In Defence of the Living Wage

Recently, Aadit Shankar wrote an article on this website claiming that the Living Wage was not the answer to improving the standards of living of those paid less than the proposed rate, currently 6 million British workers. Although Aadit makes some points worthy of note that must be considered when proposing or introducing this measure, I must disagree with his overall assessment of the impact of the Living Wage.

Firstly, Aadit argues that the government needs to concentrate on improving the general health of the ailing British economy, a point I think we can all agree upon. However, one of the greatest problems with the current financial situation in the UK is the lack of disposable income available to a high proportion of the population. With wages proving too low to provide even the basics needed for an acceptable standard of living, disposable income for too many British families is close to, if not, zero. Simply put, people simply do not have money to spend on consumer goods, particularly as they look to hoard what little savings they can with the prospect of unemployment hanging over their heads. The Living Wage would not only increase the depleted reserves of cash for poorer families, but provide the economy with a shot in the arm as the spending power of those whose wages rise increases.

Aadit’s next point worthy of attention is the claim that the Living Wage risks contributing to the UK’s long list of unemployed as companies, particularly SMEs cannot afford to maintain their workforces whilst granting a rise in wages. This is one point that should worry supporters of the Living Wage, as if the result of the wage rise was to cause greater unemployment, the proposal would actually have delivered the opposite of its intended effect. However, this is not an unavoidable outcome.

Firstly, the Living wage is currently optional, and should remain so for at least the near future, until businesses have the confidence to offer wage rises. Secondly, the real reason why SMEs and other businesses cannot afford to offer wage rises to their employees is the lack of capital currently being invested in them by the banks. In order to achieve wage rises whilst offsetting fears of a growth in unemployment, the government should force the banks to lend more (particularly those that are owned by the Treasury), and use a government-led investment bank to provide the capital that businesses need to raise their worker’s wages. This would kick start a cycle of higher wages leading to higher disposable income, higher spending and greater prosperity for both businesses and their staff.

As well as the economic benefits readily available to the nation’s finances via the Living Wage scheme, the proposal offers us the chance to help the poorest in society. Aadit claims that we capitalism should provide the platform for ‘strivers’ to build their own future prosperity and indeed we should be supportive of those who want to make more of their own lives and their childrens’. However, it is obvious that in capitalist economies, the starting point of any given person has a massive impact on where they end up. No matter how hard you strive, the prospects of you improving your lot by the amount you deserve are very limited if you are starting from a point where your income is simply not enough to provide the basic needs of your family, whether that be food on the table or childcare. The Living Wage would alleviate the poverty of thousands of British families (indeed it has already done so for 10,000).

The Living Wage would not be a ‘short-term panacea’ as Aadit claims, but would make a real difference to thousands of families up and down the country as well as aiding the UK’s ailing economic recovery, providing that the government supports the measure by whatever means necessary. Without government aid, the scheme does have the potential to backfire, however, for the sake of the thousands of British families that cannot afford the basics in life, whilst the banks and big businesses make off to their holiday homes with money that should have been handed over to the Treasury’s coffers, the least the government can do is alleviate the pain of those at the bottom through allowing them to provide for their families.