tag:theconversation.com,2011:/id/topics/living-wage-campaign-13398/articlesliving wage campaign – The Conversation2022-05-16T11:22:33Ztag:theconversation.com,2011:article/1827942022-05-16T11:22:33Z2022-05-16T11:22:33ZA living wage increases economic productivity while reducing poverty – new report<figure><img src="https://images.theconversation.com/files/462816/original/file-20220512-14-fjyaxz.jpg?ixlib=rb-1.1.0&rect=124%2C99%2C5400%2C3561&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption"></span> </figcaption></figure><p>It can be difficult to see a way out of the current cost of living crisis. Prices continue to rise, and there are fears that if nothing changes, many families will face <a href="https://www.theguardian.com/business/2022/may/11/further-250000-uk-households-face-destitution-in-2023-warns-niesr">serious financial hardship</a>. </p>
<p>The effects of this will be devastating. Poverty causes <a href="https://www.bbc.co.uk/news/uk-england-44853482">premature death</a>, <a href="https://www.fao.org/publications/sofi/2021/en/">poor nutrition</a>, <a href="https://core.ac.uk/download/pdf/33573351.pdf">disease</a> and <a href="https://www.goodreads.com/book/show/1869.Nickel_and_Dimed">exhaustion</a>. In the face of this bleak outlook, there is an urgent need for effective leadership to bring about change – but not just from governments. Businesses too can play a crucial role. </p>
<p>One of the single most important things any company can do to reduce poverty is to pay its employees a <a href="https://www.livingwage.org.uk/what-real-living-wage">living wage</a>. Our <a href="https://businessfightspoverty.org/register-the-case-for-living-wages/">new report</a> demonstrates in detail how a living wage not only benefits employees and workers, but also employers and society as a whole.</p>
<p>Receiving a living wage helps to break cycles of poverty by ensuring that pay is sufficient to cover household essentials as well as occasional emergencies or unexpected expenses.</p>
<p>Our expert interviewees reported that being paid a living wage can reduce stress levels and the excessive working hours sometimes needed to make ends meet. This in turn means <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3071132">fewer sick days</a> and overall <a href="https://www.qmul.ac.uk/geog/media/geography/livingwage/docs/Livingwagecostsandbenefits.pdf">greater employee wellbeing</a>. </p>
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<img alt="Shopper holding receipts." src="https://images.theconversation.com/files/463086/original/file-20220514-18-bhd86m.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/463086/original/file-20220514-18-bhd86m.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/463086/original/file-20220514-18-bhd86m.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/463086/original/file-20220514-18-bhd86m.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/463086/original/file-20220514-18-bhd86m.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/463086/original/file-20220514-18-bhd86m.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/463086/original/file-20220514-18-bhd86m.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">Costs are rising.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/minded-man-viewing-receipts-supermarket-tracking-1980000383">Shutterstock/Denys Kurbatov</a></span>
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<p>From a business perspective, this can result in <a href="https://www.livingwage.org.uk/sites/default/files/Cardiff%20Business%20School%202017%20Report.pdf">lower staff turnover</a>, reducing recruitment and training costs. Productivity can increase, and there are even early signs that raising entry-level wages may be linked to <a href="https://www.inc.com/minda-zetlin/paypal-wages-ndi-profits-growth-dan-schulman.html">increased revenue</a>.</p>
<p>We also discovered that as living wage commitments become more common, the benefits reach further into society. Wage increases stimulate spending in the local economy, while reductions in poverty and inequality can lead to <a href="https://equalitytrust.org.uk/resources/the-spirit-level">greater social cohesion</a>.</p>
<p>In short, our report (produced by <a href="https://businessfightspoverty.org/">Business Fights Poverty</a>, the <a href="https://www.cisl.cam.ac.uk/">Cambridge Institute for Sustainability Leadership</a> and <a href="https://shiftproject.org/">Shift</a>) supports growing evidence that living wages offer <a href="https://escholarship.org/uc/item/47r05658">multiple benefits</a> – beyond those experienced by individual workers. </p>
<p>This should provide businesses with the confidence to see wages not just as a net cost, but as a <a href="https://shiftproject.org/accounting-for-a-living-wage/">positive investment</a>. After all, a business can only be as resilient as the workers it employs. </p>
<p>The wider impact on society is also clear. We found that living wages have the potential to not only help tackle poverty, but also to address many of the UN’s <a href="https://sdgs.un.org/goals">Sustainable Development Goals</a>. For instance, one of the goals includes “<a href="https://www.ilo.org/global/topics/decent-work/lang--en/index.htm">decent work for all</a>”, and fair incomes are a core component of decent work. Tackling poverty can also improve access to housing, food and health. </p>
<p>Fortunately, being a living wage employer is becoming a new marker of business leadership, which is valued by investors and <a href="https://onlinelibrary.wiley.com/doi/abs/10.1002/csr.1946?casa_token=unErQs4zY4cAAAAA:8TVwV4_8gcMw7ZZdsLAsJiJ2mg8RhuxpxoTJgsD0Xxy3cO43lhlCNdSfNsxKMcRZD2UWXYTZ_sOaocs">consumers</a> alike. </p>
<p>In the UK for example, IKEA, Everton Football Club, and the Nationwide Building Society, are just three of over 10,000 employers <a href="https://www.livingwage.org.uk/news/living-wage-milestone-10000-employers-paying-real-living-wage-support-staff-cost-living%C2%A0%C2%A0">who have committed</a> to paying what the Living Wage Foundation describes as a “real living wage”. In practice that means paying workers a minimum of £9.90 per hour (£11.05 in London). Similar campaigns exist in other countries, including <a href="https://www.livingwage.org.nz/">New Zealand</a> and <a href="https://www.livingwageforfamilies.ca/living_wage">Canada</a>. </p>
<h2>Raising the bar</h2>
<p>Some companies are going even further, by extending living wages commitments to include their suppliers. In 2021, Unilever <a href="https://www.unilever.com/suppliers/partner-with-purpose/our-people-plans/">announced plans</a> to work towards a living wage for the people who provide goods and services to the company in areas like logistics and packaging. To achieve this, Unilever is partnering with suppliers to commit to and report on paying their workers at least a living wage.</p>
<p>Our report, which combined extensive analysis of previous research with numerous interviews, suggests that others should join them. </p>
<p>Dr Annabel Beales, who co-authored the report with us, said: “Given the sheer scale of rising poverty, a shift to a living wages economy is urgent and we need more businesses to play their part. The decision to pay living wages offers businesses a lot in return for their investment in terms of performance, resilience and stability.” </p>
<p>To move things forward, investors and CEOs should now feel confident that the payment of living wages is a sensible business decision. Meanwhile, governments can increase statutory minimum wages to reach living wage levels. </p>
<p>Consumers too can push for progress through the power of their spending decisions and the businesses they support. For businesses large and small have an important role to play in combating the drivers of poverty – and can be economically more successful as a result.</p><img src="https://counter.theconversation.com/content/182794/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Dr Anna Barford works at the University of Cambridge Institute for Sustainability Leadership. She receives funding from the British Academy, the ESRC, and her research fellowship is supported by a philanthropic gift from Unilever. </span></em></p><p class="fine-print"><em><span>Jane Nelson works at Harvard Kennedy School and the program that she directs has received funding from private foundations, corporate philanthropic funding, the United Nations and nonprofit organizations. She is affiliated with the following organizations: a nonresident senior fellow at the Brookings Institution; a member of the Business Commission to Tackle Inequality, the World Economic Forum’s Stewardship Board for the Future of Food Systems, and the Forum's Global Future Council on Transparency and Anti-Corruption; a board director of Newmont and the Niger Delta Partnership Initiative; and a member of advisory councils for Abbott, Bank of America, APCO, ExxonMobil, and Griffith Foods. </span></em></p>How employers benefit from paying higher wages.Anna Barford, Prince of Wales Global Sustainability Fellow, University of CambridgeJane Nelson, Director of the Corporate Responsibility Initiative, Harvard Kennedy SchoolLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/468312015-08-31T10:14:19Z2015-08-31T10:14:19ZAmerica doesn’t just ‘need a raise,’ we need a new national norm for wage growth<figure><img src="https://images.theconversation.com/files/93371/original/image-20150828-19923-18t877a.jpg?ixlib=rb-1.1.0&rect=41%2C59%2C901%2C620&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">How can workers fight for higher wages in today's economy?</span> <span class="attribution"><a class="source" href="https://www.flickr.com/photos/library_of_congress/3295494764/in/photolist-8UyGxK-qRKuTZ-a1m6R8-4idwpL-62dgQU-62dgMf-8NYJw9-7vSuz8-4ibgsY-4i9eZp-9rh89a-i41KNk-4idcvf-9rh87a-ovKCMX-owWgvP-ovYXDY-owpyen-osA38o-oweBaT-ow1mYi-ougMwd-ouoHhC-odHb5Q-otdqWh-oe4Mqu-wNT1PA-x5NqFG-tAihum-wZ4mJN-wjHZzT-aU7RYT-oeJe8x-odiw8m-oeSMmC-wjN4Ei-osjYhY-xep6J9-sGVJCe-tjNcPo-sEjuus-tCY8UL-tDnN6Z">The Library of Congress/Flickr</a></span></figcaption></figure><p>As Labor Day approaches, we are likely to hear from a <a href="http://nymag.com/daily/intelligencer/2014/12/america-needs-a-raise.html">growing chorus</a> of political, religious, academic, labor and business leaders who agree “America needs a raise” to reverse <a href="http://www.npr.org/sections/money/2015/02/11/384988128/the-fall-and-rise-of-u-s-inequality-in-2-graphs">three decades</a> of wage stagnation and rising income inequality. </p>
<p>But this consensus that something needs to be done has yet to produce a clear narrative or strategy for what to do. Getting there requires an agreement on what norms should guide wage growth, an understanding of the causes of wage stagnation and policies to address these causes in ways consistent with today’s economy and workforce.</p>
<p>It’s been 133 years since New York City <a href="http://www.dol.gov/laborday/history.htm">celebrated</a> the nation’s first Labor Day holiday in 1882 to acknowledge the role workers play in the economy. The federal government followed suit a dozen years later. As we review the suspected culprits behind wage stagnation, now is a good time to consider a new normal to ensure workers get their fair share of America’s prosperity. </p>
<h2>The old norm dies</h2>
<p>America once had at least an implicit norm guiding wages. As the chart below shows, from roughly the end of World War II through much of the 1970s, real (cost of living-adjusted) wages increased in tandem with gains in productivity. </p>
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<p>That norm emerged out of negotiations from 1947 to 1950 between General Motors and the United Auto Workers. It then spread through collective bargaining with other auto companies by unions and companies that adapted it to their specific circumstances in other industries and by nonunion firms that wanted to minimize the incentive for their employees to unionize. </p>
<p>But something changed around 1980, as the chart shows. Since then, real wages have increased only about 8% compared with a 63% increase in productivity. This has set off a great debate among analysts searching for an explanation of what caused this wage-productivity gap to grow. </p>
<h2>The college degree gap</h2>
<p>The <a href="http://www.researchgate.net/profile/David_Card2/publication/24099877_Skill-Biased_Technological_Change_and_Rising_Wage_Inequality_Some_Problems_and_Puzzles/links/5558b85b08ae6943a876ac64.pdf">first argument</a> that gained favor was that changes in technology were producing “skill-biased technological change” that increased demand and pushed up wages for more highly educated workers. </p>
<p>The growing wage gap in the 1980s between those with a college degree and those without one <a href="http://www.nber.org/digest/jan08/w12984.html">supported</a> this view. If this was the primary cause, the remedy should be increased education. </p>
<p>However, growth in this gap <a href="http://www.epi.org/publication/raising-americas-pay">eased</a> the following decade and especially since 2000, according to Economic Policy Institute think tank. While there is little question that the long-run effects of technological change are in this upward direction and will thereby make it harder for uneducated workers to command high wages, there is also a <a href="http://www.hamiltonproject.org/files/downloads_and_links/impact_of_edu_earnings_inequality_hershbein_kearney_summers.pdf">growing awareness</a> that increased education alone will not solve the wage stagnation problem. </p>
<h2>Globalization’s role</h2>
<p>The next suspect in the blame game has been globalization. </p>
<p>Since 1980, America <a href="http://data.bls.gov/pdq/SurveyOutputServlet">has lost</a> just over one-third of its manufacturing jobs, and it’s <a href="http://www.ddorn.net/papers/Autor-Dorn-Hanson-ChinaSyndrome.pdf">no question</a> that competition from China elsewhere has held down wages. </p>
<p>While investment in modern manufacturing technologies might help rebuild US output, these technologies <a href="http://www.realclearmarkets.com/articles/2015/02/09/putting_us_manufacturing_growth_in_perspective_101525.html">will not generate</a> anywhere near the number of good-paying jobs that have been lost. </p>
<p>Moreover, the small number of manufacturing jobs being “resourced” back to the US are, in many cases, coming back at a discount from prior levels commanded by similar jobs. </p>
<h2>The woeful minimum wage</h2>
<p>The third culprit in the search for an explanation is the decline in purchasing power of the national minimum wage. </p>
<p>Today’s US$7.25 per hour minimum has a <a href="http://www.epi.org/publication/raising-the-minimum-wage-to-12-by-2020-would-lift-wages-for-35-million-american-workers">purchasing power</a> about 25% below its peak in 1968. Raising the national minimum to $10.10, as <a href="http://www.washingtontimes.com/news/2014/oct/11/obama-continues-1010-minimum-wage-push-gop-calls-h/">proposed</a> by President Obama and allies in Congress, would restore the purchasing power for those now at the bottom of the wage distribution. </p>
<p>But this effort has been <a href="http://thehill.com/blogs/floor-action/senate/204802-gop-blocks-1010-minimum-wage">blocked</a> by the ongoing political gridlock in Washington. This has led to campaigns to increase the minimum wage in different cities and states, most notably the <a href="http://www.nytimes.com/2015/08/13/upshot/what-a-15-minimum-wage-would-mean-for-your-city.html?_r=0">successful fight</a> for $15 in Seattle and efforts of fast-food workers to raise or eliminate tipped wage minimums. Local innovations like this help but are not likely to spread to less hospitable communities and states across the country.</p>
<h2>The decline of unions</h2>
<p>More recently, <a href="https://theconversation.com/the-rise-and-fall-of-us-labor-unions-and-why-they-still-matter-38263">analysts</a> have begun to recognize that the long-term decline in unions and worker bargaining power accounts for a sizable portion of the problem. </p>
<p>It is no coincidence that the gap between wages and productivity began to expand dramatically around 1980, a turning point for collective bargaining. </p>
<p>That’s when union bargaining power began the three-decade-long decline that continues today. International competition was <a href="https://www.minnpost.com/macro-micro-minnesota/2012/02/history-lessons-understanding-decline-manufacturing">already eating away</a> at unionized manufacturing companies in the US, but the trend was accelerated by efforts to tame rampant inflation, a deep recession and the growth of nonunion domestic competition. In addition, President Ronald Reagan’s <a href="http://www.politico.com/story/2008/08/reagan-fires-11-000-striking-air-traffic-controllers-aug-5-1981-012292">firing</a> of striking air traffic controllers signaled management could take a harder line again unions.</p>
<p>Recent <a href="http://asr.sagepub.com/content/76/4/513.abstract">estimates</a> indicate the decline in unions accounts for as much as 20% to 30% of the rise in wage inequality. But because the 1935 labor law that supported worker rights to organize is so <a href="http://mitsloan-php.s3.amazonaws.com/iwer/wp-content/uploads/2015/08/Kochan.-2011-ABA-Labor-Law-Journal-article-on-NLRA.pdf">badly broken</a> and outmoded, unions are not likely to rebound soon. And even if they did, the old form of collective bargaining would probably not work as well in today’s global economy.</p>
<p>The one period in which wages began to move in a positive direction since this period of union decline, especially for low-wage workers, was when the labor market finally tightened during the buildup of the high-tech bubble from 1994 to 1997.</p>
<p>Very tight labor markets would do so again, but the Fed’s worry about future inflation is likely to limit how far or how long it will promote tight labor markets.</p>
<h2>A new national wage norm</h2>
<p>This quick review suggests there is no single cause of wage stagnation and therefore no silver bullet for reversing it. </p>
<p>But what if we focused instead on reestablishing a simple norm that wages and incomes should rise in tandem with worker productivity? How might we retrofit the old policies and institutions that supported this norm to work in today’s innovation-based economy?</p>
<p>Such an effort has to start with education. Continual technological changes require both higher levels of skill and the ability to learn throughout one’s career. This calls for strategies that expand apprenticeship programs and technical schools that engender the skills companies will need as baby boomers retire, as well as expanding the number of college graduates with the advanced science, technical, math and problem-solving skills in high demand. </p>
<p>If global competition makes it difficult to sustain high wages in manufacturing or other industries under outsourcing pressure, then wage increases in these sectors will need to be tied more directly to profits, customer service or other indicators of enterprise performance. This is the approach the United Auto Workers and domestic automakers took to better align incentives of owners and workers in ways that both help drive productivity and reinstall a sense of fairness at the workplace. </p>
<p>While this kind of norm should emerge from the private sector, ultimately it will take a comprehensive update of labor law to provide workers the ability to bargain at the highest levels where the key decisions affecting wages are made. </p>
<p>The <a href="http://www.nytimes.com/2015/08/28/business/labor-board-says-franchise-workers-can-bargain-with-parent-company.html">ruling</a> last week by the National Labor Relations Board allowing subcontracted workers to negotiate with the parent firm is a step in the right direction. It may serve as a precursor to permitting fast-food workers to negotiate directly with a parent firm such as McDonald’s as opposed to only with individual restaurant franchisees.</p>
<p>More reforms such as this one are necessary to protect and empower low-wage workers. Such labor reforms could include creating enterprise-wide “work councils” and supporting efforts of employees and contractors at “sharing” economy companies like Uber to negotiate a fair share of the revenue they help produce. One way involves drawing on the bargaining power provided by <a href="https://www.sherpashare.com/">apps</a> that help them calculate their hourly earnings after deducting the full range of expenses they incur. </p>
<p>Minimum wages could also be tied to other economic indicators such as the cost of living or the ratio of the minimum to median wages and raised gradually to allow employers to make adjustments in strategy to avoid or minimize negative employment effects. That’s the <a href="http://www.washingtonpost.com/news/storyline/wp/2014/08/04/the-early-results-from-americas-experiments-with-higher-minimum-wages/">strategy</a> Seattle employed to pass its $15 minimum while easing the impact on business. </p>
<h2>How to spread the new norm</h2>
<p>What might replace collective bargaining as the means for diffusing this norm across the economy? Here government can learn from its <a href="http://www.dol.gov/ofccp/regs/compliance/ca_11246.htm">historic role</a> in spreading equal employment practices across industry when it started in 1965 requiring government contractors to take affirmative actions to eliminate discrimination in employment. </p>
<p>The purchasing power of government can be brought to bear by requiring employers to disclose their wage and hour compliance records. It can also give priority in awarding contracts to firms that pay above-average wages and have in place supportive productivity-enhancing work practices. </p>
<p>The federal government is on a course to do the first part. President Obama signed an executive order requiring companies to disclose their compliance records. Now it is time to move on to the second part of this strategy.</p>
<p>So this Labor Day, let’s not only chant that America needs a raise but also rally around a simple norm that all workers should share fairly in the economic growth they help produce. We need to start pursuing this norm in ways that are well-matched to the needs of an innovation- and knowledge-driven global economy.</p><img src="https://counter.theconversation.com/content/46831/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Thomas Kochan has received funding from The Thomas Haas Foundation for his work on building a new social contract for the next generation workforce..
</span></em></p>The chorus chanting ‘America needs a raise!’ will undoubtedly grow as Labor Day approaches. They’re not wrong, but America needs more than that.Thomas Kochan, Professor of Management, MIT Sloan School of ManagementLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/423422015-05-27T10:18:57Z2015-05-27T10:18:57ZPast minimum wage gains make LA’s $6 hike appear rather puny<p>The <a href="http://www.latimes.com/local/lanow/la-me-ln-minimum-wage-hike-20150518-story.html">Los Angeles City Council</a> recently passed a law increasing the minimum wage to US$15 per hour by 2020. The city joins the ranks of <a href="http://money.cnn.com/2014/11/05/news/san-francisco-increased-minimum-wage/">San Francisco</a> and <a href="http://www.usatoday.com/story/news/nation/2014/06/11/seattle-minimum-wage-15-challenge/10344443/">Seattle</a> in boosting the wage to this level. </p>
<p>Currently, Los Angeles’ (LA) minimum wage is $9 per hour, which means at least a few low-wage workers in this city are going to receive a $6 (66%) increase over the next five years. </p>
<p>Is there any precedent for a minimum wage jump this large? </p>
<p>The answer might surprise <a href="http://www.forbes.com/sites/timworstall/2015/05/21/las-15-minimum-wage-too-high-too-soon/">many people</a>, because even larger increases than this have occurred before, both in California and at the federal level. </p>
<p>At a minimum, this suggests the economy has absorbed similarly sized and much larger pay hikes in the past. Given how few people will likely be affected by LA’s wage increase, the city probably won’t have any problem absorbing this one either. </p>
<h2>Cheered and derided</h2>
<p>LA’s new law, which passed by a <a href="http://cityclerk.lacity.org/cvvs/search/votedetails.cfm?voteid=80622&rnd=0.820633030843">14-to-1</a> vote, will raise the current $9 minimum in <a href="http://clkrep.lacity.org/onlinedocs/2014/14-1371-s2_mot_05-19-15.pdf">five steps</a>. First, the wage will be increased to $10.50 per hour in July 2016, then to $12 in 2017, followed by $13.25 in 2018, $14.25 in 2019 and $15 in 2020. The annual gains range from 5% in the final year to as high as 17% in the first. </p>
<p>LA’s decision to boost the pay of low-wage workers has been both <a href="http://www.chicagotribune.com/news/opinion/commentary/ct-15-dollar-minimum-wage-los-angeles-hurts-workers-20150521-story.html">derided</a> by numerous <a href="http://www.bloombergview.com/articles/2015-05-20/los-angeles-s-15-minimum-wage-will-hurt-workers">writers</a> and <a href="http://www.motherjones.com/kevin-drum/2015/04/economic-collapse-prediction-minimum-wage-raise">cheered</a>. The reaction isn’t surprising, since minimum wage laws and changes to them are very contentious.</p>
<p><a href="http://businessmacroeconomics.com/">Economists</a> have engaged in acrimonious debates about this topic for years, starting with an influential 1913 <a href="http://catalog.hathitrust.org/Record/000952404">book</a> by the English economist AC Pigou. His theory suggested minimum wage laws caused unemployment because they raised pay to levels that led more people to want these higher-paying jobs at the same time that businesses were cutting back on hiring people for jobs that were now more expensive to staff. Later <a href="http://davidcard.berkeley.edu/papers/njmin-aer.pdf">research</a> suggested that minimum wage increases did not affect unemployment, but their impact remains in <a href="https://www.epionline.org/oped/minimum-honesty-on-minimum-wage/">dispute</a>. Minimum wage <a href="http://www.forbes.com/sites/timworstall/2014/03/06/the-moral-case-against-raising-the-minimum-wage/">opponents</a> claim that it hurts small businesses and even the very people it is supposed to help, while <a href="http://www.nytimes.com/2014/02/09/opinion/sunday/the-case-for-a-higher-minimum-wage.html">proponents</a> argue it takes “aim at the inherent imbalance in power between employers and low-wage workers.” </p>
<p>Even though many people have strong opinions on the subject, relatively few people in the US actually work at a minimum wage job. In 2014, just <a href="http://www.bls.gov/cps/cpsaat44.pdf">three million</a> workers out of the <a href="http://www.bls.gov/cps/cpsaat01.pdf">146 million</a> people employed in the entire US were paid at or below the minimum wage. This means only 2% of all workers were covered last year by the <a href="http://www.dol.gov/dol/topic/wages/minimumwage.htm">Fair Labor Standard Act</a>, or FLSA, the formal name for the minimum wage law. </p>
<p>The entire state of California had only 108,000 people working in minimum wage jobs (see table 3 <a href="http://www.bls.gov/opub/reports/cps/characteristics-of-minimum-wage-workers-2014.pdf">here</a>), out of <a href="http://www.bls.gov/eag/eag.ca.htm">17.7 million</a> total workers – little more than half a percent. Moreover, one-fifth of minimum wage workers across the US were teenagers 16 to 19 years old (<a href="http://www.bls.gov/opub/reports/cps/characteristics-of-minimum-wage-workers-2014.pdf">table 7</a>) who are often still living at home, learning the basic skills needed to participate in the labor market and are not considered part of the adult working poor that minimum wage legislation is designed to protect.</p>
<p>Of course, many Los Angeles workers who aren’t making the bare minimum will see their wages lifted as well, but relatively few will get the full 66% increase, limiting its overall impact.</p>
<h2>Why is LA raising its minimum?</h2>
<p>So why are many major cities such as LA enacting their own increases in the minimum wage? </p>
<p>The graph below shows the history of the federal <a href="http://www.dol.gov/whd/minwage/chart.htm">minimum wage</a> since it was introduced in 1938 at 25 cents per hour. Since then, the minimum has been increased 22 times, or about once every 3.5 years. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/82865/original/image-20150525-32575-1u8ew9c.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/82865/original/image-20150525-32575-1u8ew9c.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/82865/original/image-20150525-32575-1u8ew9c.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=263&fit=crop&dpr=1 600w, https://images.theconversation.com/files/82865/original/image-20150525-32575-1u8ew9c.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=263&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/82865/original/image-20150525-32575-1u8ew9c.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=263&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/82865/original/image-20150525-32575-1u8ew9c.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=331&fit=crop&dpr=1 754w, https://images.theconversation.com/files/82865/original/image-20150525-32575-1u8ew9c.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=331&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/82865/original/image-20150525-32575-1u8ew9c.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=331&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">The federal minimum wage has historically been lifted in regular increments.</span>
<span class="attribution"><span class="source">Department of Labor</span></span>
</figcaption>
</figure>
<p>Given that the minimum has been set at $7.25 per hour since 2009, it is not surprising that cities are setting their own increases. Congressional inaction has delayed a federal wage hike that, based on the pace of past revisions, is now overdue, forcing cities to take local action.</p>
<h2>Precedent for big wage hikes</h2>
<p>It is interesting to argue whether boosting the minimum wage is fair or not fair to low-wage workers and whether it helps or hurts the working poor and the economy as a whole. However, it is more enlightening to understand if such a large boost in the minimum wage has occurred before. </p>
<p>If it has, then looking at what happened afterward could provide a rough guess of what will transpire when LA and other cities boost low-level wages. While it is difficult to see in the above chart, there have been a number of very large increases in the minimum wage.</p>
<p>In 1949, the federal minimum wage was 40 cents per hour. It was increased to 75 cents in 1950, an 88% jump that was intended to account for the inflation that built up during and after World War II. This hefty pay hike – the biggest in a single year – did not appear to crush economic activity. On the contrary, the national unemployment rate <a href="http://www.bls.gov/cps/cpsaat01.pdf">fell</a> in subsequent years, to 2.9% in 1953 from 5.9% in 1949.</p>
<p>An 88% increase in LA’s current $9 per hour minimum wage would boost the minimum in one shot to $16.92, well above the $15 being legislated for 2020.</p>
<p>LA’s increase, however, is not a one-year boost but instead will occur over five years. Historical data show a number of times when an increase in the minimum over such a period was quite high. </p>
<h2>California’s own experience</h2>
<p><a href="http://www.dir.ca.gov/iwc/MinimumWageHistory.htm">California</a> has had its own minimum wage law even longer than the federal government, first enacting one in 1916, three decades before a national law took effect. California initially set its minimum wage at 16 cents per hour. By 1920, the state raised it to 33 cents, more than doubling the minimum in a four-year time frame. If LA boosted its $9 minimum by the same scale, it would have set a rate of more than $18 per hour by 2019, $3 more per hour than what is currently planned and one year faster.</p>
<p>Both the US and California minimum wages have seen other large multi-year increases. For example, from 1973 to 1978, both minimums went up by roughly what LA has recently enacted. The US federal minimum jumped from $1.60 in 1973 to $2.65, a 66% increase, while California’s minimum jumped from $1.65 to $2.65, a 61% gain.</p>
<h2>Comparing LA’s incremental increases</h2>
<p>LA’s first increase from $9 to $10.50 per hour in July 2016 will be a 17% increase in one year. Both the federal and California minimums have experienced many jumps much larger than this in years not already identified above. </p>
<p>For example, the federal minimum wage in 1955 rose from $0.75 per hour to $1 in 1956, while in 1943-44 the minimum was raised from $0.30 to $0.40 per hour, both 33% increases. An increase of this size would raise LA’s current rate to $12 in one year, equivalent to the total increase LA has proposed for both 2016 and 2017.</p>
<p>So is there a precedent for LA’s wage hike plan? The data provide a clear answer: numerous times in the past, the US and California have experienced even larger increases. </p>
<p>Still unanswered, however, is an important question: will boosting the minimum help or hurt California’s economy? </p>
<p>In my opinion, because the entire state only employs about 100,000 minimum wage workers (see table 3 <a href="http://www.bls.gov/opub/reports/cps/characteristics-of-minimum-wage-workers-2014.pdf">here</a>), raising the rate in just LA and San Francisco will affect so few people that this 66% boost is primarily symbolic. </p>
<p>The pro-minimum wage side has clearly won the most recent battles in LA, San Francisco and Seattle. Time will tell which side will win the war that has been raging for more than a century.</p><img src="https://counter.theconversation.com/content/42342/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Jay L. Zagorsky does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Los Angeles’ planned 66% increase over five years pales in comparison with many past minimum wage hikes in California and at the federal level.Jay L. Zagorsky, Economist and Research Scientist, The Ohio State UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/343442014-12-11T11:04:48Z2014-12-11T11:04:48ZIt’s time we revived FDR’s ‘wages of a decent living’<p>A noxious combination of falling wages, income inequality at its highest since the 1920s and a growing low-wage sector has caused the ranks of the working poor to swell to more than <a href="http://www.nelp.org/site/issues/category/living_wage_and_minimum_wage/">47 million</a>. That’s one out of every seven Americans. </p>
<p>Harnessing the anger and economic pain that workers are feeling at the decimation of the middle class, a living wage movement made up of grassroots groups, unions and community organizations has been pushing hard to reverse that trend on numerous front, including by lifting minimum pay at all levels of government. The activists are targeting a US$15 hourly rate in the retail and fast food sectors and trying to pass living wage resolutions that aim to increase base salaries above the poverty line.</p>
<p>While activists have yet to reach their goals at the federal level, they have been very successful convincing voters in cities and states – both conservatives and liberals – to raise their own minimums closer to a living wage. As more states and cities raise their minimums in a significant way, pressure rises on Congress to pass an increase of the federal minimum wage rate. Workers also are making demands directly of their employers, including a visible campaign among fast food and retail workers demanding higher wages, regular schedules, full-time work and dignity on the job.</p>
<h2>Voters want wage hikes</h2>
<p><a href="http://www.pollingreport.com/work.htm">Most Americans support</a> an increase because long-term economic pain has become excruciating for so many. Voters have come to see it and the accompanying income inequality as issues that affect them. </p>
<p>How else to explain why 66% of voters in politically conservative Arkansas, home to Walmart, the country’s largest employer, <a href="http://ballotpedia.org/Arkansas_Minimum_Wage_Initiative,_Issue_5_(2014)">chose to raise</a> the minimum wage? Prior to the midterm elections, the wage was US$6.25 (one dollar below the federal minimum). Now it will rise to US$8.50 by 2017. </p>
<p>Businesses that directly or indirectly depend on low wages increasingly understand that treating employees well means they will treat customers well. <a href="http://www.careerbuilder.com/share/aboutus/pressreleasesdetail.aspx?sd=9%2F25%2F2014&id=pr843&ed=12%2F31%2F2014">About 62% of employers</a>surveyed earlier this year on behalf of CareerBuilder.com believe that the minimum wage should rise. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/66816/original/image-20141210-6051-1hdh1pg.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/66816/original/image-20141210-6051-1hdh1pg.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/66816/original/image-20141210-6051-1hdh1pg.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=450&fit=crop&dpr=1 600w, https://images.theconversation.com/files/66816/original/image-20141210-6051-1hdh1pg.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=450&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/66816/original/image-20141210-6051-1hdh1pg.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=450&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/66816/original/image-20141210-6051-1hdh1pg.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=566&fit=crop&dpr=1 754w, https://images.theconversation.com/files/66816/original/image-20141210-6051-1hdh1pg.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=566&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/66816/original/image-20141210-6051-1hdh1pg.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">Supporters of raising the minimum wage have been holding annual Black Friday rallies at Walmarts across the country.</span>
<span class="attribution"><span class="source">Carla Katz</span>, <span class="license">Author provided</span></span>
</figcaption>
</figure>
<h2>Workers’ woes resonating</h2>
<p>One reason the struggles of low-wage workers are resonating with Americans is that so many newly created jobs pay very little. According to a <a href="http://www.nelp.org/page/-/reports/low-wage-recovery-industry-employment-wages-2014-report.pdf?nocdn=1">study by the National Employment Law Project</a>, 44% of employment growth in the last four years has been in low-wage jobs. Middle-income positions are being steadily replaced by jobs paying less than $10 an hour. Worse, involuntary part-time work has pulled 7 million Americans <a href="http://money.cnn.com/2014/11/20/news/economy/america-part-time-jobs-poverty/">into poverty or near it</a>. </p>
<p>While efforts by President Obama and Democrats in Congress to raise the federal minimum wage to US$10.10 withered in Washington this summer, the midterm elections highlighted the strong bipartisan public support for giving it a much-needed boost.</p>
<p>In an overwhelmingly Republican state, a whopping 69% of voters in Alaska endorsed [increasing theirs](http://ballotpedia.org/Alaska_Minimum_Wage_Increase,<em>Ballot_Measure_3</em>(2014) to US$9.75 by 2016 from US$7.75 today. <a href="http://ballotpedia.org/Nebraska_Minimum_Wage_Increase,_Initiative_425_(2014)">Nebraska followed suit</a> with 59% approving a US$1.75 bump to US$9 by 2016. In South Dakota, <a href="http://ballotpedia.org/South_Dakota_Increased_Minimum_Wage,_Initiated_Measure_18_(2014)">55% voted to raise the minimum wage</a> US$1.25 to US$8.50. </p>
<p>By January, 29 of 50 states (and the District of Columbia) will boast minimum wages higher than the federal rate. Additionally, more than 130 cities have enacted legislation or resolutions to restore a strong wage floor. Voters in Seattle and San Francisco have led the way with $15 hourly minimums. </p>
<p>Many cities have also enacted “living wage laws” that establish a higher minimum wage for employers that receive contracts or subsidies from local government. Workers also are making demands directly of their employers, including a campaign among fast-food and retail workers demanding higher wages, regular schedules, full-time work and dignity on the job. </p>
<h2>Fast food on the front lines</h2>
<p>That fast food and retail workers occupy the front lines of the living wage fight makes sense since the industries employ about two thirds of low-wage workers. The <a href="http://www.nelp.org/page/-/Job_Creation/LowWageRecovery2012.pdf?nocdn=1">top 12 US companies paying workers the least</a> are national restaurant chains such as McDonalds, Starbucks and Taco Bell and retailers like Walmart, Target and Sears. </p>
<p>Walmart, which earned more than US$16 billion last year, cost American taxpayers US$7.8 billion in subsidies and tax breaks, while the <a href="http://www.aflcio.org/Blog/Corporate-Greed/Taxpayers-Subsidize-Walmart-and-America-s-Richest-Family-to-the-Tune-of-7.8-Billion-Annually">majority of their employees</a> earned less than US$25,000 a year. </p>
<h2>Below the poverty line</h2>
<p>The federal minimum wage has risen occasionally since 1938 from 25 cents an hour to its current level of US$7.25, where it has remained since 2009. In the 1960s, the <a href="http://www.epi.org/publication/bp357-federal-minimum-wage-increase/">minimum wage was equal to roughly half</a> the national average but today it is worth only 37%. Minimum wage workers employed full-time <a href="http://poverty.ucdavis.edu/faq/what-are-annual-earnings-full-time-minimum-wage-worker">earn just $15,000 a year</a>, falling under the poverty line for a family of two. </p>
<p>If the 1968 minimum wage had kept pace with inflation, it would be US$10.90 today. A <a href="http://www.cepr.net/documents/publications/min-wage1-2012-03.pdf">2012 study</a> by the Center for Economic and Policy Research noted that if the minimum wage had kept pace with productivity, it would be US$21.72 an hour, and if it had kept pace with the wage growth of the wealthiest 1%, it would be US$29 an hour. </p>
<h2>Moving the economy forward</h2>
<p>Raising the federal minimum wage is not enough to reduce the inequality gap that is causing Americans so much pain. We need more jobs that pay a living wage so a family can afford basic needs such as food, adequate shelter and the ability to deal with emergencies and other necessities of life. </p>
<p>When he introduced the federal minimum wage in 1933, President Franklin D Roosevelt said, “No business which depends for existence on paying less than living wages to its workers has any right to continue in this country. By living wages, I mean more than a bare subsistence level. I mean the wages of a decent living.”</p>
<p>Too many working families are making impossible choices – between paying for food or rent or electricity. A vital US economy that works for all of us needs a thriving middle class. For that to be realized, good jobs – full time with a fair wage that lets families live a comfortable life – must be the norm. The recent ballot box victories and continuing protests across the country prove that Americans understand their collective power to turn the tide. </p>
<hr>
<p><em>Read more stories on the minimum wage <a href="https://theconversation.com/au/topics/minimum-wage">here</a>.</em></p><img src="https://counter.theconversation.com/content/34344/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Carla A. Katz, Esq. is affiliated with the NJ State Bar Association and the American Bar Association and a member of the AAUP/AFT as a Professor at Rutgers University.</span></em></p>A noxious combination of falling wages, income inequality at its highest since the 1920s and a growing low-wage sector has caused the ranks of the working poor to swell to more than 47 million. That’s…Carla A. Katz, Esq., Attorney and Labor Studies Professor, School of Management and Labor Relations , Rutgers UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/340362014-12-04T10:46:02Z2014-12-04T10:46:02ZThe problem with a ‘living wage’<figure><img src="https://images.theconversation.com/files/65139/original/image-20141120-4487-4sbo02.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">How many Big Macs can you buy from one hour's work?</span> <span class="attribution"><span class="source">Image sourced from www.shutterstock.com</span></span></figcaption></figure><p>A recent <a href="https://www.facebook.com/TheOther98/posts/941958165815162">internet meme making the rounds on Facebook</a> compares minimum wages and the prices of Big Macs in the United States and Australia. The minimum wage is more than double in Australia (US$16 per hour versus US$7.25 per hour in the United States), while the price of a Big Mac is about the same in both countries (around US$4.50).</p>
<p>Despite the much higher minimum wage in Australia, unemployment rates in both countries are both around 6% and the Australian unemployment rate remained at this lower level in recent years, while the US suffered from double-digit unemployment at the height of the Great Recession.</p>
<p>If the minimum wage appears to have little impact on the unemployment rate or prices (although other restaurant prices are noticeably higher in Australia, as any tourist will tell you in about 10 minutes upon their arrival in Oz), why are economists generally opposed to mandating a “living wage” to reduce income inequality?</p>
<p>Non-economists might assume that the answer is simple: economists are pro-business. But we’re not. We’re pro-market, not pro-business.</p>
<h2>Pro-Market, Pro-Virtue</h2>
<p>The possibly surprising reason economists tend to oppose a “living wage” is <em>virtue</em>. In particular, if the goal is to reduce inequality, mandating someone else to pay a higher wage is not a particularly virtuous way to do this. </p>
<p>This is because it prevents an employer and potential employees from engaging in mutually beneficial exchange. At least this is how I saw it as a teenager in Canada struggling to find a summer job during a recession. My frustration with the minimum wage policy was one of the reasons I became an economist later in life.</p>
<p>In typical teenage fashion, I indulged in <em>reductio ad absurdum</em> arguments at the time, wondering why proponents of a “living wage” kept such earthly ambitions. If they truly thought such a policy would have few unintended consequences, why didn’t they propose mandating a “heavenly wage” that would allow all of us to drive Porsches through the pearly gates?</p>
<p>My cynicism was mostly incited by the fact that minimum wage and living wage laws cost politicians nothing (except possibly votes from small business owners). I detected a distinct lack of virtue in a costless mandate from government about what wage a high school student could work for. </p>
<p>If progressive politicians really wanted to be more virtuous in helping the poor and reducing income inequality, they should do something that would no doubt be very hard for them. They should listen to Milton Friedman.</p>
<p>Milton Friedman, of course, opposed minimum wages because they hindered the proper functioning of markets. Instead, he argued for a guaranteed minimum income, whereby everyone (man, woman, and child) would receive a lump-sum income payment to cover basic needs (in practice, he argued for implementation of the program in the form a negative income tax). </p>
<p>Because it does not restrict mutually beneficial exchange or create disincentives to work, a guaranteed minimum income is less distortionary than a minimum wage or a welfare program.</p>
<p>Like a welfare program, a guaranteed minimum income is costly, which is its source of virtue, but a hindrance to implementation. Friedman opposed “means testing” to limit who qualifies for the income payment, although a means test is probably the only way to make such a program financially viable.</p>
<p>However, a graduated means test could reduce the disincentives to work compared to a sudden threshold and make the program more affordable. And, in general, any increase in focus on income rather than employment status would be an improvement over most existing welfare programs in term of incentives to work. </p>
<h2>Minimum wages might be okay, but progressive taxes are better</h2>
<p>I’ve mellowed since my teenage years in terms of my views about minimum wages (though not about “living wages”). Having also lived in the United States and Australia, I can now see the problems with a very low minimum wage and some benefits of a higher minimum wage. </p>
<p>For example, in the United States, service workers often receive tips in addition to their minimum wage (tipping is much less common in Australia). But they would clearly be better off receiving their compensation and benefits all in one payment, as they do in Australia.</p>
<p>And minimum wages may simply be much more politically feasible than a guaranteed minimum income, with or without means testing. As a wise friend once told me, we should never let the best be the enemy of the good.</p>
<p>At the same time, I recognize the typical hypocrisy of middle age in my mellowing views. Compared to when I was younger, I can now sometimes afford the higher restaurant prices in Australia. And youth unemployment in Australia is quite high and has been <a href="https://theconversation.com/dont-believe-the-unemployment-rate-heres-whats-happening-31730">increasing relative to the rest of the population in recent years</a>. It is hard to believe this is completely unrelated to a minimum wage that is close to AU$20 per hour in many service industries.</p>
<p>Ultimately, though, I think economists of all political stripes (even Friedrich von Hayek professed to be in favour of a guaranteed minimum income!) have it right that the focus in addressing income inequality should be more on progressive taxes and less on a “living wage.”</p><img src="https://counter.theconversation.com/content/34036/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>James Morley receives funding from the Australian Research Council.</span></em></p>A recent internet meme making the rounds on Facebook compares minimum wages and the prices of Big Macs in the United States and Australia. The minimum wage is more than double in Australia (US$16 per hour…James Morley, Professor of Economics and Associate Dean (Research), UNSW SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/339232014-11-06T19:29:12Z2014-11-06T19:29:12ZThe living wage on its own won’t win the war on poverty<figure><img src="https://images.theconversation.com/files/63883/original/svxwr9bg-1415299777.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Poverty is about more than just the living wage</span> <span class="attribution"><a class="source" href="http://www.shutterstock.com/dl2_lim.mhtml?src=mFfzF0CdBSnPn3lgdDuX-w-1-83&id=177426335&size=huge_jpg&submit_jpg=">Shutterstock</a></span></figcaption></figure><p>The living wage won’t eradicate poverty in the UK. It may seem churlish to make the point as Living Wage Week draws to a close, but it’s a point well worth making. </p>
<p>Don’t get me wrong, the living wage campaign is a just cause and can take pride in its many achievements since London Citizens <a href="http://www.livingwage.org.uk/history">launched it</a> in 2001. Estimates suggest that the campaign <a href="http://www.livingwage.org.uk/news/we-are-recruiting">has generated</a> more than £210m of additional income for some of the lowest-paid workers in the UK. </p>
<p>There are few anti-poverty UK campaigns whose principal partner organisations include blue chip companies like KPMG, Aviva, Linklaters and Nestlé. While a move to make the hourly £7.65 living wage part of all public sector contracts was defeated in the Scottish parliament, a provisions <a href="http://www.bbc.co.uk/news/uk-scotland-scotland-politics-27386503">was added</a> to new legislation which meant firms seeking public contracts would have their willingness and ability to pay the living wage assessed by local authorities in Scotland. </p>
<p>Plans <a href="http://www.theguardian.com/society/2014/nov/05/brent-council-living-wage-first-firms-incentive">are afoot</a> in Brent council in London to incentivise companies to pay a living wage by offering business-rate discounts. And more than 1,000 organisations in the UK are now accredited living wage employers, a list which includes my own employer, Glasgow Caledonian University.</p>
<h2>Minimum wage shame</h2>
<p>So what’s the problem? Well, there are four. First and foremost, it highlights that there is something fundamentally wrong with the national minimum wage in the UK. If it takes a wage of £7.85 per hour to meet the basic cost of living in the UK (£9.15 per hour in London), then it is a national disgrace that the government permits employers to pay their employees, the people who create their wealth, anything less (£1.35 per hour to be exact, or £2.65 less in London). </p>
<p>Platitudes abound from politicians <a href="http://www.bbc.co.uk/news/uk-politics-11728546">about “making work pay”</a>. The reality is that many are more concerned with “making work pay relatively more than welfare” than ensuring an hourly working rate that provides for the basic cost of living. So while we should applaud organisations that increase their employees’ hourly rates to reflect living-wage levels, we must not lose focus on the pressing need to increase the minimum wage.</p>
<p>Second, an hourly rate of pay is only an effective tool for eradicating poverty when enough properly paid hours are available. The scourge of <a href="http://www.ons.gov.uk/ons/publications/re-reference-tables.html?edition=tcm%3A77-327187#tab-Supplementary-tables">zero-hours contracts</a> and <a href="http://www.ons.gov.uk/ons/publications/re-reference-tables.html?edition=tcm%3A77-327187#tab-Hours-worked-tables">the fact that</a> more than one in every four workers in the UK describe themselves as part-time mean that even a living wage is insufficient to ensure that many escape poverty.</p>
<p>A related point is that avoiding poverty depends on household composition. Two workers paid the same living wage will have different poverty outcomes if one wage supports the individual worker alone, while the other supports a partner and children. Although it would be impractical (and illegal) to suggest that employers remunerate workers to reflect household circumstances, it must be acknowledged that even a living wage is insufficient to ensure that all workers and their dependents escape poverty.</p>
<h2>Risks to the poor</h2>
<p>Finally, “making work pay” does nothing to address the quality of life of those who cannot work. Let’s not get distracted into blindly campaigning for decent pay without acknowledging that, inadvertently, this might add grist to the mill of those who are comfortable peddling the notion that there is a deserving poor (who work) and an undeserving poor (who do not). </p>
<p>In a just society, efforts to increase the pay of those who are inadequately rewarded for their labour must be balanced by as much effort to avoid the intensifying poverty being thrust upon those who rely on welfare.</p>
<p>Let me be clear, I firmly believe in the living wage campaign. There <a href="http://www.theguardian.com/commentisfree/2013/nov/23/celtic-fc-refuse-pay-living-wage-disgrace">was a recent case</a> in Scotland where the CEO of a large institution that prides itself on its charitable heritage was rewarded with a financial package amounting to almost £1m for a year’s work, while recommending to his board that the lower-paid staff should not have their income raised to the living wage. </p>
<p>The living wage campaign provides a means to challenge these kinds of inequities – and at the same time challenging the perverse adage that “we pay the rich more to make them work hard, while we pay the poor less to achieve the same end.” But, in the final analysis, if tackling poverty is a war then the living wage is only one of many battles that must be won.</p>
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<p><em>Next, read this: <a href="https://theconversation.com/the-living-wage-may-cut-poverty-but-not-by-very-much-33918">The living wage may cut poverty, but not by very much</a></em></p><img src="https://counter.theconversation.com/content/33923/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>John H McKendrick 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>The living wage won’t eradicate poverty in the UK. It may seem churlish to make the point as Living Wage Week draws to a close, but it’s a point well worth making. Don’t get me wrong, the living wage campaign…John H McKendrick, Senior Lecturer, Glasgow Caledonian UniversityLicensed as Creative Commons – attribution, no derivatives.