeed, pegging incomes (such as pensions or benefits) to rising earnings has often been a more favourable formula than pegging them to living costs, since earnings rose steadily in real terms.</p>
<p>However, times have changed. In the past few years, living costs have sometimes risen faster than earnings, making an earnings link less beneficial than it once was. Moreover, the “real” living wage espoused by Labour can also rise if the government cuts the help it gives working families, for example through tax credits. This is what George Osborne did when announcing the Conservative Party’s NLW in its 2015 budget, which would have caused families <a href="https://www.jrf.org.uk/report/will-2015-summer-budget-improve-living-standards-2020#jl_downloads_0">a net loss</a>. So a real living wage requires employers to make good on any cuts in state support.</p>
<p>But what will be the effect of much higher minimum wages on employment? In my <a href="http://agendapub.com/index.php/books/political-economy?view=title&id=18">new book</a> with Laura Valadez on the living wage, I show that evidence from the UK and US overwhelmingly contradicts the economic prediction that higher minimum wages automatically mean fewer jobs. Yet we also point out that both countries have been highly cautious in setting the minimum wage, and are about to become much less so – New York and California are <a href="http://www.npr.org/2016/04/01/472716122/california-new-york-to-raise-minimum-wages-to-15-an-hour">planning phased increases to US$15</a>, over twice the federal minimum. In the UK, a statutory minimum of £9 or £10 will have a vastly different impact on labour markets from the voluntary adoption of a real living wage by the 3,000 employers who have so far felt able to do so. </p>
<h2>Whether it’s tied to age</h2>
<p>The most radical aspect of the Labour version, and potentially the most risky in terms of employment, is that it would apply from age 18, unlike the Conservatives’ from age 25. Someone who is 20, who in 2017 can be paid £5.60 per hour, would be guaranteed £10 three years later – if they were still being offered jobs. </p>
<p>Our book shows how in Portugal, ending minimum wage youth rates was followed by a substantial “displacement” effect, with fewer jobs going to less experienced workers. This effect is also <a href="http://www.resolutionfoundation.org/app/uploads/2014/08/Beyond_the_Bottom_Line_-_FINAL.pdf">predicted</a> in the UK. On the other hand, under Conservative plans, a growing gap between the minimum for 24- and 25-year-olds could damage job prospects for the latter, as employers in casual industries such as restaurants and hospitality dump low-paid workers on their 25th birthdays. (<a href="http://www.resolutionfoundation.org/app/uploads/2016/07/NLW-first-100-days.pdf">Early evidence</a> shows some employers already favouring younger workers.)</p>
<p>In adopting greater ambitions for tackling low pay in Britain, therefore, politicians should not throw all their former caution to the winds, but look carefully at how their policies are affecting the labour market as they unfold. </p>
<p>Producing a formula that can contribute to higher living standards without destroying people’s job prospects requires a delicate balance. After the election, the simplicity of the manifesto promise will have to be followed by careful, evidence-based delivery if a living wage is to be sustainable.</p><img src="https://counter.theconversation.com/content/77971/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Donald Hirsch is a member of the Labour Party.</span></em></p>Crucially, they differ in how they are calculated and the ages of workers that they apply to.Donald Hirsch, Professor of Social Policy, Loughborough UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/766262017-04-27T08:44:20Z2017-04-27T08:44:20ZFact Check: do six million people earn less than the living wage?<figure><img src="https://images.theconversation.com/files/166684/original/file-20170425-13408-1775902.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">via shutterstock.com</span></span></figcaption></figure><blockquote>
<p>I’m angry and fed up with the way in which six million people earn less than the living wage.</p>
</blockquote>
<p><strong>Jeremy Corbyn, leader of the Labour Party, <a href="http://www.bbc.co.uk/iplayer/episode/b08nxsbr/the-andrew-marr-show-23042017">interviewed</a> on the BBC’s Andrew Marr show on April 23</strong>.</p>
<p>To assess this claim by Jeremy Corbyn, distinguishing various low-wage floors is important. In 2017, the Living Wage Foundation’s higher voluntary <a href="http://www.livingwage.org.uk/what-is-the-living-wage">Real Living Wage</a> (RLW) is £9.75 an hour in London, £8.45 elsewhere, based on a calculation of living costs.</p>
<p>The government’s compulsory wage floor is lower and covers all employees. For employees aged 25 and over, it’s called the <a href="https://www.gov.uk/national-minimum-wage-rates">National Living Wage</a> (NLW) and is £7.50 per hour. For younger employees, it’s called the National Minimum Wage, and ranges from £3.50 to £7.05. </p>
<p>Corbyn’s claim concerns the RLW, and the Labour Party directed The Conversation to <a href="http://visual.ons.gov.uk/how-many-jobs-are-paid-less-than-the-living-wage-in-your-area/">figures from</a> the Office for National Statistics (ONS), which show that in 2014 an “estimated 5.9m jobs were paid below the Living Wage”.</p>
<p>But the underlying <a href="http://visual.ons.gov.uk/how-many-jobs-are-paid-less-than-the-living-wage-in-your-area/">ONS data</a> refers to the number of employee jobs with hourly earnings below the RLW in April 2014, so Corbyn should be referring to <a href="https://fullfact.org/economy/how-many-earn-below-living-wage/">jobs rather than people</a> when making this claim. The two are not identical because some people may hold more than one job. It has been estimated that, in 2014, 5.4m people with <a href="http://webarchive.nationalarchives.gov.uk/20160105160709/http://www.ons.gov.uk/ons/about-ons/business-transparency/freedom-of-information/what-can-i-request/published-ad-hoc-data/labour/october-2015/jobs-paid-less-than-the-living-wage-in-2014-by-work-pattern.xls">one job</a> earned less than the RLW.</p>
<p>More recent ONS data from <a href="http://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/earningsandworkinghours/adhocs/006335annualsurveyofhoursandearningsashenumberandpercentageofemployeejobswithhourlypaybelowthelivingwagebyparliamentaryconstituencyandlocalauthorityukapril2015and2016">April 2016</a> estimates that the number of UK employee jobs paid below the RLW increased from 6.16m (22.8%) in 2015 to 6.22m (23.2%) in 2016. More jobs are now paid below the RLW, up from 19% in 2012. Many more part-time jobs are paid below it, compared to full-time jobs, and more women’s jobs than men’s are below the threshold.</p>
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<p>Regarding the legal thresholds, in April 2016, when the NLW was introduced, an <a href="https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/earningsandworkinghours/bulletins/lowpay/apr2016">estimated 362,000 jobs</a> were paid less than the statutory minimum – 1.3% of UK employee jobs. This includes those aged between 16 and 25.</p>
<p>The labour market (notably outside London and the South East) is still suffering from wage stagnation after the 2008 financial crisis and subsequent economic recession and austerity, with the low-paid hit hardest. The UK has drifted further towards a low wage, low productivity, low-quality employment model, while the membership density and bargaining power of trade unions to win higher wages has weakened. </p>
<h2>Verdict</h2>
<p>Given ONS earnings projections, it would be more accurate for Jeremy Corbyn and others to refer to the number of employee jobs (rather than people) paid below the RLW. The latest available data indicates that 5.4m people with one job were earning less than the RLW in 2014. That said, in April 2016, 6.22m employee jobs were paid below the RLW, continuing a rising trend in recent years. So while Corbyn’s statement is somewhat misleading, it is true in essence. </p>
<h2>Review</h2>
<p><em>Chris Grover, senior lecturer in social policy, Lancaster University</em></p>
<p>I agree with the verdict, and Corbyn should have referred to six million jobs, rather than six million people. The concept of a “living wage” is a handy device to highlight low pay. What is less clear is to what extent a person earning such a wage might expect to “live”. This is most visible in the government’s NLW, which aims to increase the wages of older workers to <a href="https://www.gov.uk/government/publications/national-living-wage-nlw/national-living-wage-nlw">60% of median hourly earnings by 2020</a>. This approach relates wages to what others earn, rather than the cost of living.</p>
<p>The RLW is related to living costs. But it is <a href="http://www.resolutionfoundation.org/app/uploads/2016/10/Living-wage-calculations.pdf">calculated</a> using weighted averages for a range of families. For this and other reasons, some families, particularly those headed by lone mothers and couples with more than three children, being paid the RLW will face continuing poverty while in paid work. Even deeper poverty will be faced by such families being paid the NLW.</p>
<p><em>The Conversation is checking claims made by public figures. Statements are checked by an academic with expertise in the area. A second academic expert then reviews an anonymous copy of the article. Please get in touch if you spot a claim you would like us to check by emailing us at <a href="uk-factcheck@theconversation.com">uk-factcheck@theconversation.com</a>. Please include the statement you would like us to check, the date it was made, and a link if possible.</em></p><img src="https://counter.theconversation.com/content/76626/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Chris Grover has previously received funding from the British Academy.</span></em></p><p class="fine-print"><em><span>Tony Dobbins does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Labour leader Jeremy Corbyn claims they do. Two academics assessed the facts.Tony Dobbins, Professor of Employment Studies, Bangor UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/594102016-05-16T13:58:14Z2016-05-16T13:58:14ZFact Check: will UK living wage cause rampant EU migration?<figure><img src="https://images.theconversation.com/files/122718/original/image-20160516-15904-83s0a9.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Stampede imminent?</span> <span class="attribution"><a class="source" href="http://budgetresponsibility.org.uk/efo/economic-fiscal-outlook-march-2016/">Lukasz Stefanski</a></span></figcaption></figure><p><em>The living wage is an excellent policy, but how will you stop it being a big pull factor for uncontrolled EU migration, given that it is far higher than minimum wages in other EU countries?</em></p>
<p><strong>Boris Johnson <a href="http://www.conservativehome.com/parliament/2016/05/boris-johnsons-speech-on-the-eu-referendum-full-text.html">speech</a> from May 9</strong></p>
<p>George Osborne’s living wage <a href="http://www.theguardian.com/uk-news/2015/jul/08/budget-2015-uk-gdp-other-rich-nations-george-osborne">announcement</a> in July of last year substantially increased the national minimum wage from £6.70/hour for over-25s then to £7.20/hour since April, with a <a href="http://labourlist.org/2016/03/poor-pay-the-price-for-osbornes-failure-as-national-living-wage-is-cut/">target of</a> £9.00/hour by 2020. </p>
<p>Minimum wages are now in operation in 26 out of the 34 OECD countries, and 22 out of 28 EU member states. Germany only joined the list in January 2015 with a minimum wage of €8.50 (£6.69), while some of the EU members without one – that’s Austria, Cyprus, Italy, Sweden, Finland and Denmark – have sector level collective agreements and wage floors. </p>
<p>You can see from the table below that the UK’s minimum wage is similar to the other major EU economies but higher than countries with lower levels of GDP per capita such as Bulgaria, Latvia and Romania. On the traditional minimum wage comparison as a proportion of median monthly earnings, however, the UK is broadly in line with most EU countries at about 50%. </p>
<p>This will rise to slightly over 55% with the £9/hour level in 2020 (factoring in <a href="http://budgetresponsibility.org.uk/efo/economic-fiscal-outlook-march-2016/">forecast</a> inflation). If that happens – note the target has <a href="http://labourlist.org/2016/03/poor-pay-the-price-for-osbornes-failure-as-national-living-wage-is-cut/">already been pared back</a> several times from an initial £9.35/hour – it would place the UK among the highest in the OECD. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/122486/original/image-20160513-10652-vthl57.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/122486/original/image-20160513-10652-vthl57.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/122486/original/image-20160513-10652-vthl57.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=351&fit=crop&dpr=1 600w, https://images.theconversation.com/files/122486/original/image-20160513-10652-vthl57.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=351&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/122486/original/image-20160513-10652-vthl57.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=351&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/122486/original/image-20160513-10652-vthl57.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=442&fit=crop&dpr=1 754w, https://images.theconversation.com/files/122486/original/image-20160513-10652-vthl57.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=442&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/122486/original/image-20160513-10652-vthl57.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=442&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Source: Eurostat.</span>
</figcaption>
</figure>
<h2>The migration effect</h2>
<p>No one can predict with any certainty how this UK policy will affect migration levels, but several variables are at play. The minimum wages in other EU countries will also have risen through to 2020, so the differential will be less pronounced than it appears. Johnson’s argument also assumes that wages are the primary driver of migration, but researchers have shown otherwise. </p>
<p>While low domestic wages <a href="https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/287287/occ109.pdf">encourage</a> outward migration, there is no straightforward relationship between high minimum wages and inward migration. Otherwise there would be a wave of migrants heading to Luxembourg and Colombia, both of which have very high minimum wages. Many EU migrants are <a href="https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/287287/occ109.pdf">motivated by</a> employment opportunities while other factors <a href="http://www.imi.ox.ac.uk/news/new-paper-on-the-role-of-social-networks-in-migration">include</a> personal networks with other migrants already in situ. </p>
<p>Wages also only tell part of the story. Housing costs <a href="http://www.bbc.co.uk/news/business-23234033">tend to be</a> highest in London and the south east, where most jobs are created in the UK’s service-driven economy, and this often largely offsets any benefit from additional wages. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/122719/original/image-20160516-15934-t2rdhs.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/122719/original/image-20160516-15934-t2rdhs.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/122719/original/image-20160516-15934-t2rdhs.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=450&fit=crop&dpr=1 600w, https://images.theconversation.com/files/122719/original/image-20160516-15934-t2rdhs.JPG?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=450&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/122719/original/image-20160516-15934-t2rdhs.JPG?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=450&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/122719/original/image-20160516-15934-t2rdhs.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=566&fit=crop&dpr=1 754w, https://images.theconversation.com/files/122719/original/image-20160516-15934-t2rdhs.JPG?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=566&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/122719/original/image-20160516-15934-t2rdhs.JPG?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=566&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Housing is the thing.</span>
<span class="attribution"><a class="source" href="https://commons.wikimedia.org/wiki/File:Sutton,_Surrey,_London_-_Estate_agent.JPG#/media/File:Sutton,_Surrey,_London_-_Estate_agent.JPG">Wikimedia</a></span>
</figcaption>
</figure>
<p>Even if we were to accept that having a relatively high minimum wage would still make the UK a bit more attractive to workers from elsewhere in the EU, there could be an important positive in this: higher EU migration could improve the UK’s stock of human capital. Migrants <a href="http://www.oecd.org/migration/OECD%20Migration%20Policy%20Debates%20Numero%202.pdf">tend to be</a> younger and better educated than the average worker, so it could enhance the UK’s <a href="https://www.theguardian.com/business/2016/feb/18/uk-productivity-gap-widens-to-worst-level-since-records-began">notoriously low</a> productivity. </p>
<p>Indeed, the living wage policy is <a href="http://www.ft.com/cms/s/0/6b54032e-da43-11e5-98fd-06d75973fe09.html#axzz48XDi9QjE">designed to</a> improve this productivity gap by motivating companies to train up minimum wage staff to justify the extra salary. If this proves illusory and the policy instead leads to companies laying off workers to reduce costs, the result could be higher overall unemployment. Much lower youth unemployment in the UK <a href="http://www.statista.com/statistics/266228/youth-unemployment-rate-in-eu-countries/">relative to</a> the likes of Spain and Greece is one of the main drivers of young people moving to the UK. If UK unemployment rises, levels of EU migration could conceivably fall. </p>
<p>Alternatively, if businesses do lay off staff to cope with higher wages they may turn to illegal immigrants to avoid paying the living wage. If so, perhaps a negative impact on businesses from the policy could turn out to boost illegal migration by unscrupulous employers. </p>
<h2>Verdict</h2>
<p>Boris Johnson is wrong to say the UK minimum wage is far higher than other EU members, but it is higher than in Eastern Europe and will probably become relatively higher than most EU countries by 2020. Whether this will affect migration, we just don’t know. That said, these debates are very reminiscent of when Tony Blair first introduced the UK minimum wage in April 1999. Many economists and commentators forecast it would be highly detrimental to the UK’s highly deregulated jobs market. This proved largely inaccurate and the same may be true this time. </p>
<h2>Review</h2>
<p><em>Mireia Borrell-Porta, Postdoctoral Research Officer in Family Policy, University of Oxford</em> </p>
<p>The author correctly states that although the UK living wage is more or less in line with minimum wages in other EU major economies, it is indeed higher than in some Eastern European countries. The first part of Boris Johnson’s statement is therefore too bold, but the fact that it holds true for some EU countries makes it worth considering the effect on EU migration.</p>
<p>Yet as the author highlights, this claimed correlation is unfounded – the research evidence is <a href="http://wol.iza.org/articles/do-minimum-wages-induce-immigration.pdf">scarce and inconclusive</a>. And I would agree that wages are not the only important driver of migration. Employment opportunities, personal networks and other costs such as housing are key. </p>
<p>Above all, as the author again points out, the effect of the minimum wage on migration depends on how it affects employment. I agree that the empirical evidence is inconclusive here. There is no evidence from <a href="https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/288841/The_National_Minimum_Wage_LPC_Report_2014.pdf">the research that</a> a minimum wage <a href="http://www.resolutionfoundation.org/wp-content/uploads/2014/08/Final-Minimum-wage-paper_vFinal.pdf">increases unemployment</a>. On the other hand, the Office for Budget Responsibility <a href="http://budgetresponsibility.org.uk/docs/dlm_uploads/July-2015-EFO-234224.pdf">is predicting that</a> the living wage will increase unemployment by 60,000. </p>
<p>What we do know is that European migrants tend to be younger and better educated than UK native workers. This suggests they might not benefit from the increased minimum wage, and that migration may actually be good for the UK economy, as it boosts productivity. Indeed recent research <a href="http://cep.lse.ac.uk/BREXIT/press1.asp?index=5053">shows that</a> EU immigration has not had significantly adverse effects on employment, wages, inequality or public services for people born in the UK. </p>
<p><em>The text has been amended – previously it said that Colombia is in the OECD.</em></p><img src="https://counter.theconversation.com/content/59410/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Boris Johnson says so. But the reality about EU minimum wages and the effect on migration is more subtle.Ross Brown, Lecturer in Entrepreneurship and Small Business, University of St AndrewsLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/557232016-05-09T13:16:27Z2016-05-09T13:16:27ZSheffield is on a quest to be the fairest city of them all – here’s how it’s doing<figure><img src="https://images.theconversation.com/files/121704/original/image-20160509-20584-7vssi8.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption"></span> <span class="attribution"><a class="source" href="https://www.flickr.com/photos/34517490@N00/7066042811/sizes/l">nicksarebi/flickr</a>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span></figcaption></figure><p>Fairness has become one of the most important ideas in contemporary politics. It’s a concept leveraged by both sides of the political spectrum, to attack or support decisions about who gets what, and how – particularly when it comes to state support. </p>
<p>Most would agree that people should not have poorer health or fewer opportunities, simply because of where they live. Or that people who work hard should be able to earn enough to live on. Or that we should support those in our society who have experienced unprecedented difficulties in their lives, through no fault of their own. </p>
<p>In all of these examples, we can recognise the possibility that it could be us; that we could easily have found ourselves in this position, if it weren’t for a few quirks of fate. </p>
<h2>A sleight of hand</h2>
<p>But one of the great triumphs – or indeed, sleights of hand – of recent years has been the way that an educated, rich and articulate political elite have attacked the conditions of those with least, in the name of those with only a little. </p>
<p>There has been a kind of <a href="http://www.lrb.co.uk/v38/n04/james-meek/robin-hood-in-a-time-of-austerity">inversion of the Robin Hood principle</a>. Instead of a galvanising argument that those with excessive wealth should be taxed in the name of those with least, we now <a href="http://www.thesun.co.uk/sol/homepage/news/7117348/Benefits-cheat-single-mum-who-blew-40k-on-luxury-trips-busted-after-investigators-catch-partner-at-her-home-in-pyjamas.html">hear it said</a> that the residents of social housing, lone mothers, penniless migrants and those looking for work are people who we cannot afford to maintain. Or, worse, that such groups are somehow a drain on the livelihoods of <a href="http://www.thisismoney.co.uk/money/news/article-2215070/Are-contributor-burden-nations-finances--Squeezed-middle-increasingly-dependent-state.html">those who are working hard</a>. </p>
<p>This rhetoric has served a programme of austerity, which has enabled wealthy institutions and individuals to avoid much of the pain generated by the financial crisis, and – according to <a href="https://theconversation.com/fact-check-has-austerity-held-back-economic-growth-40578">top economists</a> – harmed the UK’s economic recovery. But there is good cause to believe that a less polarised vision could ensure that people are given equal opportunity to thrive, regardless of their circumstances. </p>
<h2>The fairest city</h2>
<p>This is the vision underpinning the <a href="https://sheffieldequality.wordpress.com/next-steps/fairness-commission/">Sheffield Fairness Commission</a> – which aims to make Sheffield the fairest city in the country. These blueprints offer some practical guidelines about what cities can actually do to promote social and economic fairness – particularly given that many policy “levers”, such as the level of social security benefits, cannot be operated from within the city. </p>
<p>With the help of 23 independent commissioners – who include councillors from all of the main political parties, as well as representatives from local groups including the voluntary sector, church, chamber of commerce and local press – the commission produced a <a href="https://www.sheffield.gov.uk/your-city-council/policy--performance/fairness-commission.html">report in 2013</a> which detailed 48 recommendations for action. It also put together a guide to help business owners, the local authority and even families make fair decisions. Since then, there has been an annual review of progress, to measure what the city has been able to achieve. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/121722/original/image-20160509-20605-1c10kip.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/121722/original/image-20160509-20605-1c10kip.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=438&fit=crop&dpr=1 600w, https://images.theconversation.com/files/121722/original/image-20160509-20605-1c10kip.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=438&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/121722/original/image-20160509-20605-1c10kip.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=438&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/121722/original/image-20160509-20605-1c10kip.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=550&fit=crop&dpr=1 754w, https://images.theconversation.com/files/121722/original/image-20160509-20605-1c10kip.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=550&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/121722/original/image-20160509-20605-1c10kip.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=550&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Responsible competition.</span>
<span class="attribution"><span class="source">Sheffield Money</span></span>
</figcaption>
</figure>
<p>Here’s what has been accomplished. Led by the city council, <a href="http://www.livingwage.org.uk/employers/region">several large employers</a> have <a href="http://www.bbc.co.uk/news/business-35837712">introduced a higher living wage</a> based on calculations by the Living Wage Foundation, and the Sheffield Chamber of Commerce has also encouraged small and medium-sized organisations to do so. Another recommendation, on fair access to credit, resulted in the creation of <a href="http://www.theguardian.com/money/2015/aug/08/sheffield-money-payday-loans-rates-poverty">Sheffield Money</a>, to compete with the unscrupulous and usurious payday lenders. </p>
<p>More recently, a fair employer charter was introduced, designed to ensure fair conditions of work as well as pay. Several large public and private organisations have already signed up to the charter, which focuses on promoting fair and flexible employment contracts. It encourages recruitment and employment practices that identify and support talent, value diversity and promote aspiration and social mobility. And it promotes the delivery of excellent working conditions, high ethical standards, positive health and well-being and training, development and reward opportunities.</p>
<p>The measures extend beyond business, too. Health funding has been redistributed from acute to primary and community care, and 20mph speed limits have been introduced to cut child injuries and deaths, and reduce air pollution. </p>
<p>These and other measures have not yet succeeded in reversing inequality. But they do seem to have played a role in <a href="https://www.sheffieldfirst.com/key-documents/state-of-sheffield.html">preventing it from getting worse</a> in many aspects of city life. All this has been achieved in the face of adverse national policies, which have removed massive resources from the city council. For instance, the cuts to housing, disability and job seekers’ benefits alone have removed £200m annually from the city. </p>
<p>The work of the commission goes to show that there are things which cities can do, which have a tangible impact on the lives of thousands of people. When city institutions can come together around an idea, it is possible to play down politically fractious relationships, and focus instead on what really matters: that our society is fundamentally a fair one. Whether or not such local initiatives to promote fairness can be extended nationally or even if they will survive the various devolution deals taking place are, for the moment, open questions.</p><img src="https://counter.theconversation.com/content/55723/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Rowland Atkinson has received funding from the Economic and Social Research Council.</span></em></p><p class="fine-print"><em><span>Alan Walker receives funding from the ESRC and is a member of the Labour Party </span></em></p>Cities don’t have much control over national policies – but that doesn’t mean there’s nothing they can do.Rowland Atkinson, Chair in Inclusive Societies, University of SheffieldAlan Walker, Professor of Social Policy and Social Gerontology, University of SheffieldLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/570132016-04-01T11:31:19Z2016-04-01T11:31:19ZWhy the living wage won’t compensate for tax credit cuts<figure><img src="https://images.theconversation.com/files/116794/original/image-20160330-28443-1fcc92n.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Will government cuts to tax credits hit Britain's poorest the hardest?
</span> <span class="attribution"><span class="source">Becky Stares/shutterstock</span></span></figcaption></figure><p>Wage poverty is endemic in Britain because wages are <a href="http://www.lancaster.ac.uk/news/articles/2016/wage-supplements--price-for-a-job-or-means-of-earning-a-living/">thought</a> of as a price for a job, rather than as a means of earning a living. </p>
<p>The introduction of the so called “<a href="https://www.livingwage.gov.uk/?gclid=CInk8e3T6MsCFQ0SGwodSWUMtg">national living wage</a>” – what really should just be viewed as an increase in the national minimum wage for the over 25s – will raise wages for the lowest-paid workers by 50p an hour. This should be good news for those receiving the increase, but it seems some businesses are using the national living wage as <a href="https://www.change.org/p/don-t-use-living-wage-as-excuse-to-cut-pay-benefits">an excuse to cut overall pay</a> and rewards for staff. </p>
<p>Pair this with concerns that businesses are <a href="http://www.theguardian.com/business/2015/sep/08/living-wage-fears-sending-shockwaves-through-uk-labour-market">scaling back recruitment</a> to make allowances for wage increases and it’s clear the higher minimum wage isn’t all it’s cracked up to be.</p>
<p>It isn’t only businesses that are playing hard ball. Alongside the introduction of this higher wage the government is moving forward with its cuts to wage supplements through the introduction of <a href="https://www.gov.uk/universal-credit/overview">universal credit</a> – a new benefit which is set to replace job seekers’ allowance and other means-tested benefits.</p>
<p>It is recognised that the cuts to wage supplements brought about by the introduction of universal credit will not be made up by the increases planned for the minimum wage. The Resolution Foundation, for instance, <a href="http://www.resolutionfoundation.org/media/press-releases/low-income-working-families-on-universal-credit-set-to-lose-1300/">calculates</a> that when all of the tax, benefit and minimum wage changes announced in 2015 are taken into account the average loss for the poorest half of households will be £650 a year by 2020.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/116812/original/image-20160330-15137-1i8341v.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/116812/original/image-20160330-15137-1i8341v.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=450&fit=crop&dpr=1 600w, https://images.theconversation.com/files/116812/original/image-20160330-15137-1i8341v.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=450&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/116812/original/image-20160330-15137-1i8341v.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=450&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/116812/original/image-20160330-15137-1i8341v.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=565&fit=crop&dpr=1 754w, https://images.theconversation.com/files/116812/original/image-20160330-15137-1i8341v.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=565&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/116812/original/image-20160330-15137-1i8341v.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=565&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Poor show for the low-paid.</span>
<span class="attribution"><span class="source">1000 words/Shutterstock</span></span>
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</figure>
<p>Wage supplements such as <a href="http://revenuebenefits.org.uk/tax-credits/guidance/how-do-tax-credits-work/">tax credits</a> help to address the problem of low wages, by adjusting the incomes of low-paid households to the number of people living in them. In this sense, wage supplements allow people to “earn” an income that is more related to their living costs than wages alone.</p>
<p>The reduction of these supplements alongside an increase in minimum wage, will do little to solve Britain’s longstanding problem with wage poverty.</p>
<p>As benefits for unemployed people are being eroded in value, working poor families face a bleak future. And while the shift to a higher minimum wage should increase the incentive to work, the mechanism that attempted to link wages to need is being put under pressure. </p>
<h2>A history of wage supplements</h2>
<p>Wage supplements have a <a href="http://www.palgrave.com/gb/book/9781137293961">chequered history</a> in Britain. At various points they have been interpreted as being both deeply problematic and highly beneficial for working people – and for the economy and society more generally. </p>
<p>To understand the problems we face today with wage supplements, we need to go back in time in the 1800s when this difficult relationship with benefits was first unfolding. Between 1834 and 1971, the main thrust of policy was that the supplementation of wages by the state – at least on a means-tested basis – would destroy the incentive for people to work and would encourage employers to pay low wages. </p>
<p>The <a href="http://www.nationalarchives.gov.uk/education/resources/1834-poor-law/">1834 Poor Law Commission</a> report’s argument, that wage supplements made working people “<a href="https://books.google.co.uk/books?id=BPw9AAAAcAAJ&pg=PA69&lpg=PA69&dq=idle,+lazy,+fraudulent+and+worthless&source=bl&ots=pKMKnu4zA-&sig=8uliiyIeZ5KS564SLLCI0Lw47Gg&hl=en&sa=X&ved=0ahUKEwjireuf6ujLAhWBPhQKHSJBDVEQ6AEIHTAA#v=onepage&q=idle%2C%20lazy%2C%20fraudulent%20and%20worthless&f=false">idle, lazy, fraudulent and worthless</a>”, cast a long shadow over policy. </p>
<p>But from the 1970s the position was reversed – it was argued that wage supplements had the potential to encourage people to do low-paid work and to reduce pressure on employers to increase wages. During the <a href="http://www.telegraph.co.uk/finance/recession/4323064/UK-recession-in-1980-What-was-it-like.html">mass unemployment</a> of the late 80s wage supplements came into their own as a way to encourage people into <a href="http://blog.britac.ac.uk/understanding-tax-credits-in-debates-about-wage-supplements-from-the-past/">low paid work</a> in the hope of reducing unemployment levels.</p>
<p><a href="https://en.wikipedia.org/wiki/Central_Policy_Review_Staff">The Central Policy Review Staff</a> (the Conservative think tank of the time) argued this could be done through the further development of wage supplements – which was introduced in 1988 as family credit.</p>
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<img alt="" src="https://images.theconversation.com/files/116814/original/image-20160330-28445-11f5l7o.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/116814/original/image-20160330-28445-11f5l7o.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/116814/original/image-20160330-28445-11f5l7o.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/116814/original/image-20160330-28445-11f5l7o.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/116814/original/image-20160330-28445-11f5l7o.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/116814/original/image-20160330-28445-11f5l7o.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/116814/original/image-20160330-28445-11f5l7o.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Replacing tax credits with the living wage will leave many people worse off.</span>
<span class="attribution"><span class="source">Yulia Grigoryeva/Shutterstock</span></span>
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<p>Whether wage supplements are considered to be negative or positive, what has often been missing from arguments about them is reference to the way in which they might address in-work poverty.</p>
<p>It is not that such issues have been completely absent from debates about supplementing wages – quite the opposite in fact. The first benefit ever aimed specifically at people in low-paid work – family income supplement – which was introduced 1971, was the consequence of policy debates that had been revitalised by the “rediscovery of poverty” in the mid-1960s. Later, for New Labour governments, tax credits were partly a means of addressing child poverty.</p>
<p>However, in both these instances, concerns about poverty were either usurped by wider concerns with incentivising people to take low-paid work – in the case of family income supplement – or sat uneasily alongside them in the case of tax credits. </p>
<p>And of course attempting to incentivise unemployed people to take low-paid work is a very different exercise to addressing in-work poverty.</p>
<h2>Waging war</h2>
<p>It is because of this history surrounding wages supplements that the conservative government has found itself in difficulties in recent times. The government’s focus has been on shifting the incentive to work by taking away tax credits and increasing the national minimum wage, alongside lowering the real and relative level of benefits for workless people. </p>
<p>In this approach, the government’s belief is that the need for wage supplements is reduced. The problem with this belief is that even if it was not their original intention, wage supplements are important in relieving the poverty of poorly paid workers, as many people argued when resisting the cuts to tax credits. </p>
<p>The current proposal to reduce universal credit payments in favour of a higher minimum wage will not help to address the <a href="http://www.palgrave.com/gb/book/9781137293961">longstanding poverty</a> of many people in paid employment. In fact it will only make things worse for those already living on the breadline.</p><img src="https://counter.theconversation.com/content/57013/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Chris Grover received funding from the British Academy for research into wage supplements in the inter-war period and the 1980s. </span></em></p>Plans to stop universal credit payments in favour of a ‘national living wage’ will not address the long-standing poverty of many people in paid employment.Chris Grover, Senior Lecturer in Social Policy, Lancaster UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/570172016-03-31T14:52:51Z2016-03-31T14:52:51ZHere’s why the national living wage might not leave you better off<p>As of April 1, the UK’s new <a href="https://www.livingwage.gov.uk/?gclid=CN_HkOzY6ssCFWoz0wodJxENHQ">National Living Wage</a> (NLW) means a compulsory pay rate of £7.20 an hour for over-25s. Some see it as little more than <a href="https://theconversation.com/will-the-new-national-living-wage-hurt-business-57002">a clever piece of branding</a> by George Osborne; an addition of only 50p per hour to the existing <a href="https://www.gov.uk/national-minimum-wage-rates">National Minimum Wage (NMW)</a>. After all, it still falls well short of the £8.25 voluntary <a href="http://www.livingwage.org.uk/">accredited living wage</a> outside London – which is <a href="http://www.lboro.ac.uk/research/crsp/mis/thelivingwage/">based on my research</a> on actual living costs – let alone the £9.40 London rate.</p>
<p>Yet the advent of the NLW marks two historic shifts: the first of which is a big change in the aim of the minimum wage. In 1999, the Labour government <a href="http://news.bbc.co.uk/onthisday/hi/dates/stories/april/1/newsid_2465000/2465397.stm">first introduced the NMW</a>, at a cautious £3.60 an hour compulsory minimum. The move met with fierce opposition from the Conservatives, who were against any state interference in a free labour market. </p>
<p>The NMW created a bottom “floor” to avoid clearly exploitative pay, but it did little to alter overall pay inequalities. Under the watchful eye of the <a href="https://www.gov.uk/government/organisations/low-pay-commission">Low Pay Commission</a>, the NMW has grown under careful constraints, to avoid any threat to employment in an economy that’s better at <a href="https://www.tuc.org.uk/economic-issues/labour-market-and-economic-reports/low-paid-job-creation-has-pushed-earnings-growth">creating relatively low-paid jobs</a> than most of our European neighbours. </p>
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<p>In contrast to this cautious approach, Osborne’s NLW makes a virtue of creating a “higher wage economy”, with a wage floor relative to average pay, which is forecast to be in the <a href="http://budgetresponsibility.org.uk/docs/dlm_uploads/July-2015-EFO-234224.pdf">top quarter of similar countries</a> by the time the NLW exceeds £9 an hour in 2020. The policy could have unintended consequences, including some reassignment of low-paid jobs to under-25s, who are not covered by the new NLW requirements. </p>
<p>But the bigger picture is that a Conservative chancellor is seeking to end our low-pay culture by legal means: a breathtaking turnaround.</p>
<h2>Leaving families worse off</h2>
<p>The other significant shift is the <a href="https://www.gov.uk/government/speeches/chancellor-george-osbornes-summer-budget-2015-speech">accompanying message</a> from Cameron and Osborne that higher wages should go hand in hand with “lower welfare”. This is a new departure from the previous <a href="https://theconversation.com/failures-and-u-turns-the-conservative-partys-record-on-welfare-56634">“cut welfare” rhetoric</a>, which until now has been focused on limiting what benefits you can get from the state if you are not working. </p>
<p>For nearly half a century, UK governments have been offering in-work benefits to families with children who work on low incomes. In the past two decades, these payments (in the form of <a href="https://theconversation.com/explainer-what-are-tax-credits-49904">tax credits</a>) have <a href="https://fullfact.org/economy/tax-credits-how-much-has-spending-increased-16-years/">grown</a> a great deal, as a way of “<a href="https://www.politicshome.com/news/uk/economy/news/63265/david-cameron-speech-making-work-pay">making work pay</a>” – even for those with low-paying jobs and high childcare costs. Now, the present government wants to reverse the growth in these payments, by telling employers to pay decent wages and cutting taxpayer support.</p>
<p>Iain Duncan Smith’s biggest and most legitimate grievance with George Osborne is that the chancellor’s cuts to in-work benefits fatally undermine the basis for Universal Credit (UC). The UC scheme, which was devised to merge a range of welfare benefits into a single payment given directly to individuals, became Iain Duncan Smith’s flagship. It was intended to reward people who sought out employment by topping up low earnings – even for those with only a few hours of work per week. </p>
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<p>This policy has now been reversed. The result is that a lone parent who would (at best) have had no reduction in benefits on up to £8,800 a year of earnings under UC, will now have them reduced by £2,600 due to the latest round of cuts. This change does the reverse of making work pay: even taking account of higher minimum pay, it <a href="https://theconversation.com/osbornes-living-wage-wont-spare-low-income-families-from-cuts-44438">leaves low-income working families worse off</a>. And despite Osborne’s climbdown on <a href="https://theconversation.com/tax-credits-showdown-for-once-public-opinion-may-be-with-the-house-of-lords-49774">cuts to tax credits</a> last year, his cuts to UC remain untouched.</p>
<h2>Deeply flawed</h2>
<p>“Higher pay, lower welfare” – as Osborne is applying it – is in fact deeply flawed. If all he had done was introduce the NLW, this would have cut the in-work “welfare” bill – simply because people getting more adequate pay need less support from tax credits or UC, and the system rapidly withdraws this support as earnings rise. </p>
<p>But cutting means-tested support for families at a given level of earnings inevitably makes people at those earnings worse off. In-work poverty is not just a product of low hourly pay: short or erratic working hours and high childcare costs are just as important. And someone on tax credits getting today’s 50p an hour pay rise may see only 13p of it after paying tax and having their benefits reduced due to higher pay. Combined with the planned cuts, this will <a href="https://www.jrf.org.uk/report/will-2015-summer-budget-improve-living-standards-2020#jl_downloads_0">leave many families far worse off by 2020</a>.</p>
<p>Of course, pay is not irrelevant to improving family living standards. A system in which employers were allowed to pay almost nothing in the knowledge that the state would top up working incomes would feel unjust and unaffordable. </p>
<p>But the current move towards higher minimum wages could make it more affordable for the government to maintain – rather than cut – support for people still in need, because having more people with higher earnings will automatically reduce the welfare bill. In other words, ensuring that working families have enough income to make ends meet should be a shared responsibility between employers and the state.</p><img src="https://counter.theconversation.com/content/57017/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Donald Hirsch does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Low-income families will actually end up worse off, if Osborne’s cuts to welfare continue.Donald Hirsch, Professor of Social Policy , Loughborough UniversityLicensed as Creative Commons – attribution, no derivatives.