The Living Wage – Policy And Practice

• Date: 01 March 2016
• Author: Ray Fells,Peter Prowse
• Published date: 01 March 2016
• DOI: http://doi.org/10.1111/irj.12132

The Living Wage –Policy And Practice

Peter Prowse and Ray Fells

ABSTRACT

A recent development in addressing the longstanding problem of low pay in the

United Kingdom has been the emergence of a social campaign for a ‘living wage’.

Using a case study approach this article explores an employer’s decision to pay the

living wage that, in turn, provided both challenges and opportunities for the unions

in their dealings with contractors.

1 INTRODUCTION

A longstanding problem for policymakers and practitioners has been the issue of low

pay. This issue has been addressed in a number of ways, most commonly through the

establishment of a legislated minimum wage, an approach advocated by the Interna-

tional Labor Organization through its Minimum Wage-Fixing Machinery Conven-

tion (1928). An estimated 90 per cent of countries in the world operate a statutory

minimum wage (ILO, 2013) with Germany joining this group in July 2014. However

the existence of a formal minimum rate only provides a floor to wage rates and at

levels which may still be regarded as low, particularly if the point of reference is,

for example, the median rate of pay. It has been the uncertain impact of minimum

wage policy on low paid workers that has given rise to other approaches –such as

the emergence of living wage campaigns –to addressing the problem of low pay.

For much of the twentieth century the policy response to the problem of low pay in the

United Kingdom was through tripartite Trade Boards that reviewed and determined

wage rates in their specified industry (Bayliss, 1962). Following their demise, a national

minimum wage was established in 1999 through the creation of the Low Pay Commission

but the problem of low pay has not been resolved and a community-based campaign

around the notion of a ‘living wage’emerged to secure better than minimum wages.

However, the take-up of the living wage appears slow and a significant proportion

of the workforce are still in the category of ‘low paid’which suggests that Living Wage

campaigners face the challenge of translating their aspirations into the wage packets of

low paid employees. The Office of National Statistics (ONS) estimate 22 per cen t of all

employees were estimated to be paid below the living wage excluding overti me in 2014;

26.6 per cent of all women and 42.3 per cent of part-time employees (ONS, 201 4).

To explore the nature of the Living Wage campaign and the challenges it faces this

paper first examines the policy context out of which the campaign emerged in East

London. Against this background the paper then examines the evolution of the cam-

paign by focusing in the local government sector where low paid occupations are

❒Peter Prowse, Sheffield Business School, Sheffield Hallam University, Sheffield, South Yorkshire, UK.

Ray Fells, Business School, University of Western Australia, Crawley, Australia. Correspondence should

be addressed to Peter Prowse, Sheffield Business School, Sheffield Hallam University, Sheffield, South

Yorkshire, S11WB, UK; email: p.prowse@shu.ac.uk

Industrial Relations Journal 47:2, 144–162

ISSN 0019-8692

© 2016 John Wiley & Sons Ltd

widespread. The exper ience of a l arge City C ouncil, ‘Metro City’, in the north of

England which deter mined to pay the ‘living wage’to its employees, provides an op-

portunity to examine the campaign away from its East London origins, recognising

the influence of geography on labour issues (Herod et al., 2003). The case examines

the role of the principal unions, the General, Municipal and Boilermakers’Allied

Trades Union (GMB)and Unison and Unite and also the role of theemployers, includ-

ing service-providing contractors, in the spread of, or resistance to the implementation

of the living wage. The analysis of events demonstrates the practical difficulties of

implementing the policy of a living wage and highlightssome unintended consequences

and opportunities for the parties that extend beyond the question of low pay.

2 THE PATH TO A NATIONAL MINIMUM WAGE AND MORE

The history of government involvement in determining wages extends as far back as

the Statute of Labourers, 1351 (which set maximum rather than minimum rates).

More recently, the Fair Wages Resolution 1891 sought to prevent government con-

tractors paying unfairly low wages to their employees. In 1909 tripartite Trade Boards

(later called Wages Councils) were established for selected industries where low wage

employment was concentrated (Pond, 1983; Blackburn, 2009; Deakin and Green,

2009). Wage support in the labour market has also been provided through the Sched-

ule 11 of the Employment Protection Act, 1975 and the Equal Pay Act, 1970. How-

ever analyses of labour markets (Metcalf, 1981, 1999; Grimshaw and Bosch, 2013;

Rubery and Edwards, 2003) reveals inadequate protection for employees. Following

his review of the persistence of low pay in the 1970s and mid-1980s Pond (1983:179)

concluded that ‘partly as a result of the economic recession, low pay has once again

become a matter of central importance in industrial relations’. He suggested poor la-

bour utilisation, high turnover of staff and the social consequences of poverty on mo-

tivation as reasons for raising the level of low paid workers.

In the 1970s theunion movement advocatedthe abolition of specific wagecouncils on

the grounds that they set very low levels of pay and discouraged collective bargaining

(Ruberyand Edwards, 2003). Twentyyears later the Conservative governmenttook sim-

ilar view but fordifferent reasons, believing that the existence of the WageCouncils had

an adverse effect upon employment. A government review (House of Commons, 1995)

of the 26 Councils which covered2.5 million employees did notadvocate their abolition

but the ensuing Wages Act,1986, limited the Councils’role to setting only minimum

wage rates in their industry (Machin and Manning, 1994). The Conservative government

finally abolished the Wages Councils in 1993 (Trade Union Reform and Employment

Rights Act,1993) with the exception of the Agricultural Wages Council (abolished in

2013) (Dickens et al., 1993; DEFRA, 2012). Their abolition symbolised the end of tripar-

tite, legally binding pay regulation in the UK that had been designed to protect

employees in low paid sectors. One consequence of abolishing minimum rates was that

it facilitated other policy measures such as contracting out of public services to the pri-

vate sector (Ascher, 1987; Weinkopf et al., 2013), there now being no l egal requirement

for contractors to meet a minimumwage standard (Lucasand Radiven, 1998). This con-

sequence posed challenges for the union movement (Foster and Scott ,19 98; Wills, 2009).

Low pay continued to be a problem after the abolition of Wage Councils as in-

creased unemployment rates placed additional pressure on the maintenance of lower

wages with an estimated 2 million workers on low pay in 1998 (Brown, 2002; Dickens

et al., 1993). In 1997, the new Labour government formed the tripartite Low Pay

145Living Wage –policy and practice

© 2016 John Wiley & Sons Ltd