The end destination must be a statutory Living Wage

The London Living Wage has raised the issue of poverty pay up the political agenda; it is now time to move to a statutory living wage.

Fiona Twycross AM is the London Assembly Labour group housing spokesperson

Today sees the London Living Wage rise to £8.80 an hour. The campaign to get employers signed up has been successful with over 400 now paying it voluntarily.

However at the current rate of progress, it will take 450 years for all employers to pay their employees enough to live on. The announcement yesterday that tax incentives would be offered to living wage employers is a welcome step in the right direction, but the end destination must be a statutory living wage.

The benefits of the London Living Wage are well established, but there have been fears that introducing a statutory living wage would lead to unemployment. However, a new report out today challenges that assumption.

The report, commissioned by Unison, analyses the economic impact of a nation-wide living wage on jobs and growth. It finds that £3.26 billion extra would be generated for the Treasury and a £3.15 billion boost to the economy. These would support jobs and “…aggregate job gains in excess of 7,000 are the most likely outcome of a statutory living wage.”

Additionally, a survey carried out by Labour members of the London Assembly in their constituencies has found that 94 per cent of people believe that the national minimum wage is not enough to survive on in London.

The London Living Wage has been successful in ensuring that thousands of workers in London receive a fair days pay for a fair days work.

Today’s report shows that introducing a statutory living wage could lead to an increase in jobs rather than a reduction. The recent London Poverty Profile found that more people now earn less than a living wage than in 2007. Should further incentives not work, then the legal minimum wage should be set at the level of the Living Wage.

Arguments were made against the national minimum wage before it was introduced, but those fears proved unfounded – employment increased and it massively helped people struggling on extremely low pay. Today London is increasingly ever more unaffordable for ordinary working people. Someone on the minimum wage who splits their rent still spends 70 per cent of their take home pay on housing, and a further 17 per cent on transport costs.

Across our city 570,000 Londoners are paid less than the living wage, and as politicians it is time we acknowledged that this is simply unacceptable. A statutory living wage would lead to increased tax revenue and a reduced benefits bill. This would save the government money which could be used for infrastructure investment or schemes to help people back into work.

Introducing a statutory living wage could be phased in to help smaller businesses and give people time to prepare. Poverty pay is unacceptable, as is expecting the taxpayer to plug the gap through the benefits system.

As today’s report states, this policy would lead to an economic win-win by boosting demand and economic growth, reducing the extent to which benefits prop up poverty pay, and reducing earnings inequality.

Efforts to encourage employers to pay the London Living Wage has raised the issue of poverty pay up the political agenda; it is now time to move to a statutory living wage.

3 Responses to “The end destination must be a statutory Living Wage”

  1. Mark Moore

    The problem with research like this is that it leaves open the reductio ad absurdum argument of “if a higher minimum wage is better, then why stop at the living wage, why not £10 an hour, or £100?” and it’s an entirely valid question.

    If the researcher can say that paying a living wage would be beneficial relative to the current minimum wage, then it’s their duty to show why paying even more would start to bring in more negatives that would outweigh the positives. I doubt anyone would argue that a £1,000 per hour minimum wage would do anything other than cripple an economy, so the argument is that there is a Laffer-curve like effect and that a wage-of-maximum-benefit exists that is somewhere above the current level.

    If they could finish that off, perhaps I might take the research more seriously. Without it, you just invite ridicule.

  2. robertcp

    I agree that it should be an end destination but it should be gradual.

  3. Mike Stallard

    The people who live and work in London are not victims and they choose to live there. For the successful ones, there is money to be made. You are one of the successful ones.
    The others eventually leave and work elsewhere – like my son who made it big in Singapore.
    And the government? Nowhere to be seen. Do you honestly think that a statute is going to make the employers pay more and more? Here in the fens, the living wage has no effect at all on wages – you see there can be deductions and the Unions are banned.

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