The week before their 29% triumph in the local elections down south, “Red Ed” set out a timid Blairite proposal on pay, perhaps with half an eye on UKIP’s bizarre idea that wage levels are entirely determined by the numbers of people arriving in Britain. His grand idea was this – if employers pay the living wage, they might get tax reliefs or lower business rates in return.
The living wage rates are assessed by Loughborough University’s Centre for Research in Social Policy, who calculate that “people need to earn £7.45 an hour to be able to pay for food, heating and clothes, as well as to participate in a minimum level of social activity“.
For those aged over 21 working outside London, a living wage at that rate represents a modest £1.26 an hour above the minimum wage. The other way of looking at this is that the minimum wage is insufficient to allow people to “pay for food, heating and clothes, as well as to participate in a minimum level of social activity“. Can that really be acceptable? Why have a minimum wage if it doesn’t allow people to lead a basic existence of that sort?
Miliband’s proposal would mean taxpayers further subsidising employers who aren’t prepared to pay this minimum, just like parts of the tax credit system did. Effectively, those employers would still be paying below the living wage but we’d be making up part of the difference. It’s an inadequate and pathetic response to a crisis in living standards.
Instead, government should just be setting the minimum wage at the living wage level, not fudging it like this or gently pressuring companies to do the right thing. Not only would it be a redistributive pay rise for the lowest-paid in society (and make the siren voices of the ‘kippers less appealing) but, as Darren Johnson points out here, it’d save taxpayers an estimated £2.2bn. It’s a decent test of a party that claims to be of the left, too: back this, or give up your claim.