The Archbishop of York is the latest individual to support replacing the minimum wage with a ‘Living Wage’. The Living Wage refers to the amount that a person would have to earn an hour, full time, to have a decent standard of living[1].
The living wage is calculated by the Centre for Research in Social Policy at Loughborough University, with funding from the Joseph Rowntree Foundation[2][3]. Calculating the Living Wage is calculated by looking at the basic cost of living, looking at day-to-day needs such as housing and food. At the moment, the Living Wage is defined as £7.45 an hour in all areas of the country except for London, where it is £8.55[4]. This compares to the minimum wage which is currently set at £6.19.
Outright replacing the Minimum Wage with the Living Wage as the national legal standard for wages is not currently a policy of any of the main political parties (though Ed Miliband supports the public sector voluntarily paying the Living Wage[3][5]). However, some councils do pay the Living Wage and Citizens UK have led a campaign to make employers voluntarily pay the Living Wage. The list includes charities, councils, unions and private sector companies[6].
Proponents of the Living Wage argue that the policy would lift the incomes of the poor, simultaneously reducing the amount the government spends on tax credits and eliminating the problem of low pay. The IFS has estimated that the Treasury gains a net £1,000 in tax and saved tax credits for each living wage worker[3][5][7]. One of the Archbishop’s criticisms was that the government spent £4 billion a year on tax credits, which he claims is in essence a business subsidy[1]. The Living Wage Foundation also argues that organisations which pay the Living Wage have seen significant benefits to employee motivation and staff retention[8].
Opponents of the Living Wage argue that it would cause unemployment, particularly in professions that would not generate £7.45 an hour of revenue for a company. The Adam Smith Institute, a libertarian think tank that advocates free markets, claims that the creation of a Living Wage would ‘price out’ many people from employment, especially the young and the poor[9]. Thus, far from helping the poor, the very poorest (the unemployed) would be worse off. The Adam Smith Institute has written a response to the Archbishops article, in which they advocate that the government could provide a ‘living wage’ without burdening businesses and without raising unemployment by raising the personal allowance, though this would cost the Treasury tax revenue[10].
Questions
- Would a Living Wage increase unemployment?
- If so, would the increased unemployment be justified?
- Are tax credits or increasing the personal allowance alternatives (though expensive) to the problem of low pay?
By Will Archdeacon
Quoted links
[1]
http://www.guardian.co.uk/society/2013/jul/20/john-sentamu-living-wage-scandal
[2] http://www.livingwage.org.uk/blog/where-does-living-wage-come
[3] http://www.guardian.co.uk/politics/blog/2012/nov/05/boris-johnson-miliband-living-wage-live
[4] http://www.jrf.org.uk/media-centre/living-wage
[5] http://www.labour.org.uk/ed-miliband-speech-on-the-living-wage
[6] http://www.livingwage.org.uk/employers
[7] http://www.guardian.co.uk/commentisfree/2012/nov/05/living-wage-tide-turning-not-enough
[8] http://www.livingwage.org.uk/what-are-benefits
[9] http://www.adamsmith.org/blog/tax-spending/one-easy-step-to-a-cost-free-living-wage
[10] http://www.adamsmith.org/blog/economics/a-letter-to-the-archbishop-of-york
Living Wage campaign gets support of Archbishop of York
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The Archbishop of York is the latest individual to support replacing the minimum wage with a ‘Living Wage’. The Living Wage refers to the amount that a person would have to earn an hour, full time, to have a decent standard of living[1].
The living wage is calculated by the Centre for Research in Social Policy at Loughborough University, with funding from the Joseph Rowntree Foundation[2][3]. Calculating the Living Wage is calculated by looking at the basic cost of living, looking at day-to-day needs such as housing and food. At the moment, the Living Wage is defined as £7.45 an hour in all areas of the country except for London, where it is £8.55[4]. This compares to the minimum wage which is currently set at £6.19.
Outright replacing the Minimum Wage with the Living Wage as the national legal standard for wages is not currently a policy of any of the main political parties (though Ed Miliband supports the public sector voluntarily paying the Living Wage[3][5]). However, some councils do pay the Living Wage and Citizens UK have led a campaign to make employers voluntarily pay the Living Wage. The list includes charities, councils, unions and private sector companies[6].
Proponents of the Living Wage argue that the policy would lift the incomes of the poor, simultaneously reducing the amount the government spends on tax credits and eliminating the problem of low pay. The IFS has estimated that the Treasury gains a net £1,000 in tax and saved tax credits for each living wage worker[3][5][7]. One of the Archbishop’s criticisms was that the government spent £4 billion a year on tax credits, which he claims is in essence a business subsidy[1]. The Living Wage Foundation also argues that organisations which pay the Living Wage have seen significant benefits to employee motivation and staff retention[8].
Opponents of the Living Wage argue that it would cause unemployment, particularly in professions that would not generate £7.45 an hour of revenue for a company. The Adam Smith Institute, a libertarian think tank that advocates free markets, claims that the creation of a Living Wage would ‘price out’ many people from employment, especially the young and the poor[9]. Thus, far from helping the poor, the very poorest (the unemployed) would be worse off. The Adam Smith Institute has written a response to the Archbishops article, in which they advocate that the government could provide a ‘living wage’ without burdening businesses and without raising unemployment by raising the personal allowance, though this would cost the Treasury tax revenue[10].
Questions
By Will Archdeacon
Quoted links
[1] http://www.guardian.co.uk/society/2013/jul/20/john-sentamu-living-wage-scandal[2] http://www.livingwage.org.uk/blog/where-does-living-wage-come
[3] http://www.guardian.co.uk/politics/blog/2012/nov/05/boris-johnson-miliband-living-wage-live
[4] http://www.jrf.org.uk/media-centre/living-wage
[5] http://www.labour.org.uk/ed-miliband-speech-on-the-living-wage
[6] http://www.livingwage.org.uk/employers
[7] http://www.guardian.co.uk/commentisfree/2012/nov/05/living-wage-tide-turning-not-enough
[8] http://www.livingwage.org.uk/what-are-benefits
[9] http://www.adamsmith.org/blog/tax-spending/one-easy-step-to-a-cost-free-living-wage
[10] http://www.adamsmith.org/blog/economics/a-letter-to-the-archbishop-of-york