Living wage campaigners cannot put down their placards yet
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Version 0 of 1. It was the sincerest form of flattery for the band of trades unionists, church leaders and grassroots campaigners who have spent the best part of 15 years holding chilly protest marches and gate-crashing corporate foyers: on Wednesday the living wage movement heard George Osborne swipe their slogan. At the centrepiece of the chancellor’s “budget for working people” – but saved until the last possible moment for dramatic purposes – was his eye-catching promise to introduce a “national living wage”, for over-25s, starting at £7.20 an hour, and rising to about £9 an hour by 2020. The independent Office for Budget Responsibility estimates that by 2020, up to 6 million people may have their wages raised as a result. That will include 750,000 who would otherwise be on the minimum wage; a further 2 million whose wages would lie between the minimum and the new, higher floor; and a further 3.25m people who are better paid but still likely to feel the effects ripple upwards through the labour market. From the fringe preoccupation of an unruly crowd of activists, calling themselves London Citizens, the idea of a “living wage” that allows workers to meet their basic needs instead of doubling-up on jobs and turning to payday lenders to get by, has shifted to the heart of public debate. Rhys Moore, chairman of the Living Wage Foundation, described the decision as a “massive victory for Citizens UK”. However, he was also quick to point out that while the chancellor is using living wage language, the budget announcement was about something rather different. “This is effectively a higher ‘national minimum wage’ and not a living wage”. Labour market expert John Philpott agreed: “Essentially, it’s just a hefty increase in the minimum wage; calling it a living wage is a misnomer for political purposes.” The London living wage, based on the cost of living in the capital, is already £9.15 an hour – roughly the level Osborne expects his new minimum to reach in five years’ time. Rather than totting up the cost of living, the independent Low Pay Commission, which has set the national minimum wage, will now be asked to plot a course to bring the new rate up to 60% of median wages, boosting what economists call the “bite” of the minimum wage. Treasury insiders said the decision to apply it only to the over-25s was because of concerns about potential job losses. George Bain, the first chair of the commission when the minimum wage was introduced in 1999 by Labour, recommended a policy shift along these lines in a recent report with the Resolution Foundation thinktank, which the chancellor cited in his speech. Bain said the commission had been very successful in tackling the worst abuses of low pay; he cites one example from his early days at the commission, a job advert for a security guard that specified “£1 an hour, bring your own dog”. But his report was an attempt to give the commission a more meaningful role in tackling the stubborn problem of low pay — he welcomed the chancellor’s argument that rather than subsidise poverty wages through the tax credit system, the state should expect firms to do more: “I’m certainly in favour of shifting the burden onto employers.” Some employers appeared to agree: the Institute for Directors responded positively to Osborne’s argument that “Britain deserves a pay rise” – a phrase stolen straight from the mouth of the TUC general secretary, Frances O’Grady. Accepting that firms have been handed a cut in corporation tax as a quid pro quo, Simon Walker, director of the IoD, said, “We should not understate the boldness of this move, and many businesses will have been taken by surprise, but the IoD accepts that after several years of slow wage rises, now is the time for companies to increase pay.” The chancellor also hopes that by forcing firms to pay a little more, he may encourage them to try and invest more in each worker, helping to tackle the stubborn productivity problem that has helped put the brakes on Britain’s economic recovery. The idea that a full-time job should pay enough to provide a decent living transcends left and right. Ed Miliband may have lost the general election in May, but his clunky notion of “predistribution” was a stab at the idea that instead of the state topping up wages through tax credits, we would be better off as a society if we could create a higher-wage economy. As Osborne put it in his budget speech: “It can’t be right that we go on asking taxpayers to subsidise, through the tax credit system, the businesses who pay the lowest wages.” It also plays into Conservative ideals of self-reliance and aspiration. Boris Johnson – who is expected to be Osborne’s main challenger for the Conservative leadership when it becomes vacant later in the parliament – has long supported the London living wage; Iain Duncan-Smith punched the air with glee on Osborne’s announcement. Yet as experts were quick to point out on Wednesday, a significant rise in the minimum wage will not be nearly enough to offset planned deep cuts in benefits and tax credits for many families. Gavin Kelly, of the Resolution Foundation, pointed out that while the living wage is already expected to rise to perhaps £10 by 2020, it would have to increase more rapidly to take into account the fact that low-earners will receive less state support to pay their rent and meet their bills. “A higher wage floor is a good thing, but it doesn’t mean you don’t need tax credits,” he said. Resolution calculates that without tax credits, the London living wage would have to rise to £12.65 to allow low wage-earners to make ends meet. Ben Richards, researcher at the Social Market Foundation, calculated that even once the national living wage is taken into account, a single-earner family with two children, where the breadwinner is on the minimum wage, will be more than £1,200 a year worse off next year due to the budget changes. Living wage campaigners would be wrong to down their placards just yet. |