Living wage – cost or opportunity? - Supply Management

Living wage – cost or opportunity?

9 September 2013
I was interested to read last week’s Resolution Foundation report into the UK’s living wage debate. Despite news indicating the country may at long last be recovering from recession, this report, Low Pay Britain 2013, showed 4.8 million Britons (20 per cent of all employees) earn below the living wage – a leap from 3.4 million (14 per cent) in 2009 – at the height of the recession. The living wage was calculated at £7.20 outside London and £8.30 in the capital for the period covered by the report – April 2012 - the most recent full figures available. Since then the living wage has risen to £7.45 an hour outside London and £8.55 in the capital. This compares with the national minimum wage of £6.31. So, we have more people living on low wages and unemployment is not falling significantly. I was also inspired by the work of the Cardinal Hulme Centre. This is a charity that enables people to gain the skills they need to overcome poverty and homelessness. The Centre helps homeless young people, families in need and local people to realise their full potential. The team provides in-depth, holistic support to around 75 people a year to help them into sustained employment. The support is tailored to an individual’s specific need. This centre is not in the mean streets or in a deprived area, it is in ‘posh’ Westminster where the streets are supposed to be paved with gold. This is not always the case, but the gap between rich and poor is very large:
  • At first glance Westminster seems wealthy; it is the third most prosperous borough in the UK in terms of average residents income
  • But this masks pockets of severe deprivation in the north and south; 14 per cent of Westminster’s neighbourhoods are amongst the 10 per cent most deprived in the country by income. 50 per cent of people classified as “deprived” live in just five wards.
  • The unemployment rate in Westminster is higher than the national average, and local unemployment is concentrated in four wards.  There was a 66 per cent increase in the number of Westminster residents claiming unemployment benefit from 2008 to 2010.
What has all this got to do with procurement? The question is should we be asking our suppliers to pay a living wage? The immediate and obvious reaction is “no”, because it will put the price up. In a recent case a client of mine did just that, simply because it was the right thing to do. The contractor in question was not happy as this was part of a negotiation related to excessive overheads and other on-costs associated with the service, so they were asked to absorb the extra costs as an alternative to being shown the door. Something that started off as a competitive negotiation became a win/win as it soon emerged paying people a decent wage to do a fairly menial task resulted in less absenteeism, lower staff turnover, fewer inductions for new staff, reduced costs for new uniforms for new staff, less supervision, etc. The list goes on. Eventually the contractor was happy the contract was at least as profitable as before, much more enjoyable and less hassle. I believe a smart buyer can build a case for a living wage if they don’t allow suppliers to perpetrate the myth that the cost will go up. It takes a leap of faith but it can be done. I have often spoken about the myth of sustainability costing a premium and next year I plan to put my money where my mouth is, so to speak. I plan to sponsor some doctorial research using funds from my social enterprise Action Sustainability Community Interest Company to start to explore some of these myths, and hopefully lay some of them to rest. ☛ Shaun McCarthy is director of Action Sustainability 
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