I got a phone call from Rachel Reeves last September asking if I would do some work to encourage the living wage. It took me about a second to agree.
I had seen the living wage campaign in action. I had seen in my business the difference it could make – helping people who were struggling to survive while holding down one, two or three low-paid jobs. And I never had a doubt about the business case for paying people properly – people who were more motivated, more loyal and just a better place to work.
If you go from micro to macro, the case for change is just as compelling. 300,000 people are not even paid the legal national minimum wage. Five million people earn less than a living wage. The situation is particularly tough on women who make up the majority of those on low pay.
If the facts are depressing, the opportunity is exciting.
There is a triple win:
- I have spoken about the business case for higher pay and believe that combined with a long-term attack on low skills we can build a more vibrant and competitive economy.
- Of course there is a huge win for those five million people and those who depend on them.
- And finally, the majority of benefits are paid to those in work so if we get the minimum wage up, we can save taxpayers billions.
Many have told me we should not mess with the minimum wage – it works. We should remember that the last increase in the national minimum wage was just 12p per hour. The next one will not be much more. And in recent years it has not kept pace with prices.
We should be proud of what the minimum wage has achieved, but it was designed in the 1990s to tackle the problem of extreme low pay – today the challenge is the millions earning just above the minimum but still not enough to get by. The minimum wage should evolve to tackle this new challenge as part of an industrial strategy to create a high skill, high value economy.
First, we can get the national minimum wage up significantly. Employers need time to plan, to adapt, and to increase productivity. So instead of a single sudden increase – we should set a five-year national target, with a shared will on the part of employers, employees and government to get us there, based on increasing the minimum wage to a higher proportion of median earnings.
The target must be stretching and motivating so that it achieves its goal of eliminating low pay and requires imagination to get there. I know from my business life that if you set a short-term safe goal, you get incremental change, but if you want transformational change, you need a stretching long-term goal – and you need to stick to it.
To do this we need to be ambitious in our approach. We need to address issues in particular sectors as they arise. In sectors such as social care and hospitality for example – we have known for several years there were huge problems. We have known that certain sectors hold the minimum wage back and also know some sectors that can clearly afford more. We should not just know about these issues – we should act on them.
To achieve this we need to give the Low Pay Commission much more authority to tackle the problem of low pay. They should be broad based, long-term advisers to government, able to set up task forces to tackle sectoral issues, challenging for change. The Low Pay Commission produce excellent analysis and commentary but it simply is not used by government.
We need to balance the risk to jobs in the face of shocks. So if the Low Pay Commission feels at any time the national five-year target cannot be met, they should let the government know – but they must provide compelling evidence of significant job losses.
Let’s once and for all do something about the huge number of people still not paid the minimum wage. It is unbelievable that 300,000 people can be cheated of their money and somehow it is okay. We need new powers:
- New powers to Her Majesty’s Revenue and Customs – to stamp out unpaid holiday pay;
- New powers to local authorities to carry out their own investigations and share information with HMRC;
- New powers for the Low Pay Commission to monitor enforcement and recommend changes to government
Finally, the living wage – it is a great campaign led by amazing people. We will continue to need them. And they deserve our help.
- There is a role for government – for a start, all central government departments becoming living wage employers, requiring their sub-contractors to pay a living wage
- There is a role for investors who have the right to know why their companies do not pay the living wage and what it would cost to do so. This will focus the mind of senior executives.
- And there is a role for local government – Ed Miliband has suggested a subsidy to employers who become accredited for the living wage. I agree with this and believe it should be extended to support living wage zones, where local authorities, businesses and others come together to promote the living wage in their area.
These are my proposals. A triple win: for five million people and their families, for business and for taxpayers.
There will be opposition.
In 1990s when the minimum wage was introduced there were scare stories of mass unemployment –these were unfounded and held us back. And both employers and unions put their fears on one side and worked together.
We need the same courage today.
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Alan Buckle is the author of an independent report on the subject of low pay
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Photo: Magnus Halsnes