Lessons for the Living Wage movement from a UK-grown scheme

Date: 03/04/2015

A guest blog by Oxfam GB’s Ethical Trade manager Rachel Wilshaw

Rachel WilshawOne of the initiatives highlighted in Oxfam’s new briefing paper Steps towards a living wage in global supply chains is that of the UK living wage campaign. This was started by parents in the East End of London, whose long working hours on the minimum wage meant they had little time to spend with their families. The Living Wage Foundation was established in 2011 to develop and promote a scheme which accredits employers who pay £7.85 per hour (£9.15 in London) compared with a national minimum wage of £6.50.

Why has this campaign got traction?

1300 employers have now been accredited, including 21 of the UK’s top 100 companies. The ‘glass-half-full view’ is – that’s 19 more than two years ago; an alternative ‘glass-half-empty’ view is, where are the other 79? These are being tackled with ongoing campaigns, such as the Just Pay! Campaign of ShareAction.

The Living Wage Foundation capitalises on many of the drivers for companies to tackle low wages, turning a reputational risk into a reputational benefit, since each new accreditation is welcome with positive media coverage. Accredited employers report benefits in terms of productivity, staff turnover and motivation. An independent evaluation found 80% of accredited employers reporting it had enhanced the quality of staff and led to a 25% reduction in absenteeism. Accreditation also positions companies to win public procurement contracts which include living wage in their criteria.

Having just two figures for a living wage (London and Rest of the UK) helps prevent the campaign getting bogged down in circular debates about ‘the number’ which hamper progress elsewhere. Companies can calculate the costs of becoming accredited and agree internally on ways to absorb them, making it easier to make the business case. The campaign has normalised discussions about minimum vs living wages, got the debate into boardrooms and caused embarrassment to executives about the gap between their take-home pay and that of their low-paid employees.

High profile moral champions, such as the Archbishop of York, have helped, and it is one of very few initiatives that enjoy broad political support in the UK since its message chimes with the ‘cost of living’ agenda of parties on the left and the ‘work pays’ agenda of parties on the right. An annual Living Wage Week in November celebrates success and calls for more.

What about the limitations?

There are an estimated five million workers in the UK earning less than a living wage. So far the scheme has reached about 35,000. The list of accredited employers is dominated by financial sector companies, who have a tiny proportion of employees on low pay; SMEs which want this to be part of their brand values; and organisations that need to ‘walk the talk’, such as the Department for Work and Pensions, Oxfam and TUC. Recent converts include Nestle, Chelsea Football Club and National Express Coaches. But a recent spat with the owner of Next suggests the campaign has work to do to win over companies employing large numbers of low paid workers, such as retailers and health care providers.

A second limitation relates to workplace dialogue. There is a fundamental principle that negotiation of gains should be based on the principles of freedom of association and collective bargaining. As a minimum schemes should not prejudice the development of such systems. Does the process of accrediting a living wage employer do anything to challenge attitudes to employees joining or forming a trade union and seeking to bargain collectively? This remains unclear.

And how transferable is the UK scheme to the challenge of tackling poverty pay in global supply chains, where the gap between minimum and living wages is often much more than 20%? There are estimates of the gap being 60% on Malawi’s tea estates and 80% in Bangladesh’s garment factories.

Can the scheme help drive change beyond the UK?

Examples of progress in global supply chains include the partnership emerging in the garment sector, between 14 brands and global union IndustriALL; a sector-wide coalition in Malawi tea, led by Ethical Tea Partnership, Oxfam, IDH and GIZ; and work by BananaLink and the World Banana Forum on a fair distribution of value in this value chain. These approaches have a sector rather than national focus and a model of change that involves influencing governments to raise the minimum wage, freeing up value for employers to raise wages and removing barriers to worker representation.

The success factors for the UK scheme surely has useful lessons for initiatives with a developing country focus. Figuring these out is a key challenge – and opportunity – for the next 10 years. European governments could help this along, for instance by ensuring public spending via Aid and Public Procurement promote a living wage; by offering tax or rate incentives to living wage employers; and issuing guidance to companies on staying within competition law while collaborating to raise low wages.

Read Oxfam’s briefing paper on ways to achieve a living wage here (available in English, Spanish and French).

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