‘Still Waiting for a Living Wage, Part 1: A strengthened social and business case on the ‘why’; but more still needed on the ‘how’

Living Wage Week last week highlighted the significant progress made in the UK during the pandemic, but also surfaced the major outstanding issues with applying the Living Wage concept internationally and into supply chains and the poorest countries.

“A man must always live by his work, and his wages must at least be?sufficient to maintain?him; otherwise, it would be impossible to bring up a family, and the race of such workmen could not last beyond the first generation.” Adam Smith, 1775

‘It is a serious national evil that any class of His Majesty's subjects should receive less than a living wage in return for?their utmost exertions’. Winston Churchill, 1909

‘Still waiting for a living wage’. Suffragette poster in Museum of London, 1913

I joined in on three or four of the Living Wage Foundation’s sessions last week in their annual Living Wage Week , most interestingly a three-hour discussion on Thursday afternoon on ‘Connecting the dots’ on global living wages. And if you had joined me you might have thought that we are at last making progress on delivering everyone in work a wage they can live a decent life on, after such a long wait.

The overall tone and atmosphere all week was, rightly, celebratory, with East London schoolkids singing supporting songs for the LWF’s 20th anniversary; and also recognising LWF achieving the landmark of 9000 members the previous week. Katherine Chapman, Living Wage Foundation Director, said:?“For the past 20 years?the Living Wage?movement?has?shaped the debate?on?low?pay, showing what is possible when responsible employers step up?and?provide?a wage?that delivers dignity”. More than?￡1.6?billion in extra wages?has gone to low-paid workers since the start of the Living Wage movement 20 years ago?and ￡613?million?in extra wages has gone to the more than 300,000 UK low-paid workers covered?since the start of lockdown.

Katharine continued, ‘With?living costs rising so?rapidly,?today’s new Living Wage rates will provide hundreds of thousands of workers and?their?families with?greater?security and stability’. She announced the new UK Living Wage rates, a rise to ￡9.90 across the UK (40p increase), and ￡11.05?in London (20p increase). Unlike the Government minimum wage (‘National Living Wage’ for over 23s?- ￡8.91?rising to ￡9.50 in April) the real Living?Wage is the?only wage rate independently calculated based on rising living costs ?–?including?fuel,?energy, rent and food. A?full-time worker earning the new,?real?Living Wage will earn ￡1,930?a year more?than a worker earning the?current?government minimum (NLW).?

So they didn’t really focus during the week on grizzled old low pay warriors like me and a few of the investor bodies represented, who pointed out the continuing difficulties of large companies progressing living wage policies globally: of lack of government action, inconsistent definitions and measurements, lack of enforcement tools and so on; and who have seen enough of living wage roadmaps and toolkits in the past, never mind the new ones they added last week. ?As Grit Cattaert from the UN Global Compact said, there are still lots of problems and difficulties but they wanted to focus on ‘solutions’, taking ‘opportunities’ to make practical progress.

But as Katharine recognised ‘Despite this,?there are still millions trapped in working poverty (in the UK and overseas), struggling to keep their heads above water?– and these are?people (often) working in jobs that kept?society?going during the pandemic?like?social care workers and cleaners’. Research published last Monday by the Resolution Foundation showed that in the UK there are still 4.8?million employees ?(1 in?6?workers)?paid below the Living Wage,?with women and those from?ethnic minority?groups?more likely to be paid below the Living Wage than white male workers (19.4% compared to 16.3%).?And many of our largest multi-national companies are still not signed up to the UK national standard, nor applying a LW policy internationally and into their supply chains, where problems of low pay and conditions are often at their worst and even modern slavery can lurk.

So what were the key themes and points I took away from Living Wage Week and how optimistic or pessimistic should we be?

1.?????There is now real momentum. Covid has certainly upped the ante on and awareness of living wage in the UK and it sounds many other countries. Be it in the highlighting of the extent and degree of low pay for key workers in supposedly advanced economies like the UK and US, or as part of the strong stimulus towards ESG-linked ratings of corporate risk and performance and the desire for accreditation to help push these up, the moves to adopt domestic LW policies have undoubtedly gained momentum from the pandemic.

LWF membership has grown by over 1/3 in the last 18 months to 9,000 accredited employers; and there are probably similar numbers of employers who informally take account of their rates in setting their lowest pay levels. That that includes now 50% of the FTSE 100 is I think particularly significant, as that should trigger a snowball effect which will see the other half of the FTSE covered much more quickly.

The rise in inflation globally and ‘cost of living crisis’ this is starting to precipitate as price inflation outstrips wages seems likely to keep this momentum going. Katherine Chapman said in the opening session, ‘as we?rebuild our economy?post pandemic, the real Living Wage?must be at its heart.’

In Europe, this is now helping to drive a draft directive on minimum wages through the European Parliament, which looks likely to pass through the full debate due on it in Strasbourg this week. Although applying to member state governments and holding them accountable for ensuring minimum wages are high enough to provide a decent standard of living, co-rapporteur Agnes Jongerius explained the employer responsibilities in a special guest session, that ‘The draft directive explicitly aims to strengthen and extend the coverage of collective bargaining and protect workers by providing them with a minimum wage via these negotiations’.

2.?????LW as a social movement. The ‘Connecting the (global) dots’ session positioned LW as a powerful social movement more than anything; and so the greater global reach and impact LWF have been seeking primarily involves closer working between similar bodies like them, rather than for example, all moving to apply the same methodology and standards to setting a LW. For Catherine Howard at Share Action, another guest speaker in the week, ‘we all need to combine to persuade companies.’

The new LW six-step Touchstone process they are launching with Living Wage for US largely involves networking and connecting companies with relevant advisers and authorities on LW in each of the countries they operate, rather than supplying data to common standards and methods or applying common accreditation criteria.

Michelle Murray, CEO, Living Wage for US - explained that there are lots of tools and information for interested companies out there, but that they are hard to find and so ‘we want to make journey easier through collaboration’. But the issue of inconsistency in data and methods is still, it seems not being addressed. This is a missed opportunity.

The six process steps in their roadmap in the tool which she briefly ran through look very similar to the IDH roadmap and toolkit which Ronald Sanabria from IDH described later in the session. She did though talk about ‘establishing a global database of methods’ and moving for more co-ordination between 15 LW auditing bodies including LWUS and LWF.

Living Wage for US launched their new US standard last week too, which mirrors the LWF accreditation approach but uses the Ankers’ cost-based methodology, and this ‘gold-standard’ seems to be what they are advocating globally. IDH use this method too but it is controversial in some quarters, with the ILO for example where Anker worked for many years pointedly not supporting it; and the LWF use their own methodology for setting their rates in the UK, not Anker’s.

3.?????Continuing employer concerns of inconsistency/weakness of measures and the cost. So the assumption during the week seemed to be that better connecting up globally is the most important thing that's needed to get more MNCs signing up to a GLW. Yet employer concerns raised in the discussions, chat boxes and online polls held during the week mainly related to alignment of LW with business needs and priorities, especially affordability, inconsistency of data, costs of compliance and the challenges of getting their suppliers on board.

For example, a poll on the main challenges of applying LW globally saw: 14 delegates list lack of reliable benchmarking data across countries; 10 the lack of supply chain visibility and support; and 10 people listed lack of clarity as to how to measure LW. Other challenges mentioned included: the unclear hit on costs; aligning ESG goals with financial returns, a lack of agreed concept definition and frameworks, the lack of global consistency, getting suppliers on board; costs; absence of data consistency and approach.

4.?????Employer case studies: opportunities and problems. These were the highlights of week for me. Irina Van Der Sluijs of NN Investment Partners highlighted that there are still millions globally not earning a Living Wage and this essentially needs co-ordinated governmental action, not just employers, to address. Dan Neale of the World Benchmarking Alliance also saw the primary issue as the laws/governments either not having minimum wages or not having them at living wage levels.

Frederic Pinglot of Schneider Electric described their fascinating LW journey which has taken 3 years to cover all of their own workforce across 100 odd countries. They are moving now into their supply chain with their largest strategic suppliers, as part of a decent work programme.

He was very critical of the lack of standardised methodologies and accessible benchmarks and data, describing their process of data gathering and monitoring as ‘hugely time and resource intensive’. In most cases they are one among many customers to suppliers so many won’t accept LW in their contractual agreements. LW is also easy to contest today as there is no standard or agreed value like there is for a statutory minimum wage. They are now trying to automate the process, as with normal benchmarking of salary data, and he feels that is really important to extend the concept. Progress needs a collective effort across sectors and with governments.

Remco Kouwenhoven from Fairphone, a small community-based business, described how they pay a per hour per employee per phone amount to suppliers in their contracts to?cover the gap between employee pay and LW rates, which is a novel way of enabling and enforcing payment. He called for more transparency from suppliers and companies on the benefits of paying LW and opportunity cost of not doing so. He stressed the need for a pragmatic, ‘it can’t be perfect’ approach, accepting some uncertainty and inconsistency. Also he stressed the need for more consistent publicly available datasets, a point reinforced by Martin Buttle from Share Action.

So in sum, lots of corporate progress is evident on LW over the last 18 months, but still largely on a national basis. Really pulling it together and applying it globally across large multinationals and into supply chains and the poorest countries, sounded like it requires major co-operation between international bodies (like COP the previous week in respect of climate; and the European Commission) and sectors.?However, national government and investor pressure for large companies to be seen to be addressing the ‘S’ social agenda is developing swiftly and rapidly catching up with concerns for the ‘E’ of environment and climate. No large multinational company can afford to be ignoring the LW issue and any employees in their organisation and supply chains who are paid less than the amount required for them to live on

In the second part of this blog next week, I will look more specifically at the methodological challenges with measuring and applying living wages in multinational companies and how these might be overcome, informed by an expert roundtable on the issue which I ran recently on behalf of a FTSE 100 company wanting to progress a LW policy globally.