Monday, 4 October 2010

Ed Miliband and the Living Wage


Ed Miliband impressed the Labour Party conference expressing the optimism of a “new generation” in the Labour movement. The real trick was to offer enough substance to avoid giving the impression of naivety or empty rhetoric. Standing from outside the labour movement and looking in I have to admit thought that he was the most exciting of the five who were standing for leadership of the Labour Party. Of course he has a long way to go and the critics will start finding their voice soon enough.

His party leader’s speech on Wednesday made passing reference to his campaign for adoption of a Living Wage. The Living Wage is higher than the minimum wage and is the minimum pay required to allow someone to live and participate in society.

The Institute of Fiscal Studies has conducted research that shows that companies paying below the "Living Wage" cost the taxpayer between £5.9bn and £6.3bn a year. This happens because people on very low wages also need to claim benefits make ends meet. Essentially this becomes a government subsidy to low paying employers.

Two business leaders (Graeme Leach and David Frost) have misinterpreted (unintentionally or otherwise) what Ed Miliband has proposed. He is however not proposing a massive hike in the minimum wage but supports offering tax incentives for companies that adopt the living wage. Companies would be encouraged to adopt the Living Wage over time.

Miliband has also urged that local authorities to implement the Living Wage through direct employment and clauses in procurement contracts.

Eventually public pressure might be the most significant factor in the adoption of a Living Wage. As the concept of the Living Wage becomes better appreciated, businesses (or indeed charitable organisations) that pay less than the living wage are likely to be perceived as exploiting some of the most vulnerable in our society.