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When is a minimum wage a living wage?

31 July 2015
When is a minimum wage a living wage?

Mark Linehan, managing director of the Sustainable Restaurant Association, says there are long-term benefits to paying a living wage to staff

"We believe that an economy in which an adult has the reasonable expectation of earning a decent living is one where dignity and respect are perpetuated. We advocate for a living wage as a norm."

These are the words of pub landlord Andrew Fishwick, not a politician. The owner of the Truscott Arms made this admirable statement. And when he did, he was talking about paying his staff the Living Wage, as calculated by the Living Wage Foundation, which in London is £9.15 an hour.

The Chancellor has since announced his own version of the Living Wage, called the National Living Wage. He decreed that all over-25s would have to be paid a minimum of £7.20 an hour from April 2016. That's 70p up on the current rate paid to over-21s.

While it's irrefutable that a genuine living wage comes with a significant upfront cost, there is a very strong case for it proving cost effective in the long term.

And who are the real winners in this anyway? Certainly not the under-25s who'll have to wait for that milestone before they can appreciate the new-found riches of their older colleagues. With the government taking away tax credits, its solution is to make employers step up and pay their staff a wage they can live on, without actually hitting the mark. The Chancellor has imposed a rate of pay (it grates calling it a Living Wage) below what the Living Wage Foundation has calculated is required to sustain a basic standard of living, leaving thousands of workers as the losers.

Perhaps George Osborne should have listened to his colleague Boris Johnson, who in a speech at the British Hospitality Association Hospitality and Tourism Summit earlier this month said: "When businesses pay the Living Wage they have higher loyalty and commitment from staff, better productivity and lower staff turnover and HR costs."

If consumers said they'd be prepared to pay that little bit extra to cover increased staff costs, wouldn't that be a good incentive for businesses?

In a 2014 survey by Censuswide, 52% of shoppers were willing to pay more if staff were paid the Living Wage; 61% would recognise the benefits in service from staff in pubs, restaurants and hotels if they were paid the Living Wage; and four in 10 would consider shopping elsewhere if their preferred store did not pay the Living Wage.
And an independent study examining the benefits of implementing a Living Wage policy in London found that more than 80% of employers believed that it had enhanced the quality of the work of their staff, while absenteeism fell by approximately 25%.

There's an old phrase about knowing the cost of everything and the value of nothing. Employees are the lifeblood of a business - value them and treat them well and the rewards will flow.

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