7 May 2014 | Shaun McCarthy
The living wage debate has again been prominent recently. I was very impressed with Big Issue founder John Bird’s commentary on “social business”. It is a sensible, balanced and jargon- free piece containing pragmatic advice for businesses wishing to be socially responsible. Central to his advice is payment of a living wage to all employees.
As if reading his thoughts, energy giant SSE in April announced they will go further and extend living wage requirements to their supply chain. A cynic would say the ‘big six’ energy suppliers are very good at following each other on pricing, so maybe they will follow suit on wages in their supply chains? Don’t hold your breath.
This is a complex issue, even if we confine our thinking to the UK alone. According to the Living Wage Foundation the UK living wage is £7.65 per hour, in London this increases to £8.80. Other cities and regions, such as Bristol, Oxford etc, set their own.
First, we can consider the business case. Intuitively I believe improvements in motivation, reduced staff turnover and absenteeism will give rise to improved productivity. But there is very little reliable evidence of this. I plan to use my sponsorship of a doctorate to help make this case but this would be a small contribution. More research is needed.
Then there is an issue of disparity. It is not really possible to pay different wages to staff in the same business working for different clients so businesses supplying companies such as SSE need to apply living wages across the board. Will they be prepared to do this or will they walk away from the business? Facilities served by multiple businesses such as airports, railway stations and shopping malls face the problem that some businesses with this policy will pay more than others doing the same job, giving rise to industrial relations issues.
We also need to consider compliance and risk. Can the policy be effectively policed? If not, SSE will become a target for NGOs and politicians wishing to indulge in a bit of energy company-bashing.
There is also a political dimension. If this issue is so important why does the government not legislate to increase the minimum wage? Or should government butt out of the debate altogether, scrap the minimum wage and leave it to market forces? Germany is legislating for a minimum wage for the first time and it could be argued they have done perfectly well without it.
I believe responsible businesses and public bodies should pay a living wage to their staff and should insist on this standard for their supply chains because it is the right thing to do. They will also benefit in the longer term from a better-motivated workforce. But there are many issues to be overcome and well-coordinated action across sectors may be more effective than unilateral action by a single business.
☛ Shaun McCarthy is director of Action Sustainability