The Living Wage: Supporting living standards, economic prosperity and consumer freedom

The Living Wage Campaign is a laudable campaign that seeks to protect and strengthen employee rights. The LW will be a key factor for economic recovery and crucially helps to re-balance our economic system in favour of the citizen. A decent, living wage has three positive claims: first, it rests on a moral claim that people should not be treated as cheap commodities; second, it rests on a economic claim that it will increase growth through greater consumer spending; and third, it rests on a political claim that will allow citizens to spend their money more ethically.

Living Standards

The Living Wage Campaign was founded on the principle that work should be rewarding, and that it should bring dignity. Consequently, wages should be enough to provide families the essentials of life. [1] The campaign has roots that go back to the late nineteenth century, where one MP wrote: ‘A living wage must be sufficient to maintain the worker in the highest state of industrial efficiency, with decent surroundings and sufficient leisure’. [2] A living wage is important because the minimum wage is not enough for a sufficiently comfortable life in the twenty-first century. This is not about luxury, it is about protecting living standards:

  • The Living Wage has had a colossal effect on reducing in-work poverty. Since 2001, over 45,000 families have been lifted out of working poverty, directly as a result of the LWC.
  • Relatedly, the LW contributes to a reduction in fuel poverty. A living wage would cut the horrifying situation where people have to choose between their radiator and their dinner (especially at a time when fuel bills are going up).
  • The LW is about increasing the health of employees. A higher wage means less stress, and could ensure that the money is spent on better quality food, goods and services (with obvious health benefits).
  • Being paid the minimum wage prevents parents from seeing their children at weekends because they end up with two or three jobs to make ends meet. The LW intends to end such a situation, ensuring hard-working parents’ strain is eased through wage security.
  • Better living standards will have an effect on the economy: a happier, healthier workforce will lead to higher productivity, fewer ‘sick days’ and a greater sense of social cohesion. The modest effect that the LW will have on reducing inequality is vital. [3]

Economic Prosperity

The last three bullet points of the above section have already hinted that the Living Wage plays an important part in prosperity. This is something that goes beyond the individual level, or as the Mayor of London puts it: ‘Paying the London Living Wage is not only morally right, but makes good business sense too’ (quote from LWC Website). Independent studies have shown that 80 percent of employers believed that the LW increased employees’ quality of work, and absenteeism decreased by approximately 25 percent. Two thirds of employers reported a significant impact on recruitment and retention within their organisation. 70 percent of employers felt that the Living Wage had increased consumer awareness of their organisation’s commitment to be an ethical employer. [4]

The benefits for the economy are important for the macro-level too. Higher wages allow for greater consumer spending. Workers’ spending on consumption accounts for roughly half of GDP in advanced economies. Lower wages means less spending, and hence less demand for economic output. Unless this is more than offset by new investment or exports, total output will contract as a result of a wage cut, and employment will fall. [5] Unfortunately, the UK is not export-focused. Combine that with government cuts and decreases to global investment, and we have stagnation in economic output (enter the double-dip recession). A Living Wage could counter some of these negative effects.

Citizenship

Ultimately, giving the employee more economic power can only be a good thing. A massive problem for the low-paid is that their choices, in economic terms, are diluted. They are forced to shop in the cheapest possible places, without any regard to the ethical or moral outcomes. Plenty of people do not buy goods with a Fairtrade mark simply because it is more expensive. Should our moral and ethical choices be limited because we are paid less? No. [6] I am not saying that we should all be paid enough so that we can go to Waitrose, or that everyone should buy free range eggs. But surely there is a problem if shoppers buy unethically because they are paid unethically?

A link between ethical consumption and the LW definitely exists. The LWC is not just about individual changes to eating more healthily, but also about wider societal efforts to create a more ethically-balanced economy. Higher wages means that spending power of the consumer could be directed towards more ethical goods – precisely those Fairtrade, free range and environmentally-friendly products that cost marginally more. Wages affect attitudes to shopping. As one commentator puts it: ‘spenders of the world, unite!’. [7] The LW could enhance exactly this sort of behaviour to create a more ethically-based capitalism.

Fighting For A Living Wage

A living wage has unparalleled benefits for living standards of employees, benefits the economic growth of this country, and can ensure that citizens become more active in their consumer choices. There are other reasons for introducing the LW. One is that it would reduce the need for taxpayers to effectively subsidise employers who pay their staff too little, because state benefits, such as working tax credits, would be reduced.

It is hugely misleading to say that the Living Wage would ‘kill business’. For most businesses – and especially in banking, IT and construction – implementing the LW would represent less than a one percent rise in overall costs; in other industries the costs are a few percentage points higher, but a phase-in could mitigate any harms. [8] Indeed, one way to increase the take-up rate would be to offer tax-cutting incentives to small- and medium-sized businesses for introducing a living wage.

Analysis has also shown that simply reducing income tax rates – touted as one alternative to the LW – is poorly targeted and cuts the British tax base even further, which would perversely increase debt (cut income tax but pay tax credits equals higher debt burden).

For all those reasons, I’m very happy that the Labour Party has announced its unequivocal support for the Living Wage and that Sheffield Labour Students supports this campaign. I’m also proud to support the Living Wage Campaign in Sheffield more generally. And I’m more than happy that Sheffield City Council will introduce a living wage for all its staff.

mg

Notes

[1] D. Hirsch and R. Moore (2011) The Living Wage in the United Kingdom, London: Citizens UK, p.4. Report available here.

[2] Ibid., p.4.

[3] For instance, see R. Wilkinson and K. Pickett (2009) The Spirit Level: Why equality is better for everyone, London: Penguin.

[4] These figures are drawn from the Living Wage Foundation. Click here for more details.

[5] J. Stanford (2008) Economics for Everyone, London: Pluto Press, pp.158-9.

[6] One very interesting example of this in action was Hugh Fearnely-Whittingstall’s Channel 4 three-part documentary, Hugh’s Chicken Run, from a few years ago. Here, local residents learnt about free range chicken, but some residents simply could not afford to eat ethical chicken – even if they wanted to.

[7] D. Jeffery (2012) ‘A Call to Arms: Spenders of the world, unite!’, Canvas 3:6. Article available here.

[8] M. Pennycock (2012) What Price a Living Wage? Understanding the impact of a living wage on firm-level wage bills, London: IPPR. Report available here.

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Tesco, you handsome devil, I have had enough of you

For some time I have been interested in consumption, and particularly the food industry. Following books such as Tescopoly and watching films such as Food, Inc., I have entrenched my view that there is something deeply wrong with our present over-consumption, and more importantly our relationship with supermarkets. This is a topic that has seen increasing prevalence in the media too, from the BBC’s Today Programme to the Guardian in recent times.

Boycotts, door-to-door campaigning, local community groups, co-operatives, spreading the word, keeping online momentum: they are almost all entirely different things, but also amount to a growing resistance against supermarkets. One example is the Tescopoly Alliance. This organisation describes itself as a campaign group that seeks to ‘challenge the negative impacts of Tesco’s behaviour along its supply chains both in the UK and internationally, on small businesses, on communities and the environment’. This online presence is impeccable, and just by scanning the website you can see the plethora of issues that trouble consumers throughout the UK. However, that is not all. Community groups and activism exists across the country. To name a few of them:

  • Campaign Against Another Supermarket in Hadleigh (CAASH) demonstrated that over 150 jobs would go if a new supermarket was built. 56 per cent of the town opposed a new supermarket.
  • Residents Against Thundering Rattling Unbearable Noise (RATRUN) exists to expose the true cost to Harlow’s residents of the Tesco HGV network.
  • People In North Berwick Against Tesco (PINBAT) co-ordinated a raft of objections to East Lothian Council to prevent a new Tesco store.

A Colchester campaign called TESCNO called for the planned city-centre Tesco to be abandoned in 2006 – successfully.

Other campaigns include Hereford Against Supermarkets Squashing our Local Economy (HASSLE), Community Has Rights In School Sites (CHRISS) and Unthank Road. [1] These are but small examples from the backlash against supermarkets. Tesco has been targeted particularly because of the damage it causes through it’s aggressive buying and selling – it has not outstripped the other retailers for no reason.

A national alliance and local activist groups can only logically culminate in a boycott. I have not bought a single item from a Tesco store since 2009. There are eight substantial reasons (in no particular order):

  1. Supermarkets are depressing. Well-being should not be overlooked any longer, and nor should food be a suicidal mission. Local, independent shops have managed to provide a sense of trust with their customers, and developed vibrant networks. The same cannot be said of supermarkets. According to a survey done by The Grocer, 56 per cent of Tesco customers were ‘bored’ by the shop, 53 per cent were ‘stressed’, 52 per cent ‘frustrated’ and 51 per cent ‘overwhelmed’. Over half of Tesco shoppers were unhappy in one of four unpleasant ways. [2]
  2. Loss of diversity. Chain stores, and particularly supermarkets, are killing of independent high streets. Recently, the BBC Today Programme has investigated the vibrancy of local markets, and how supermarkets are the largest contributor to their slow extinction. [3] This must change – we ought to encourage local businesses of all types. I want an end to clone towns.
  3. A chilling monopoly. Tesco and Asda/Wal-Mart combined control 48 per cent of the British grocery market. The Competition Commission has called this a ‘complex monopoly situation’. [4] This is unacceptable. Do I need to mention the fact that Tesco also provides a service from cradle-to-grave, at the expense of local retailers?
  4. Identity theft. In my previous article in which I have reviewed Andrew Simms’ Tescopoly, there is a section on privacy. In effect, Tesco is creating a commercial panopticon, accumulating more data than the East German Stasi.
  5. Supermarkets do not support the local economy. Profits made from a store go to head office, and do not trickle back into the community. A supermarket may create local jobs, but only at a cost of closing down independent businesses (which will also off-set any new jobs created). For example, CAASH (see above) calculated 150 jobs would be lost by a new store.
  6. The high cost to our low prices. We may be able to pick up a bunch of bananas for £1.19, but the the profits do not end up at the producer: just over 12 pence would go to the producing country. [5] Tesco and others abuse food suppliers on a global scale, and our relationship to cheap food must change. We are deferring the costs through time (the future) and space (to the developing world).
  7. Over-consumption. Supermarkets encourage you to spend more money than you necessarily need. Of course they do, they want to profit. The problem is that this causes a tendency for over-consumption, including obesity. However, there is also an environmental impact. If the world consumed as much as Britain does today, then we would need 3.1 times as many Earths. [6]
  8. The environmental impact. We are losing 13 million hectares of natural forest each year due to consumption; and Canadian stocks of cod have been depleted by 99 per cent over the last four decades. [7]  If we bought more local and organic food and shopped by bus, bike and on foot, we could save over £4 billion worth of environmental damages to the British economy. [8]

This may not be an exhaustive list. If anything, it is very short and obviously people can try to take issue with some (all) of them. But I have had enough of Tesco, of clone towns, and of supermarkets. Evidently I can’t live without them – supermarkets have made that impossible – on a realistic level. However, where I can, I will shop local.

[1] Andrew Simms, Tescopoly, pp.258-62.

[2] Ibid., p.20.

[3] BBC Today Programme, 29 August 2011: ‘Bristol road’s ‘bright retail future’’ and ‘Britain’s favourite High Street?’.

[4] See the report by the Competition Commission here.

[5] Simms, Tescopoly, p.218.

[6] Ibid., p.233.

[7] Peter Dauvergne, The Shadows of Consumption, p.19.

[8] Jules Petty and Tim Land, ‘Farm costs and food miles: an assessment of the full cost of the UK weekly food basket’, Food Policy 30:1 (2005).