Category Archives: North East

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

Paper 4

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

STLW

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

BITC

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

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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


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

Guest post by Luke Hildyard of the High Pay Centre

HPC

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


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


New Working Paper – Using the evidence base on poverty

Today sees the publication of a new Working Paper from the North East Child Poverty Commission. The paper looks at the use, misuse and occasional ignorance of evidence in child poverty policy, drawing on over a century of social scientific research around this issue in the UK.

Poverty is an issue that has been examined for over 100 years in the U.K. and as Professor David Gordon has argued, ‘not a single study has ever found any large group of people/households with any behaviours that could be ascribed to a culture or genetics of poverty’ (2011). Despite this available evidence, the current government strategy for tackling poverty focuses primarily on changing individual or familial behaviours.

Some local authorities adhere closely to this narrative, despite a suggested focus on ‘evidence-based policy’ which should rule out many of the activities being proposed. For example, the North East Child Poverty Commission report ‘Local authorities, local duties & local action’ found that some local authorities identified ‘low aspirations’ and ‘cultures of worklessness’ as major barriers to people escaping poverty despite recent, accessible evidence from researchers in the North East which suggested alternative forms of action might be more beneficial.

The paper draws a dstinction between social scientific and empirical evidence and evidence produced by organisations with close links to politicians, which fly in the face of facts. It is, perhaps, perticularly timely given the recent publication of a report on education by an ‘independent’ think-tank which yesterday drew criticism from Helen Barnard of the Joseph Rowntree Foundation who argued that

‘Sensationalist stories of parents who cannot be bothered to toilet train children make for good headlines; they have little to do with the reality of closing the attainment gap.’

Kind regards,

Steve


“How and why did we let it become acceptable for a full time job not to pay enough to live on?”

In the New Statesman earlier this week (reported on here, here and here, but no direct link available to the article at time of writing), Guy Opperman, the Conservative MP for Hexham in Northumberland, called for employers to pay their employees a Living Wage. This is significant in that he is the first Conservative MP to proactively call for employers to do this. David Cameron has previously called the Living Wage ‘an idea whose time has come’ and Boris Johnson is a big supporter, but it is not a subject that Conservative MPs regularly promote and only one Conservative council has become Living Wage employers, to the best of my knowledge.

We have also heard in recent weeks that the Conservatives may be attempting to position themselves as the ‘party of the low paid’ in the North. One could choose to see Guy Opperman’s announcement in this light, but we shouldn’t forget that he has ‘form’ in this area already. He was also the first Conservative MP to speak out against regional pay. At the time he said there was ‘no economic argument’ for regional pay and highlighted the importance of public sector pay in supporting and hopefully stimulating the region’s economy

“I am very concerned that regional pay would lead to a reduction in the pay packets of some public sector workers in the North East. I do not believe reducing public sector pay will help stimulate private economic growth.”

All of this is, therefore, very interesting for the North East. We have one of only two Conservative MPs in the North East arguing for a Living Wage, in a region with no Conservative controlled councils – but also a region with no public sector employers paying all of their staff the UK Living Wage of £7.45 per hour. So, as someone remarked to me on Wednesday, you could argue there is definitely room for a bit of competition for the votes of low paid workers in the North East.

Of course, if this is part of a Conservative plan to become the party of the low-paid, there are lots of other issues that Mr Opperman’s colleagues could address as well as pay. We know that low paid jobs are very often part-time and/or temporary and the recent attention on zero hours contracts highlights the insecurity of much low paid work that is one offer at present. Becoming a Living Wage employer doesn’t make a great deal of difference to employees if they’re only working a couple of hours a week – or none at all.

For now though, we should be grateful that MPs in the region are talking about this issue (Middlesbrough MP Andy Macdonald recently announced his desire to see Middlesbrough becoming a Living Wage town and, to be fair to him, we didn’t give that the coverage it perhaps deserved) and it is particularly heartening that a Conservative MP in the North East is offering the glimpse of a political consensus on improving the pay of our lowest paid workers.

You can – and should – follow Guy Opperman on Twitter – @guyoppermanmp


Tackling child poverty locally – whose responsibility?

Today sees the publication of our first ‘Working Paper’ which looks at whose responsibility it is to tackle child poverty locally.

Local authorities and their partners are central to efforts to tackle poverty, and have been for many years. In the preface to South Riding, written in 1935, Winifred Holtby remarked that local government was ‘in essence the first line of defence thrown up by the community against our common enemies’ and identified poverty as the first of these enemies. In the 1990s, researchers noted that a growing number of local authorities were actively engaged in anti-poverty work with local citizens, many as part of a formal corporate strategic commitment to this’ (Alcock et al. 1999). More recently, the local duties in the Child Poverty Act (2010) have required all local authorities to co-operate with partners to reduce child poverty and to prepare a Child Poverty Needs Assessment and a Child Poverty Strategy for its area and the government at the time argued that ending child poverty was ‘everybody’s business’ . The Coalition government emphasis on localism and decentralisation led to non–statutory guidance being issued in support of the local duties and this allowed local authorities to develop child poverty work in different ways and with different approaches.

The paper draws on evidence from reviews of current child poverty work and from work in the 1980s and 1990s which explored ‘anti-poverty’ work taking place in local autorities. The working paper can be accessed by clicking the link below.

NECPC Working Paper 1

If anyone would like any more information regarding the Working Paper, please do not hesitate to contact me.

There will be more to come….

Best wishes,

Steve


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