Achieving a Living Wage for UK workers: voluntary vs public policy responses

Calum Carson - PhD candidate, Centre for Employment Relations, Innovation and Change (CERIC), Leeds University Business School

One of the most important reputational advantages that accreditation can have is the public signalling to ethically-minded customers that firms are “putting their money where their mouth is” when it comes to corporate social responsibility. As Ellie Gore discussed recently on this site, the current surge of employers making high-profile public commitments to being LGBT+ friendly (known as “pink capitalism”), without necessarily making more substantive changes to their working practices, raises important questions as to whom exactly benefits from such actions. A similar debate has long surrounded the notion of “greenwashing”, with employers looking to publicly establish their environmental credentials and benefit from the positive perception of such actions without necessarily committing to substantial reductions in their environmental impact.

When it comes to the Living Wage Foundation, however, a publicly accountable commitment to extensive internal change is at the core of what it asks of employers. The two Living Wage rates, which currently stand at £9 per hour across the UK and £10.55 in London (reflecting the higher cost of living in the capital), are independently calculated by the Resolution Foundation, and updated annually using a basket of goods that reflect the current cost of living. Employers are informed of the following year’s rates in “Living Wage Week” in November, to prepare for the forthcoming financial year in April, but have no means of negotiating lower rates, or delaying implementation in any way. Accreditation guidelines also ensure that an employer cannot simply outsource and replace permanent employees with sub-contracted staff to reduce the number of workers paid the Living Wage, another example of the Foundation strengthening voluntary regulation to compensate for gaps in existing national labour regulation.

In essence, employers are making a public commitment to voluntarily transfer control of their own pay scales to an external body, which they have no independent oversight over, to ensure that all of their workers are paid a decent standard of living and are not suffering from the effects of in-work poverty. This is a bold and transparent step for firms to take to bolster their corporate social responsibility strategies, and can signal very clearly to ethically conscious consumers how a particular organisation treats its workforce. Previous research has demonstrated the reputational benefits that businesses can accrue from making such a commitment.

Nevertheless, despite the campaign’s success in establishing itself on a national scale, accreditation still remains an entirely voluntary standard. As Remi Edwards discussed in a recent article on this site, pressure from civil society campaigns can precipitate public commitments to pay a living wage from individual employers, but in order to effectively tackle in-work poverty rates in the UK on a more comprehensive scale, a public policy response is required.

Since 2001 Citizens UK and the Living Wage Foundation have amassed an extensive amount of cross-party political support across Britain. Both the Scottish Parliament and the Welsh Assembly are accredited, as are a considerable number of councils across the UK, including Manchester, Cardiff, Glasgow, and Edinburgh. Each successive Mayor of London has also been a strong advocate for the campaign, from Ken Livingstone to Boris Johnson through to Sadiq Khan, encouraging its adoption by London-based employers and establishing City Hall as a Living Wage Employer in its own right. The logical end game for the campaign, then, is to successfully convert this political support into public policy action, delivering higher wages and a decent standard of living for all low-paid workers in Britain.

While both the Scottish and Welsh governments have implemented some legislative initiatives promoting the living wage, particularly concerning the important role that procurement policy can play in embedding higher wages within supply chains, it is at Westminster that legislation must be implemented to turn the independently calculated Living Wage rates into the new legal minimum(s).  With the establishment of Boris Johnson as the new Prime Minister of Great Britain and Northern Ireland, the Living Wage campaign may now benefit from his support (as he was enthusiastic about the campaign whilst Mayor of London).

It remains to be seen, however, how far his support will stretch. In his first week in office Johnson accepted the premise that at the very least all cleaners in Whitehall should be paid the Living Wage, but it is still too early to say how (or even if) such public pledges will extend into public policy, at both the Whitehall level and on a UK-wide scale.

As it is with individual employers, then, it is through real and tangible action that the new prime minister’s support for the Living Wage will be tested, rather than accepting public statements at their word. In the absence of such action, the debate over whether the state or the market has ultimate responsibility for ensuring workers can afford a decent standard of living in Britain will continue to rage.