The best way for Osborne to cut the benefits bill would be to make the living wage compulsory
Have you ever asked your boss for a raise? If the mayor of London, the prime minister or the chancellor had done so while working in a low paid job in the capital, they’d quickly realise why we need a statutory living wage to achieve their aim of reducing the in-work benefit bill.
The prime minister said in a speech last week that he wanted to move from a ‘low wage, high tax, high welfare society to a high wage, low tax, low welfare’ society, and that he would ‘always make sure that work pays’.
I don’t agree about taxes – and I don’t think I’m alone in feeling proud of paying them, nor in wanting us to pay a slightly greater share of our national wealth towards decent public services.
But I do agree that working full time should earn you enough to pay the bills, and that we shouldn’t subsidise employers so much in the form of in-work benefits and tax credits. I also agree that it would be better for wages to rise than the employers’ subsidies.
I’ve pressed Boris Johnson on the idea of raising wages many times in recent years. I want him to join me in calling for a statutory living wage, which would involve raising the National Minimum Wage from its current level of £6.50 per hour to a living wage of £9.15 in London and £7.85 elsewhere.
According to this study by the IPPR and the Resolution Foundation, if the government made the living wage compulsory the Treasury could stand to gain £1 billion a year.
This should be the first place the chancellor looks at as he tries to cut £12 billion from the benefits budget.
A couple of years ago the mayor admitted to me that there ‘clearly would be a reduction in the in-work benefits that they receive’ if the living wage was compulsory, but insisted it should remain a voluntary campaign.
Two weeks ago he complained that ‘hardly any [billionaires] are taking the trouble to ensure that the companies they lead or invest in are paying their employees the London living wage’, but he had no explanation as to how they could be persuaded.
After his seven years in office, nine out of ten big businesses in London still haven’t signed up to the living wage campaign, and so the in-work benefit bill has risen.
Infuriatingly, both the mayor and prime minister apparently think that the best approach to all of this is to pick the pockets of the poor with benefit cuts, and then expect employers to voluntarily raise wages to make up the difference.
But they are ignoring a huge power imbalance in the economy. With 286,000 unemployed people looking for work in the capital, few workers can afford to lose their job by bargaining for higher wages. People are more able to pinch pennies on their food and energy bills than they are to demand higher wages.
We’ve seen this as the government has cut housing benefits, and rents have continued to rise in London. Far from negotiating lower rents, people have forgone meals or moved further afield.
The low pay sectors like hotel workers, shop assistants and cleaners are almost completely un-unionised.
Countries like Denmark have higher pay without a statutory living wage because four-fifths of people are covered by collective bargaining agreements, but I haven’t heard the mayor or prime minister calling for stronger trade unions!
Since Johnson became mayor in 2008, the number of people earning less than the living wage has risen from 569,000 to 917,000 as of last year. That’s almost one in five working Londoners not earning enough to afford a very basic quality of life.
The voluntary living wage campaign has been an inspiration, and I’m glad the mayor has supported it. But if the government further shreds the social security system with £12 billion of cuts, we cannot leave one million Londoners reliant on this small campaign to earn them a basic quality of life.
Jenny Jones is a member of the London Assembly for the Green Party. Follow her on Twitter
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