The Living Wage Victorian anachronism or a new tool in social policy?

Transcription

1 The Living Wage Victorian anachronism or a new tool in social policy? Donald Hirsch Director, Centre for Research in Social Policy

2 Survival isn t living [A subsistence minimum wage] means that people are not paid what they are worth but what is necessary to keep them working. That is how the horse or slave is paid R.H.Tawney

3 Corbynomics in 1909: It is a serious national evil that any class should receive less than a living wage in return for their utmost exertions. It was formerly supposed that the working of the laws of supply and demand would naturally regulate or eliminate that evil [...and...] ultimately produce a fair price. Where... you have a powerful organisation on both sides... there you have a healthy bargaining... But where you have what we call sweated trades, you have no organisation, no parity of bargaining, the good employer is undercut by the bad, and the bad employer is undercut by the worst... where those conditions prevail you have not a condition of progress, but a condition of progressive degeneration. Winston Churchill

4 From Churchill to Brown (via Thatcher)

5 Working poverty hasn t fallen 8% Change in % of all children by work and poverty status, % 4% 2% 0% Children in working poverty 98/99 99/00 00/01 01/02 02/03 03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14 14/15 15/16-2% -4% -6% -8% Tax credits haven t changed proportion of children in working poor families (stuck at 11-13%)

6 but more children are in working families 8% Change in % of all children by work and poverty status % Children in non-poor working families 4% 2% 0% Children in working poverty 98/99 99/00 00/01 01/02 02/03 03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14 14/15 15/16-2% -4% Children in non-working families -6% -8%

7 How FDR s living wage became a poverty wage Level of the Federal Minimum Wage (2014 prices) since the 1960s $20.00 $18.00 $16.00 a) If it had grown with productivity $ $ $12.00 $10.00 $8.00 b) If it had grown with average pay $6.00 $4.00 c) Actual rate $2.00 $

8 Moving the goalposts We want to move Britain from a low-wage, high-tax, high-welfare society to a higher-wage, lower-tax, lower-welfare economy George Osborne (2015), announcing national living wage and cuts to tax credits.

9 Household income status of individuals by work and pay status Working age adults 2014/15 a) Position in overall income distribution Not working full time Full-time worker, not low paid Low-paid full-time worker Poorest 20% Richest 20% Households ranked by income Source: FRS

10 Household income status of individuals by work and pay status Working age adults 2014/15 b) Position in distribution of working households Not low paid Low paid Poorest 20% Richest 20% Full-time workers ranked by their household's income Source: FRS

11 The equivalisation moment has passed Hourly earnings needed for minimum income standard, compared to National Minimum Wage Couple two children two earners Single Minimum Wage (over-25s)

12 Making ends meet: wages and tax credits Couple + 2, parents work ft and pt, Minimum income standard: 432 a week 420 Weekly disposable income (after rent, childcare and tax) Without National Living Wage: Family falls 40 week short of adequate income Wage rate Note: assumptions include 30 hours a week of free childcare for 4 year old, being introduced in 2017

13 Making ends meet: wages and tax credits Couple + 2, parents work ft and pt, Minimum income standard: 432 a week 420 Weekly disposable income (after rent, childcare and tax) With National Living Wage: Family falls 24 short Without National Living Wage: Family falls 40 week short of adequate income Wage rate Note: assumptions include 30 hours a week of free childcare for 4 year old, being introduced in 2017

14 Making ends meet: wages and tax credits Couple + 2, parents work ft and pt, Minimum income standard: 432 a week Work Allowance + 40/week Work Allowance + 20/week Weekly disposable income (after rent, childcare and tax) Present Universal Credit regime With National Living Wage: Family falls 24 short Without National Living Wage: Family falls 40 week short of adequate income Wage rate Note: assumptions include 30 hours a week of free childcare for 4 year old, being introduced in 2017

15 Making ends meet: wages and tax credits Couple + 2, parents work ft and pt, Minimum income standard: 432 a week Work Allowance + 40/week Work Allowance + 20/week Weekly disposable income (after rent, childcare and tax) Present Universal Credit regime Wage rate Note: assumptions include 30 hours a week of free childcare for 4 year old, being introduced in 2017

16 Making ends meet: wages and tax credits Couple + 2, parents work ft and pt, Minimum income standard: 432 a week Additional 40 Work allowance gives 26 of gain back to family: net gain 42 family, 14 HMT Work Allowance + 40/week Work Allowance + 20/week Weekly disposable income (after rent, childcare and tax) Present Universal Credit regime Wage rate Note: assumptions include 30 hours a week of free childcare for 4 year old, being introduced in 2017

17 Of course it s not that simple.

18 Five conclusions A living wage is not an equation Yet benchmarks based on living standards are useful Most useful as part of a multi-faceted strategy Must include both subsidy and quantity of work Ignoring pay in policies to enhance working incomes is not an option.