Implementing the Living Wage in local authorities

This week is Living Wage Week in the UK and, as part of this, we have just published our fourth Working Paper looking at the challenges and obstacles local authorities have faced – and overcome – in implementing the Living Wage.

The UK Living Wage is £7.65 and, at the time of writing, a number of local authorities in the North East (and hopefully beyond) are considering how they can implement the Living Wage. At present, none of the 12 local authorities in the region pay all of their staff over the UK Living Wage. During discussions with a number of local authorities, they have expressed concern over what the Living Wage might mean for pay structures, or for commissioning and procurement arrangements. These discussions suggested that a Working Paper exploring how other local authorities had appraoched these issues might be of benefit to local authorities who have yet to implement the Living Wage.

The Working Paper can be accessed by clicking on the image below, and below this are two related presentations that I have given recently looking at the wider role of employers in tackling poverty in the UK.

Working Paper 4 – Implementing the Living Wage in Local Authorities

Presentation delivered to South Tyneside Living Wage Commission (June 2013)

Presentation delivered to Business in the Community Peer Learning Network (October 2013)

If you would like any more info on our work with employers in the North East and the role they can play in tackling poverty, please feel free to get in touch with us.

Kind regards,

Steve

s.j.crossley@durham.ac.uk

Valuing the person over the function

Why Paying a Living Wage Makes Business Sense

Guest post by David Van der Velde, Managing Director of Web Development Company, Consult and Design International.

Consult and Design recently joined hundreds of other employers in pledging to pay a living wage to all our staff, see www.livingwage.org.uk/employers. In this blog post, I will clarify why this is a positive move for our business, for our staff, for our clients and for society at large. I will explain why I am advising businesses to join us and other living wage employers such as PWC, Amnesty, NCVO and KPMG as well as my thoughts on what the living wage (or an increase in the minimum wage) means for how we think about our staff and where government should be targeting public policy.

So what are our reasons for becoming a Living Wage employer?

Consult and Design is a knowledge-based business, investing heavily in the skills of our workforce. We know the value of bringing good people into the business, giving them the proper financial support and training in order that they can contribute to the success of the business, not just by doing their job adequately but also by staying committed to the on-going success of the business. When staff are treated well they put their whole self into the job. By treating our staff well, we attract talented and creative people who are constantly finding new ways to improve what we do and the way do it.

Staff who feel valued and respected are more likely to go the extra mile to provide a good service to our clients and make sure that the work they produce is of the highest quality.

The alternative to looking after our staff in this way would be increased staff turnover (with associated recruitment and training costs), more sick leave, reduced productivity for us and a lower quality of work for our clients. This really isn’t an alternative. (See 1. “The Business Case for the Living Wage”)

What about unskilled workers?

All this is easy enough to say for a highly skilled, knowledge based business, but there is an argument that a higher minimum wage or ‘Living Wage’ will force some businesses to shed unskilled jobs in order to accommodate the increase in costs, or alternatively pass higher costs on to their customers.

Will consumer prices rise?

In terms of higher costs to the consumer, if paying the living wage was accepted as the norm, then without any government intervention the tendency would be for this to increase the costs of production and therefore the price paid by the customer. Studies have found however (2), that much if not all of this loss can be offset by reductions in staff turnover and the associated recruitment and training costs. As stated above, the improved staff loyalty that results from paying a living wage results in greater productivity (again offsetting costs) and better quality of work (meaning better quality for the customer.) With this in mind cost increases are likely to be marginal and customers will see a rise in the quality of the goods/services they purchase, resulting in better overall value.

Will unemployment increase?

Before the minimum wage was introduced in the UK in April 1999, it was opposed by business lobbies and some on the political right, with David Cameron quoted in the Stafford Chronicle, 21 February 1996 saying  ‘Labour’s plans for minimum wages, would send unemployment straight back up.’ This has not been borne out by data (3) – empirical work on the impact of the introduction of the minimum wage suggests that ‘while it may have had an adverse effect on employment in particular sectors, the overall effect on employment has been broadly neutral.’

How should businesses change the way they work to meet the living wage standard?

In short, if businesses are given enough time to plan for the change then smart businesses will recognise the need to change the way that jobs are organised so that the value their staff contribute can make paying the living wage viable.

In some sectors, for smaller businesses and in certain contexts it may be necessary for public policy to offer financial support and incentives to counteract any increased burden on employers, which could stifle enterprise and growth.

This is less of a problem for the knowledge based businesses, where investment in staff is the norm and retention of trained staff a priority. For businesses employing a large proportion of unskilled, minimum wage staff the culture change needs to be a bit more radical.

Moving from a ‘function-centric’ to a ‘person-centric’ employment model

We need to move away from the ‘function-centric’ model where a business owner asks a question like –  “what’s the cheapest way I can keep the floor clean?” to a “person-centric” model where the question is framed as “how can I get the best value out of employing Mary?”

Once the question is framed in this way the business becomes more interested in the employee as a whole person, with all the potential they bring. This increases the likelihood of the organisation wanting to invest in Mary’s training and future productivity.

The social impact of low pay

The final argument for paying a living wage lies in the impact this has on the communities in which we live, work and do business.

At Consult and Design we work with a lot of voluntary sector organisations some of whom support disadvantaged children, families and communities. The Joseph Rowntree Foundation’s report (4) on ‘The Role of the low pay, no pay cycle in recurrent poverty’ shows that low pay and the associated job insecurity has a significant detrimental impact on health, child poverty and debt in communities.

So should government act and how?

These days, everyone would agree that it makes sense for governments to intervene to prevent business from polluting the environment because of the negative impact on communities and the cost to the public sector of cleaning up. In the same way it makes sense for public policy to take account of the effect in communities of low pay and the cost of dealing with the resultant social problems further down the line.

By increasing the statutory minimum wage to a living wage level, the public sector will make long term savings, which far outweigh the potential costs incurred by businesses.

That said, at Consult and Design our experience of recruiting staff has meant investing heavily in their skills, putting in time to train staff and pay their wages while they learn. We have benefitted from subsidies to recruit young people, which have offset some of these costs and enabled us to create permanent well-paid jobs for the young people we recruit.

If we can recognise the benefit to the public purse of creating well paid jobs and training staff, then there ought to be a mechanism for supporting and rewarding this activity.

I would like to see a system where small to medium enterprises (SME’s) could employ new staff at a lower rate whilst they are in training, with the difference in pay being made up by the government. The success of businesses in creating permanent posts from these subsidised contracts should be recorded to prevent abuse of the system, to reward the business that are successful employers and to inform minimum wage job seekers about those firms where they have the best opportunities to progress.

1.             The Business Case for the Living Wage

https://www.google.co.uk/url?sa=t&rct=j&q=&esrc=s&source=web&cd=4&ved=0CFEQFjAD&url=http%3A%2F%2Fwww.unisoneastern.org.uk%2Fassets%2Fdownload%2F841&ei=j8tSUqyqBKrK0QWn8oGoAQ&usg=AFQjCNGrCQQvU4x3xcY1ZpAXyM89jiN0OA&sig2=ubgrrMY33oLA55A30-1lQg

2.         Employers’ Role in the Low Pay, No Pay Cycle

http://www.jrf.org.uk/publications/employers-role-low-pay-no-pay

3.         “The Employment Effects of the National Minimum Wage”,

Economic Journal, 114, C110-116.  Stewart, Mark B. (2004b)

4.         ‘The Role of the low pay, no pay cycle in recurrent poverty’

http://www.jrf.org.uk/publications/understanding-recurrent-poverty

David Van der Velde, Managing Director of Web Development Company, Consult and Design International.

www.consultanddesign.com

North East Racial Equality Conference 2013

Colleagues at Durham University are organising a major conference on the theme of ‘Racial Equality, Diversity and Public Policy in the North East Region’ which will take place on Wednesday 13 November at Ustinov College in Durham.

There are very few places remaining for the event but you can still book, if you are quick, using the form here and you can view some of the workshops here

If you would like any more details please contact Caroldevanney@hotmail.com or gary.craig@durham.ac.uk

More information on the conference can be found on the conference blog here

Kind regards,

Steve

How should policymakers respond to economic leakage from the North East?

Guest post by Luke Hildyard of the High Pay Centre

Most North Easterners will be familiar with the flawed narrative of dependency. The region is supposedly too reliant on public sector jobs. The North East receives more in public spending than it contributes in taxes. London and the South East are the motor of the UK economy, supporting poorer regions.

Research by organisations such as ipprNorth has done a great deal to challenge this crude characterisation. It is not just the amount of public spending in a region that counts, but the quality – the North East loses out in terms of the kind of transport and infrastructure spend that generates economic growth. The region does not have an especially high number public jobs. They just form a higher proportion of the total because of lower levels of private sector employment.

Nonetheless, the stereotype endures to some extent. Certainly there is a consensus about the need to ‘rebalance’ the UK economy – meaning stronger private sector growth in regions like the North East, reducing redistribution via public spending from South to North.

What this debate too readily overlooks is the transfer of wealth in the opposite direction via big corporations operating in the North East but based outside the region. Most private spending in the key sectors that account for most North East household income is eaten up by major companies – supermarkets, energy companies and mobile phone networks. Major clothing retailers, chain pubs and restaurants, betting shops, payday lenders. What jobs these companies provide are generally low-paid with limited opportunities for career progression. They do not create extensive supply chains within the region.

If a substantial proportion of whatever household’s earn is instantly transferred out of the North East, the task of growing the regional economy becomes that much harder. The High Pay Centre will publish a report this week with the intention of starting a debate about corporate economic dominance in the North East. The launch event takes place at Newcastle University on Friday October 25 at 12pm and readers of this blog are very welcome to attend.

Luke Hildyard

Head of Research

High Pay Centre

www.highpaycentre.org

Between destitution and a hard place

North East Racial Equality Conference 2013

‘The promotion and protection of human rights is at the heart of UK foreign policy. We are determined to pursue every opportunity to promote human rights and political and economic freedom around the world’ [Foreign Secretary William Hague, UK Foreign and Commonwealth Office, 2012]

‘The UK Government treat me as not-human. They don’t give me anywhere to live, they stop support, deny access to work. Show me where is the human rights in the UK?’ [Research participant ‘Osman’, who has lived in destitution following the asylum process for over 6 years]

It is all too easy for authorities to sweep under the carpet of society those who do not fit into the bureaucratic boxes of citizenship and society: people who are displaced, people who seek sanctuary from torture and persecution, people who find themselves in a country not of their birth or culture because they paid someone to help them…

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Ethnic minority workers and low paid jobs: Hiding in plain sight?

I did a post for another blog on the latest JRF research report launched today – looking at low pay, ethnic minorities and informal workplace cultures. The blog relates to a major conference on ‘Racial equality, diversity & public policy in the North East’, to be held in November 2013. More information on the conference – and the rest of the blog – can be found by clicking on the link above.
Best wishes,
Steve

North East Racial Equality Conference 2013

The Joseph Rowntree Foundation today published research looking at ‘in-work poverty, ethnicity and workplace cultures’ (Helen Barnard has also written a blog accompanying the report). In contrast to a lot of the stuff you can read about ‘cultures’ in relation to the prevalence and persistence of poverty, the report focuses on ‘informal workplace practices’ that serve to exclude some low paid workers from progressing in work or accessing opportunities to move out of low paid jobs.

Most people familiar with current poverty work in the UK will be aware that low pay and temporary insecure employment are major factors. Even where, in the language of the current government, people ‘do the right thing’ and take a full time job, the wages on offer often does not provide an income sufficient to lift the family or household out of poverty. The report notes that ‘several ethnic groups are known to have a…

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“The human balance sheet”

Over the last couple of days, three incredibly powerful blogs or reports relating to issues of welfare reform have caught my eye. This short post is intended to highlight and promote them to readers of this blog. All 3 deal with the impact on people of the welfare reforms we are currently experiencing.

In chronological order, we’ll start with Alison Stenning’s blog on the impact of the ‘bedroom tax’. Alison’s short post on the impact of the bedroom tax on relationships ends “It’s a terrible policy, one with a potentially enormous human cost. Relationships matter and we need to take care of them.”

Alison’s post inspired Tom Slater to write ano-holds barred longer blog post drawing on the work of Marc Fried and others that highlights the extensive literature on the effects of ‘displacement’. Bringing to mind the statement that ‘we’re all in it together’, Tom notes that

Once we come to understand – and communicate more effectively – that an involuntary change change of home, like bereavement, can be a devastating disruption of the meaning of life for the person or family affected, only the coldest and cruellest policy elites and government ministers would not reflect on how they might feel if the positions were reversed

Finally, this morning saw the publication of a report called ‘Real life reform’ by the Northern Housing Consortium. This project is tracking the lives of 100 households until 2015, looking at the impact of welfare reform on them as families and individuals. The first page of the report includes the quote below from a respondent:

The pure worry of what’s going to happen has caused me anxiety. I’ve been to see the doctor… I’d rather go hungry than be cold/dark. It feels like that’s where we’re heading… I feel lost

These contributions all reminded me of a powerful section I read a while ago by Professor Mike Miller in the Introduction to ‘The Philosophy of Welfare’, a collection of selected writings by Richard Titmuss. Miller writes

Reducing expenditure on a programme not only collapses its scope but also transforms its character, leading to increased pressure to bar people from gaining access to needed aid or ending rapidly such aid. Inhumanity becomes a social policy because it keeps the costs down …

Challenging reductions in programmes or advocating restorations of some cuts require more than the examination of budgets. The effects of reduced expenditures on daily functioning is the crucial issue. A social programme is what it does daily and how it does it. The political atmosphere of the 1980s is poisoning the character of programmes and eroding their contributions; the Titmuss perspective leads us to examine the delicate processes which shape the on-going experience of those who need services and benefits. The financial balance sheet has to be compared with the human balance sheet of distress, despair, isolation and stigma.

Reading the three articles I have mentioned, it is hard to not to consider and reflect on the ‘human balance sheet’ of many of the welfare reforms. Please read them if you can.

Steve

Arbitrary lines, short-term approaches and small statistical gains

Last week, the latest figures for ‘troubled families’ whose lives have been ‘turned round’ were released. The figures, showing that 14,000 families had been ‘turned round’ were accompanied by a press release, a written statement to parliament and various interviews where the achievements of the Troubled Families Programme were lauded. Eric Pickles suggested that progress had been ‘phenomenal’ and Louise Casey said

we are finally getting to grips with problems which may have persisted for generations, giving hope to people who have often been failed in the past and relief for the communities that suffered the effects of their behaviour.

The figures, the criteria for the payment-by-results framework and the hyperbolic language prompted me to revisit a couple of statements in the government’s child poverty strategy. Firstly, on p39 of the strategy it is stated that

It has been estimated that there are around 120,000 families in England with multiple problems. Turning round the lives of these families is a core element of our strategy. (original emphasis)

Secondly – and separately from this statement – the strategy criticises the previous government’s income based approach to tackling poverty thus:

… a fixation on moving families above an arbitrary line risks distorting public spending towards short-term approaches, which provide a small statistical gain, whilst failing to provide the life-transforming support that disadvantaged families need (p20)

So we can glean from these two statements that ‘turning round’ the lives of the ‘troubled families’ is central to tackling child poverty and that this government is not going to focus on ‘short-term approaches’ which might produce some nice statistics but fail to deliver long-term change.

However, none of the outcomes required under the Troubled Families Programme Financial Framework relate to tackling poverty directly. Local authorities can claim the central government funding if relevant crime/ASB/ educational attendance outcomes OR ‘continuous employment’ is found. We know that employment doesn’t always offer an income which lifts people out of poverty and it is unlikely that large numbers of adults in ‘troubled families’ will find secure, well paid employment in the current economic climate. In fact, nationally less than 5% of the families who had been ‘turned round’ found ‘continuous employment’.

The outcomes are measured over a 6 month period, after which, if either of them are achieved, the family will have been classed as ‘turned round’, central government will pay either £700 or £800 to the local authority and no further incentive to continue to work with these families. Why should it, if their lives have been ‘turned round’? In fact, if their lives take a turn for the worse, there will still be no incentive as the TFP will only pay out one per family – to achieve maximum value for money.

We know that people’s lives are complex and many more people move in and out of poverty than stay in poverty for a long time. Therefore the behaviourist focus and the relatively short-term approach (6 months) perhaps isn’t sufficiently deep enough or long enough to make claims about ‘turning lives around’. It may even ‘risk distorting public spending towards short-term approaches’. One could even call the outcomes required ‘abitrary lines’.

Many people will remember that Nick Clegg once criticised the previous government for a ‘poverty plus a pound’ approach and he stated that it ‘is simply not an ambitious enough goal’. We might deduce from the above that, if these families lives have been ‘turned round’ then tackling the poverty which is likely to affect many of them is simply not even a goal anymore.

***I am due to start a PhD in October looking at the implementation of the Troubled Families Programme. If any of you are interested, I have blogged about the TFP a couple of time recently on a blog set up for my PhD, including a longer post on the figures released last week.

Just to be clear, the views on my own blog are mine and not those of the North East Child Poverty Commission.***

Best wishes,

Steve

New Working Paper – Child Poverty & Public Health

“The foundations for virtually every aspect of human development – physical, intellectual and emotional – are laid in early childhood”

Professor Michael Marmot

“Poverty is the greatest preventable threat to health, and tackling it is fundamental to addressing health inequalities and boosting life chances”

Professors Donald Hirsch & Nick Spencer

 In July 2013, a joint letter was sent by to the Lead Members for Children’s Services and Chairs of Health and Wellbeing Boards, calling for local authorities to do everything they can to improve children’s health. The letter included a request to sign up to a ‘Better health outcomes for children and young people’ pledge.

We have today published a new Working Paper – DUBS_ILG_NECPC Working Paper 3 – from the North East Child Poverty Commission, based at the Institute for Local Governance, in Durham University Business School. The paper highlights the links between child poverty and health, provides background information on the situation in the North East and identifies ways in which local authorities can help to tackle poverty and mitigate its effects. There is much that local authorities can do to improve children’s health. Policies relating to education, employment, housing and welfare support can – and should – all have a positive impact on children’s health. However, in a report exploring the ‘prevalence, characteristics and distribution’ of child poverty in the North East, Professor Jonathan Bradshaw noted that “Most local authorities in the NE have worse child health than you would expect given their child poverty” (p2, 2009) and “on health, it is striking how many areas in the NE are doing much worse than would be expected given their material well-being rankings” (p29). The paper draws on research that argues that attempts to tackle health inequalities and improve the health of disadvantaged communities ‘needs to move beyond ‘bad behaviours” (Katikreddi et al 2013)

As well as the information and resources provided in the Working Paper and the Appendix to the joint letter, further resources and information relating to public health can be found on the FUSE website  (FUSE is the Centre for Translational Research in Public Health in the North East) and the Wolfson Research Institute for Health & Wellbeing, based at Durham University. The Wolfson Research Institute has a specific Research Theme of Tomorrow’s Healthy Adults which ‘focuses on children and young adults, specifically targeting issues that will determine their long-term health and wellbeing’.

If you have any questions about the Working Paper, please do not hesitate to contact me.

Best wishes,

Steve

A responsible approach?

Today sees the publication of a National Audit Office report into Universal Credit. Many of the morning’s newspapers are carrying this story and, earlier this week, the Telegraph featured an interview with Howard Shiplee, the Director-General for Universal Credit in which he acknowledged there had been a number of ‘missteps’ alog the way. This contrasts with earlier public statements by the likes of Iain Duncan Smith and David Cameron who have previously failed to acknowledge any difficulties. The Prime Minister, in November last year, apparently told Parliament that ‘Universal Credit is on time and on budget’.

There is already lots of media coverage around this issue so I’ll try not to repeat much of it, but a couple of lines in an article in The Guardian yesterday caught my attention. Here they are:

The DWP said it was misleading to characterise money already spent as having gone to waste. “No one has said we’re starting again … we’re looking at enhancing not replacing [systems],” it said.

It said it did not recognise the £350m figure being lost in savings due to the slower roll out of the programme.

A DWP spokesperson later added: “The early roll-out of Universal Credit is allowing us to develop the new benefit in a safe and controlled way. This is the responsible approach.

I thought this was really interesting because the current government have always been very quick to dismiss the child poverty approach of the previous government as a waste of money. Look at the following quotes from the foreword,(written by Iain Duncan Smith) to the government’s Child Poverty Strategy:

Good intentions failed to translate into effective policies.

By transferring cash to make good on short-term relative income effects they entrenched benefit dependency, delivering both poor outcomes for society and a poor return for the taxpayer

Limited social returns were delivered despite significant income transfers

With a focus on fairness and personal responsibility, not cash handouts, this is the responsible choice in this fiscal climate.

we believe that the aims of the Child Poverty Act – to dramatically reduce levels of child poverty in the UK – will not be achieved through simply throwing money at the perceived symptoms. This approach has been exhausted, not only failing to turn the tide on income poverty, but worse still, exacerbating the problem by suppressing incentives to work and keeping families in cycles of entrenched deprivation.

It is now more important than ever to secure optimum returns on investment spending.

Just to put things into a bit of context, the last government missed their own target of cutting child poverty by half by 2010-11. However, during their term of office they still managed to reduce the number of children living in poverty by around 1 million, which, as a taxpayer, I would like to suggest was not a ‘poor return’ and nor do I believe that the last government ‘simply threw money’ at the problem. The current government, on the other hand, are likely to preside over an increase in the numbers of children living in poverty to 2015-16, the term of this parliament, of around 300,000, and it is predicted that the ‘direct impact of the current government’s announced reforms to personal tax and benefit policy will be to increase relative poverty among children by 200,000’

The point I’m trying to emphasise is that, when it suits them, this government (perhaps all politicians) are more than happy to characterise something that was making (slower than expected) progress as an ‘exhausted’ approach that failed and actually made things worse. But, when the shoe is on the other foot and something stands accused of not making planned progress, it is characterised as developing in a ‘safe and controlled way’ and the ‘responsible approach’ is to stick with it. In fact, the Press Release of the report by the NAO contains a section which, whilst focusing on Universal Credit, could easily be taken to represent the current approach to tackling poverty

The Department took risks to try to meet the short timescale and used a new project management approach which it had never before used on a programme of this size and complexity. It was unable to explain how it originally decided on its ambitious plans or evaluated their feasibility.

But then, belief, not evidence, is what it’s all about……

Best wishes,

Steve