Kevin Hollinrake is a member of the Select Committee for Communities and Local Government, and is MP for Thirsk and Malton.
When we talk about poverty in the UK today, we rarely mean the level of malnutrition and squalor of previous centuries. In fact, it may come as a surprise to many that, of the 13 million people who are living in poverty in the UK, over half are in employment. The All Party Parliamentary Group for Poverty, of which I am the Chairman, is looking at ways of increasing the understanding of poverty amongst all parliamentarians, as well as looking for solutions.
Poverty is not all about getting people into work. We must also address the issues of in-work poverty and encourage businesses, where possible, to pay the voluntary Living Wage. I understand how tough things are for businesses, and that some cannot afford to pay their staff more, but I do believe that the time has come for us to consider introducing a policy gradually to bring the National Minimum Wage to the level of the National Living Wage.
I have a business background, and my experience tells me that employers would also benefit. They would have a happier workforce who feel appreciated, and the reduction in tax benefits and tax credits, paid by the Government could deliver a commensurate decrease in corporation tax or national insurance. Of course, it might be necessary to provide dispensation for businesses who employ less than ten people.
So I’m very pleased to see that a new study from Cardiff Business School, in partnership with the Living Wage Foundation (details below), on the employer experience of paying the voluntary Living Wage shows that while paying a living wage is good for employees, it’s also proving to make good business sense too.
There are currently 5.2 million businesses in the UK, employing 236,000 people who earn less than the minimum wage, and there may be more we don’t know about. Most of these employees, and a lot more who earn the minimum wage but still can’t make ends meet, could be lifted out of poverty if they were paid the voluntary Living Wage rates of £8.45 per hour across the UK or £9.75 in London.
The Living Wage Foundation’s hourly rates are set independently and updated annually. They are calculated according to the cost of living in London and the UK. Employers that choose to sign up to this voluntary scheme – which is like a Fairtrade mark for responsible pay – ensure that all their directly employed staff and on site contractors earn the Living Wage rates. The scheme is aimed at employers that can afford it, and while for some paying the voluntary Living Wage may be a challenge, this study suggests that the benefits of paying decent wages make it a good business proposition.
The Cardiff Business School research team surveyed over 800 accredited Living Wage employers ranging from SMEs to FTSE 100 companies. They found that 93 per cent of employers felt that they had gained as a business after accrediting as a Living Wage employer, with 86 per cent reporting that it had enhanced their reputation.
Interestingly, the study found that a main driver for accrediting as a Living Wage employer was the desire to act responsibly, and that accreditation was not a disruptive or challenging event to the majority. It also found that employers benefitted from enhanced brands, differentiation from competitors and improved corporate reputation. Indeed, after accrediting as a Living Wage employer 76 per cent of large organisations reported improved staff retention and 61 per cent a boost in staff motivation. The study also found no evidence of employers recovering the increased costs by cutting other employment provisions, and there was little to suggest the Living Wage had a negative impact on investment, employment or prices.
So with more than 3,000 already accredited Living Wage employers, there seems to be no reason to run scared of the Living Wage and every reason to grasp the nettle. This investment in staff could enable people to progress in their job, be properly trained and, crucially, get paid enough to help them avoid poverty. Nearly one in four workers in the UK earns less than the real Living Wage, many of them working as sales assistants or cashiers (880,000). However, the study found that three quarters of accredited retailers saw improved staff motivation and retention following paying the Living Wage.
Being able to make ends meet can clearly help support family life, in the same way that poverty can destroy it. Government can do a lot to address issues around poverty, but it cannot do it alone. Poverty comes about for a multitude of reasons, and therefore must be dealt with in a multi-dimensional way. The Government is looking at housing, education and nutrition, and the part these factors play in consolidating household poverty, but we must examine why so many hardworking people have no chance of escaping poverty or making ends meet; and why so many children of hardworking parents can’t see the relationship between a hard day’s work and a fair day’s pay.
Since the financial crisis wages have not risen in line with inflation and many are working in jobs which are low-paid or do not give them the hours that they need. We cannot simply assume, therefore, that reducing unemployment will, in itself, reduce poverty. Last year. the Institute for Fiscal Studies found that two-thirds of children growing up in poverty lived in a household with at least one parent working. It’s also true that, in some areas, while unemployment has dropped, benefit claims have risen as in-work benefits fill the wage gap.
This makes it crucial for us find a way to balance the objectives of economic growth and commercial success, with providing sustainable employment and a reward for hard work. The Cardiff Business School study seems clear that in many cases where employers go further than paying the statutory minimum and opt to pay the Living Wage-calculated to reflect what people really need to live on, there are benefits all round. Poverty remains one of the most troubling issues facing our society, and paying the Living Wage will help us tackle poverty while boosting business and bringing a wellbeing bonus to all.