A mandatory living wage – the debate we need to have

If we don’t raise wages, control rents or reverse welfare cuts, we are going to completely price low paid workers out of London.

Jenny Jones AM is leader of the Green Party on the London Assembly and Green Party Mayoral candidate for 2012

London’s cost of living crisis is affecting more and more people; high rents and childcare costs, low wages and welfare cuts are pricing people out of the city. The voluntary living wage campaign may have won wide support, but now more than ever there is a strong case for going much further. So it’s time to talk of solutions. We must open the debate on making the living wage mandatory, thus replacing the national minimum wage.

Living wage campaigners have generally shied away from advocating a mandatory living wage. By promoting the living wage as a voluntary measure, they have won wide support from politicians, business groups and civil society. The Mayor of London has vocally supported the campaign, and thinks it should stay voluntary.

Counterproductive?

Shaun Rafferty from the Joseph Rowntree Foundation wrote on his blog that a mandatory living wage would be “self-defeating” because “in the current operating environment there are many employers who genuinely couldn’t afford to pay their staff the Living Wage”. He warned that talk of a mandatory living wage “would almost certainly kill the many thoughtful and progressive discussions going on about low pay… in the board rooms of many employers”.

That would be a shame, but I don’t think we should wait for board rooms to set the agenda. Sometimes politicians have to be brave and just do the right thing, particularly for people at the bottom of the pay scale.

I have published a report setting out arguments in favour of a mandatory living wage.

The thought that really set me off down this road was the Mayor of London’s target. He wants to see 250 private companies sign up as living wage employers by 2016. But there are estimated to be over 190,000 companies in London (not counting the self-employed). Even if you just take companies with more than fifty employees, there are over six thousand. The Mayor’s target will be a huge help to those workers affected, but could still leave hundreds of thousands of people on poverty wages.

Company board rooms might think this is the worst time to be introducing a mandatory living wage. The economy is in the doldrums and unemployment is already high.

Cost of living spiraling

But there is another side to this economic slump, and that is the cost of living crisis facing hundreds of thousands of ordinary people. A family renting privately in a cheaper part of London with children in childcare would face bills of £200 per week more than the national average. If we don’t raise wages, control rents or reverse welfare cuts, we are going to completely price low paid workers out of London.

Raising wages would have downsides, including job losses. But one estimate put the impact at 24,000 jobs in London, smaller than the rise in unemployment in the past few months. It could also net the government billions over the next few years through benefit bill savings and extra tax, which could be channelled into job creation schemes like building affordable housing.

We could start with the larger companies, or phase it in by raising the minimum wage more aggressively in regions like London. Some have suggested tax breaks. Strengthening the hand of trade unions could help them win the living wage for their members.

It’s a complicated debate, but it’s one we need to have if we want life in London to be fair, with a reasonable quality of existence for all. I hope the Mayor takes up my suggestion of looking at it more closely.

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