#010 Lies, Lidl and the Living Wage
In the first budget following the Conservative election win in 2015, George Osbourne, the chancellor of the exchequer, announced a ‘National Living Wage’, which he used to both justify cutting corporation tax from 20% to 18%, and to make the claim that he is responding to the demand “Britain needs a pay rise”, a phrase originally attributable to the Trade Union Congress and their 90'000 strong London demonstration in late 2014.
This pay rise however is neither ‘national’, as many people in the nation are excluded from it, all those under 25 years old, nor a ‘living wage’, as the government rate is being set at £7.20 an hour from April 2016, despite the independent body, which coined the phrase living wage and calculates the level in the U.K., the Living Wage Foundation (http://www.livingwage.org.uk/), finding the wage required to meet the current basic costs of living to be £7.85 per hour outside London and £9.15 per hour inside London, in October 2014.
Not only is George Osbourne attempting to mislead us, the British public, through this bogus ‘national living wage’, he at the same time claims overall Britain is getting a pay rise. This is despite independent bodies like the Institute of Fiscal Studies claiming,
“Given the array of benefit cuts it is not surprising that the changes overall are regressive - taking much more from poorer households than richer ones. Looking over the period of the consolidation as a whole, poorer households have done worse than those in the middle and upper middle parts of the income distribution…”
and that the government,
“risks worsening inequality during workers’ lifetimes by cutting tax credits and reducing income tax rates for the richest.”
The Living Wage Foundation themselves have even commented,
“…Is this really a Living Wage? The Living Wage is calculated according to the cost of living whereas the Low Pay Commission calculates a rate according to what the market can bear. Without a change of remit for the Low Pay Commission this is effectively a higher national minimum wage and not a living wage. Secondly, what about London? We have been working with the Mayor of London for seven years and there’s a London Living Wage rate that recognises the higher costs in the capital, currently £9.15 per hour. These changes will not help the 586,000 people for whom even the 2020 rate announced today would not be enough to live on now. Thirdly, what about the 2 million under-25s who are not covered by this announcement? To make sure workers in London and those under 25 do not lose out, we call on employers to join the group of 1,600 organisations that have already chosen to become voluntary living wage employers. And, lastly, do the tax credit changes announced today mean that the living wage needs to be higher to make sure people have enough?…”
Equally the government has claimed it will cut corporation tax to help offset his version of a living wage, despite it already being at 20%, half the rate of the United States’ 40% rate, whilst at the same time cutting child tax credit and Universal Credit for families with more than two children, drastically cutting the access of working tax credits to people on low pay whilst freezing & reducing benefits and benefit caps.
Despite this (or maybe as a reaction to it) some large companies in the UK, such as Lidl, have decided to go ahead and pay the living wage anyway, despite the impact on their profit margins. This being the real living wage, based on the cost of living in the real economy, as set by the independent ‘Living Wage Foundation’, rather than the government’s national living wage, which is merely based on a percentage of median average earnings.
A common counter argument thrown at the living wage idea is that businesses simply cannot afford to pay all their staff a liveable wage, without it affecting prices, inflation and employment (and unemployment) levels, however there is little evidence to support this, many studies assert a real living wage would have little effect and could easily be absorbed by profit levels of most businesses employing people. The only problems that may occur, would happen in small businesses in certain sectors, which the chancellor has at least addressed through targeted national insurance reductions. This could easily be extended to reduce any negative consequences of small firms paying the real living wage. It could also be argued that businesses which lack the revenue to pay staff even a living wage are not viable businesses anyway.
Companies now paying living wage levels or above are numerous and include Ikea, Lidl, Brewdog, ITV, Chelsea F.C., British Gas and many more.