Thursday November 08 2012

Pay: Living wage farce

Minimum pay should be determined by workers’ commissions, argues Michael Copestake

Five million workers earn less than a minimum standard of living

There has been a brief flurry of media and political commentary sparked by the release of a report by accounting firm KPMG, which revealed that five million UK workers were earning less than the nominal ‘living wage’. This is a figure calculated by the Centre for Research in Social Policy at Loughborough University,1 which currently stands at £7.45 per hour for the UK outside of London and £8.45 per hour in the capital - raised incidentally by a generous 10p for Greater London Authority workers by London mayor Boris Johnson. These sums are said to be the minimum hourly wage required in order to live in some degree of comfort.

But where do they come from? The CRSP, which is funded by the Rowntree foundation, derives them from surveys of the general public on what they think are the necessary costs of living and working, plus a “socially acceptable minimum level of comfort” for those at the bottom of the labour force. This nominal figure is campaigned for by the Living Wage Foundation, which seeks to get employers to pay their workers the calculated living wage rather than the lower national minimum wage.

Labour leader Ed Miliband quickly got in on the act by declaring that a future Labour government would “name and shame” employers who were not paying the living wage - excluding small and medium-sized enterprises, that is. In addition he praised Labour councils who were already committed to paying their workers the living wage - though the latest Labour local authority to proclaim its adherence to the policy, Sheffield council, will be doing so only for those workers who have not been sacked as part of the wider austerity programme. But those lucky enough to remain in a job will get the increased rate.

So far though, only 45,000 workers since 2005 have benefited from an increase in line with the CRSP living wage - yet there are five million workers on the official minimum wage, which is now widely recognised as being insufficient for a “socially acceptable minimum level of comfort”. Here conscious social determination meets market determination and it is clear which one is still winning.

Even though the living wage only affects a limited number of public sector workers and those employed by larger companies that typically have very few minimum-wage staff to begin with, and even though none of the political parties is for anything other than the voluntary adoption of the living wage, it has nonetheless been enough to provoke the usual suspects - the Confederation of British Industry, Federation of Small Businesses (FSB) and so on - into explaining why it must absolutely not be made compulsory, and why the whole thing is a bad idea anyway.

Ruth Porter, director of the rightwing, ‘free market’ think tank, the Institute of Economic Affairs, said it was all well and good big business coughing up for “more motivated and less transient” staff, but what about those poor small businesses who just cannot afford it? Speaking on behalf of said small business people, the chair of the FSB, having said out of one side of his mouth that it was a lovely idea in theory, added that the costs for small business in the current climate - what, with rent and energy, not to mention the owners’ own cost of living increasing - meant that many small business could not afford to pay the living wage. The niceties end abruptly with his simple final claim that “The market would determine what was affordable.”2

Even the CBI is continuing to advise its members to hold back on recruitment and pay until further signs of economic improvement are visible, keeping people on shorter hours and lower pay in exchange for remaining in some kind of employment at all.

So Labour is able to adopt a moral pose, the right gets to agree with the good intentions, whilst shooting down the idea anyhow, and the media gets something to say. Everyone’s a winner, and at no additional expense to the exchequer.

For communists this is simply a farce. No employer will voluntarily agree to redistribute their profits in favour of their employees, while it would be most unlikely for the capitalist state to insist they do so in this period of austerity. Perhaps the brief publicity given to the idea of the living wage is connected in part with the economic crisis. On the one hand, it could be viewed as part of an economic stimulus package. On the other hand, the think tank that goes by the bizarre name of International Security Forum has calculated that paying the living wage would increase state revenues and decrease the benefits bill. But it is highly doubtful whether there will be government action to push through higher pay.

However, some have said that if the living wage were to be calculated regionally, and this was accompanied by the breaking up of national pay bargaining in the public sector, then perhaps the idea would be more palatable. Sounds more like a way of cutting pay to me. Who knows how low any so-called ‘living wage’ could sink using such methods.

The living wage itself, as expressed by the CRSP, Rowntree and so on, is also problematic. For a start it is not that much higher than the minimum wage, which is clearly utterly insufficient, despite the fact that since its inception it has increased above inflation and relative to general rates of pay. A testament perhaps to the very low level at which it began. It also would take the low-paid worker over a number of tax and allowance thresholds, so that much of the extra earned income would disappear.

Finally it would do nothing to address broader questions. Those in work who have not been forced onto part-time working are often subjected to long, crushing hours. At the same time the numbers of those partly or fully unemployed continues to grow. In order to gain the maximum benefit from any supposed ‘living wage’ one would have to work maximum hours in the midst of mass unemployment.

The labour movement ought to be campaigning for a substantial reduction in working hours without loss of pay, alongside the setting of a national minimum wage, to be determined by workers’ commissions; and unemployment benefit set at the level of that minimum wage or training at union rates of pay and under union supervision.

Notes

1. www.bbc.co.uk/news/business-20204594.

2. www.bbc.co.uk/news/business-20104177.

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