Can employers afford not to pay a Living Wage?

Two weeks ago, cleaners for government departments left letters on Minister’s desks asking to be paid the London Living Wage. The man who cleans Nick Clegg’s office was involved as was the lady who cleans George Osborne’s office. A Cabinet Office spokesman responded to the press coverage by stating that the government ‘are not convinced employers should be required to pay a higher living wage’

The release of the official HBAI stats recently showed yet another increase in working poverty (Chris Goulden from JRF called it ‘a relentless rise’ whilst the Director of the CSJ admitted they had ‘missed in-work poverty’) and this post will explore the idea that, contrary to being unable to afford to implement a Living Wage policy in the current climate, employers may consider that they can’t afford not to.

All in this together

The Coalition government has made great play of a private sector led recovery from the economic crisis but, for many people, businesses (especially large, multi-national ones) are still part of the problem. Recent concerns over private sector organisations such as G4S, A4E, Barclays (a Living Wage employer it should be noted) and Southern Cross suggest that ‘the market’ is often not best placed to deliver the kind of society many people would like. Polly Toynbee suggested that outsourcing of public services contracts ‘create moral hazard on a grand scale, where profits are private but losses are ours’.

Michael Bloomberg, Mayor of New York, owner of 11 homes and the 20th richest man in the world recently vetoed the Living Wage in New York whilst Lord Griffiths, the Vice Chairman of Goldman Sachs famously suggested that ‘we have to accept that inequality is a way of achieving greater opportunity and prosperity’. So employers potentially have a choice to make. Do they risk aligning themselves with ‘the orthodox market approach: that workers should be paid what the market deems they are worth’, and where ‘the interests of workers are relegated compared to the needs of capital’, or should the wage level ‘be based on what people need to live on and not what business can afford’? (Grover 2005, p13).

Many employers are already demonstrating that paying a Living Wage does not necessarily mean higher costs or reduced profits and can be entirely compatible with an effective business model. Guy Stallard from KPMG, says that paying a Living Wage ‘isn’t just about altruism … a really motivated workforce is in many ways even more important when businesses are facing really challenging times’ and ‘It is possible to behave ethically, and pay the Living Wage, while working to earn a profit.’ UNISON have also produced a summary of responses from Living Wage employers which highlight the ‘business case for the Living Wage’, something we are working on in the North East. Employers report higher retention rates, reduced absenteeism and a more motivated workforce.

A report by GLA Economic in 2009 on the ‘business benefits of implementing a Living Wage policy in London’ concluded that:

Our findings indicate that there is some evidence of significant financial and nonfinancial benefits achieved by those employers that have implemented the London Living Wage. Although some organisations indicated that there were non-trivial implementation costs, the absence of any evidence of substantial negative impacts on business performance on an on-going basis suggests that there is a likely positive net benefit of London Living Wage implementation for a typical firm. (my emphases)

Affordability

IPPR and the Resolution Foundation recently launched a report asking ‘What price a Living Wage?‘ exploring the impact of a living wage on firm level wage bills across 7 industrial sub-sectors. They calculated that the highest average wage bill increase would be in ‘bars & restaurants’ which would see an increase of around 6.2% whilst other sectors such as banking and construction would see an increase of around 0.1 – 0.2%. The report did not take account of any wage ‘spillover’ effects and nor did it analyse how employers might ‘bear the cost’ of implementing a Living Wage.

However, there is no reason why implementing a Living Wage should cost anything. As Hilary Metcalf pointed out at a meeting I attended recently, many other countries seem to do just fine by paying their lowest paid workers a little bit more and their highest paid workers a little bit less. The 28th British Social Attitudes Survey highlighted that a large majority of people (74%) thought that the gaps between those with high incomes and those with low incomes was too large and a smaller majority (55%) thought that ‘ordinary working people do not get their fair share of the nation’s wealth’. However, a minority (34%) felt that government should redistribute income from the better off to those who are less well off, which suggests that employer efforts at ‘pre-distribution’ would be well received by the public.

The London Borough of Islington have stated that they are able to implement the Living Wage without it increasing costs substantially and they have done this ‘by in-sourcing services and trimming the pay of the Chief Executive‘. Newcastle City Council have announced that they will be Living Wage employers and there are many other examples across the country. In Scotland, over 50% of local authorities have committed to paying the Living Wage, so it can be done by the public sector, even in times of austerity.

In the words of Thorstein Veblen “Ideally, and in the popular apprehension, the university is, as it has always been, a corporation for the cultivation and care of the community’s highest aspirations and ideals” and a number of universities, particularly in London, have committed to paying a Living Wage. Labour Students have highlighted the Living Wage as a major campaign for them nationally and a recent motion passed by DSU requires ‘the student’s union to campaign for the (Durham) University to pay all staff a Living Wage’.

Reputational benefits and risks……

The reputational benefits of being a Living Wage employer provide some of the strongest reasons why employers may choose to implement a Living Wage. Being seen as a ‘good’ employer will be important not only to potential employees but also to potential consumers in an era where ‘fairness’ is a concept that many people identify with. Sainsbury’s, generally seen as one of the more ethically minded supermarkets (it’s the world’s largest fairtrade retailer) have recently been targeted by the direct action Pay Up campaign as a result of them not paying their staff a Living Wage.

A note of caution…

Of course, the Living Wage is not a silver bullet for working poverty and I’ll post another blog looking at some of the assumptions and problems with it in the next couple of weeks. You can also pay staff a Living Wage and still be a pretty poor employer as well. However, as a symbolic gesture that you are serious about tackling in-work poverty amongst your workforce, I’d argue that it takes some beating. And it needn’t be ‘bad for business’ either.

Regards,

Steve

If you are an employer who is interested in becoming an accredited Living Wage employer, you can find out more about how to do this by contacting the Living Wage Foundation here

Surviving or Thriving?

Organisations working with children and young people in the North East

Earlier this year, we worked with VONNE to develop a survey aimed at understanding how austerity measures were affecting voluntary organisations delivering services to children and young people in the North East. 39 organisations from 10 out of the 12 local authority areas responded to the survey and whilst the findings of the survey therefore aren’t particularly robust, the responses we received painted a very complex picture of how the cuts to service providers are impacting on large and small charities that work with children and young people every day.Rather than producing a report based on the findings, we discussed the potential with VONNE of doing something a little bit more interactive and, with their support, we are hoping to post a series of blogs over the coming 10 – 12 weeks exploring the situation facing organisations working with children and young people in the North East. These blogs will include some posts relating to the responses from the survey, some case studies of organisations that responded to the survey and some interviews and guest posts with some reasonably influential individuals who work with children and young people in the region. We may even get some young people to contribute their thoughts….

The National Picture

The future for voluntary organisations does not look particularly bright and there is some evidence that children’s services in local authorities and small youth charities are faring particularly badly when budget decisisons are made. The North East is also disadvantaged as research carried out by JRF suggests that “Government spending cuts are hitting poorer northern councils much harder than their richer southern counterparts”, according to the Northern Echo. Meanwhile, IPPR North produced a report last year which questioned, from a North East perspective, whether the ‘Big Society’ could be a ‘fair society’. The report noted that:

“the withdrawal of public funding and a move to greater reliance on philanthropy could doubly disadvantage organisations in some areas, such as the North East”

The North East perspective

VONNE have been carrying out their Surviving not Thriving surveys since 2009. (They also run a very informative and thought provoking blog – one recent post asked ‘Is the sector crying wolf’ in relation to the responses to the Surviving not Thriving surveys). These surveys have attempted to understand how voluntary organisations across the region are coping with changes to their funding and how they are organising for a future that, at best, appears uncertain. The survey has been adapted on a number of occasions to provide a focus on a specific geographical area within the North East and we decided to develop a survey specifically for organisations working with children and young people in the region. Here are some of the headline findings from the organisations who took part:

• 76% worked with ‘children’ and 72% worked with ‘families’
• 20% relied on public sector contracts for over 50% of their funding
• 84% received less than 10% of their income from charitable donations or fundraising

These initial responses suggest, as the IPPR report noted, a move to a greater reliance on philanthropic investment in charities and voluntary sector organisations does not bode well for organisations in the region.

Questions looking at the future brought the following responses:

• 66% thought their funding would decrease
• 79% thought there would be an increased demand for their services
• 50% thought they would engage with additional volunteers
• 35% thought they would have to close some of their services

When asked to decribe the long term future of the organisation, a number of people responded with ‘Bleak’, but there were some bright spots in amongst all the gloom and the picture was far from clear. Many organisations felt that there was still a great deal of uncertainty over how the future may pan out and we hope that the blogs in the coming weeks will provide an opportunity to explore some of the issues in more detail, as well as providing an opportunity for people working with children and young people in the region to take part in the discussion.

The next post in this series will look in more detail at how the cuts have affected organisations, communities and children and young people in the region, drawing on the responses to the survey. It will be published here on Wednesday 1st August.

As always, we’re keen to hear your views.

Best wishes,

Steve

(The photographs were taken as part of the Children North East photography project that took place last year)

Ending child poverty: a child’s right or a parent’s responsibility?

This year the European Union will publish its Recommendation on Child Poverty. This is expected to be based on three ‘pillars’ – access to adequate resources, access to services and opportunities, and children’s participation – and to argue for a strong rights-based approach to eradicating child poverty. In 2011, the current coalition administration published the first government child poverty strategy in the UK. At its heart, lies a commitment to ‘strengthening families, encouraging responsibility, promoting work, guaranteeing fairness and providing support to the most vulnerable’. Tracy Shildrick and I explored these two very different approaches in an article for the current edition of the CPAG Poverty magazine.

The article can be found here

Other articles from the magazine can be found here

 

The audacity of Hope

Stephen Armstrong, the author of Road to Wigan Pier Revisited, gave a talk in Newcastle on Wednesday evening at an event organised by Children North East and the North East Child Poverty Commission. He had retraced Orwell’s steps 75 years on and found that, in many cases, life hadn’t improved for lots of people and, in some instances, had probably got worse.

The stories, whilst brilliantly told were, utlimately, very depressing and there appeared little to be optimistic about. The question and answer session following the talk provided lots of questions, but precious little in the way of answers to the many problems many people face today. And then, an audience member from Argentina spoke about her experience in that country and noted that, in absolute terms, poverty in Argentina looked a lot different (and a lot worse) than poverty in the UK. She used the word hope as well. I asked a question about potential ‘tipping points’, a lady next to me asked Stephen about his sense of collective action and then Sara Bryson from Children NE said that she had hope because she felt that there was lots of work being done in the region about this issue, there was a real sense that something might be happening but mainly, she had hope because she worked with children and young people and many of them still had hope.

Hope’s Diary

In preparation for a conference that was held on child poverty in the North East last year, Children North East, along with Helix Arts and the Live Theatre supported a group of young people to produce a play about the experience of growing up in the region living in poverty. Hope’s Diary was the result of this idea. The 10 minute play was performed at the conference and was recently performed twice for MP’s at a Parliamentary Reception (called Hope in Parliament) hosted by Sharon Hodgson MP. Local coverage of the reception can be found here and is worth a look.

The play ends with the young people recounting what they expect to happen and what they hope will happen to them and their families in the future….

In the future…

I expect little change

I expect nothing

I expect my little sister not to get better

I expect greater stress

I expect to be wiser

I expect for no one to understand

I expect my mum won’t get a job

I don’t know what to expect

I expect to get kicked out

I expect to have a hard life

In the Future.

I hope for a better neighbourhood

I hope to have a nice garden

I hope for more money

I hope for a better house

I hope I don’t have to worry so much

I hope to go to university

I hope to become a history teacher

I hope to feel a sense of pride

I hope to win the lottery

I hope to go on holiday, anywhere

I hope.

Hope’s Diary is currently being developed into an online resource called ‘A Day of Hope’, following a Culture Hack event in the region. Again, it’s worth a look to see how young people can be involved in the discussions about the impact of poverty and in prompting everyone, not just adults, to take the issue seriously.

Has the North East got a ‘begging bowl mentality’?

I attended a fascinating discussion last night, organised by the Webb Memorial Trust at the IPPR North offices, called ‘Reducing poverty in the North East – what can we do about it?’

At the event, somebody from a private sector organisation stated that he thought the North East had a ‘begging bowl mentality’ and this was somewhat supported by another comment that someone thought the ‘North East should be leading, not pleading’. Both of these comments were in the context of a perceived lack of political leadership within the region. It is not the first time that I, or others in the North East, have heard similar remarks. At another recent event, a representative of the private sector suggested that the public sector in the North East had a ‘reputation for whingeing’.

I find this very interesting, mainly because when those outside of the party political system highlight perceived inequalities or disadvantages they presumably do not see themselves as whingeing, begging or pleading. For example, when think-tanks point out regional (or other) inequalities they are presumably seeking to ‘influence policy’ and when, for example, businesses campaign against disadvantageous trading conditions they are, presumably ‘petitioning’ or ‘lobbying’ the government.

So, politicians representing people ‘whinge’, businesses and think tanks representing other interests (including shareholders) ‘petition’.

In a properly constituted system of society……….