I am always impressed by the NGOs and philanthropists – often business people – who work with governments to address the most intractable problems of the world. They go all out to end world hunger, eradicate infectious diseases and minimise childhood mortality.
I am equally frustrated that we have lost momentum in business, and government in Britain, in working together to eradicate low pay in our society. Pay is meant to reward people for a job done well. Currently this is not happening. Pay isn’t working.
Can anyone dispute the benefits of raising pay for the 5 million people who do not earn a living wage? Does anyone believe Britain’s economic future lies in a low-pay economy? Who wants their colleagues, friends, or family to struggle with one, two or three low-paid jobs that still do not allow them to make ends meet?
Parts of the media castigate ‘welfare scroungers’ but neglect to mention that most welfare payments are in-work benefits. Isn’t the real issue that pay does not work? That pay doesn’t reward hard work in any sense?
So why can we not come together to solve the crisis?
I am focusing on low pay in isolation, that’s what Ed Miliband and Rachel Reeves asked me to review. Rachel’s wonderfully comprehensive speech at Bloomberg this week gave a full account of Labour’s plans to make work pay, thereby controlling social security spending. The blight of insecurity and low hours is just as critical as low hourly rates. Increased pay must go hand in glove with action rather than talk on skills.
Why can we not crack low pay? During my review, many business people were encouraging, and last September 20 business leaders publicly supported an increase in the minimum wage in an open letter to the Guardian. Hundreds of businesses have signed up to the living wage, currently £7.85 an hour or £9.15 an hour in London, along with many Labour local authorities.
At the same time, I have heard many arguments against an increase in low pay, which do not hold water. Here are some of them:
‘It will hit jobs.’
It will not. The evidence is clear that a well-managed increase in low pay does not reduce jobs – we know this from the UK and internationally.
‘Differentials will be squeezed so that people are less likely to move through the ranks.’ But people struggling to survive are hardly likely to invest in the skills they need to progress.
‘It will harm our global competitiveness’.
It will not. Most low-paid jobs are in non-traded sectors such as: catering, retail, facilities.
‘It isn’t broken so don’t fix it’.
The Low Pay Commission has done sterling work to tackle extreme low pay. My report recommended that we preserve the independent partnership based model of the Low Pay Commission while building on its success and giving it the tools to do more. The facts speak to a need to evolve to address the new, broader crisis.
‘The government shouldn’t interfere’.
It seems to me that this is exactly where governments should interfere: to grow our economy, to improve the nation’s finances and to improve the lives of the most disadvantaged
‘The time isn’t right. The recovery is fragile. Business can’t afford it’.
But if not now, then when? We need to seize the moment to help the economy, public finances and the low paid.
‘A large part of the increase in pay flows into the exchequer by way of lower benefit payments and higher taxes –so what’s the point?’.
But do we really want vast numbers of people’s pay subsidised by the government and people deprived of the right to earn their own living.
The solutions in my report are simple:
A five-year stretch target to increase the minimum wage.
A beefed-up Low Pay Commission, which could lead the change and work with sectors to enable them to move more quickly and would pressure government to act.
The government using every arrow in its quiver to encourage the living wage.
New powers to enable HMRC better to enforce the rules and help all the 200,000 people who should be paid the minimum but are deprived of it.
Let’s make pay work
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Alan Buckle is the former deputy chair of KPMG International and author of the report Low Pay: The Nation’s Challenge.
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