When the minimum becomes the basic there is a problem. Last week’s report ‘Work that Pays’ from the Living Wage Commission sets out the shocking extent to which British workers have become trapped in low pay.

Adopting the report’s recommendations, which include a roadmap to get 1,000,000 more workers onto the living wage, would transform the debate about how we achieve the high-skill high-wage economy to which Labour aspires. It would also save an estimated £4.2bn for the Treasury.

The minimum wage was never going to solve the low pay problem, providing as it did a baseline that enabled Labour to introduce tax credits that made work pay for the most marginal workers. Over the years and with the recession, what was intended as a minimum has become regarded as a basic pay rate. Now the gap widening between the minimum wage and the living wage of £8.80 an hour in London and £7.45 an hour elsewhere is increasing – up from 18.4 per cent in 2011 to 21.2 in 2013.

Ed Miliband has proposed to increase the minimum wage to a percentage of average earnings, likely to be about 60 per cent, the figure used by the Labour government as the measure of poverty. It is an important step forward but to aim only to escape serious poverty is realistic rather than aspirational.

‘Work that Pays’ sets out a more challenging, albeit voluntary, approach. It highlights the continuing regional imbalances in the British economy, with almost a third of workers in Northern Ireland paid below the living wage, and a fifth in the north, Wales and the East Midlands. It also points up the at risk sectors: 70 per cent of retail staff are paid below the living wage, 39 per cent social care staff, and 85 per cent of people working in the hospitality sector. These form a new and growing underclass in a changing economy.

The measures that the Living Wage Commission set out are modest and include proposals that:

• The United Kingdom government should set a goal to get at least one million more employees onto the living wage by 2020
• All directly employed public sector employees should be paid the living wage
• All publicly listed companies should publish the number of people paid below a living wage

As well as benefiting the workforce, the shift to the living wage would also benefit the Treasury, with an extra £4.2bn in increased tax revenues, and benefits savings. Treasury shadow minister Chris Leslie MP has suggested that some of this could be recycled to incentivise employers to shift their pay policies.

One of the big employers signed up to the living wage is Nationwide Building Society, which aims to ensure that its contractors and supply chain also implement the policy. Research Nationwide carried out showed that:

• 85 per cent of people polled thought that companies that could afford it should pay their staff at least the living wage
• 74 per cent thought that companies should be required to reveal how many of their employees are paid below the living wage.
• 72 per cent thought that the living wage should eventually replace the minimum wage.
• 54 per cent of people said that they would be more likely to use the services of a company that paid all its staff the living wage

A cost-of-living survey in Northampton North, showed strong public support for companies to pay a living wage, reflecting both the pressures on people contending with wages that have reduced in real terms, and the assumption that people who work should be able to earn enough to support their families.

There is a big opportunity here for Labour to lead the public consensus.

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Sally Keeble is a former minister and former member of the Treasury select committee. She is Labour’s parliamentary candidate for Northampton North

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Photo: Kyle RW