by Prem Goyal
It has become a bit of an easy game for cynical journalists to say that Labour’s leadership talks about abstract ideas like pre-distribution and responsible capitalism that are somehow too hard for people to follow. What nonsense. I don’t much like either of the phrases, but I think the ideas themselves are both simple and compelling.
Ed’s offer to the country is rooted in good old fashioned common sense: instead of taking action ‘after the fact’ to try to fix inequality, let’s build social justice into the economy at every level. It might be easy to caricature as the language of the seminar room, but it is basically just another way of saying that prevention is better than cure.
The most effective form of prevention against the most extreme forms of inequality is full employment – and the best vaccination against in-work poverty is the living wage. That’s why Ed Miliband made it such a feature of his leadership bid and did significant follow up on the details late last year.
Right-wing ideologues, of course, claim that any intervention in the market distorts it and, in the end, hurts the economy. This argument, that the market finds its own perfect equilibrium between pay, the number of jobs and the demand for goods, ignores today’s reality: low pay employers are effectively getting a public subsidy for bad practice, in the form of tax-payer top ups to their workers’ wages through the benefit system.
The IPPR and the Resolution Foundation have estimated that a universal living wage would save the Treasury £3.6 billon from the bill it currently foots to help those on poverty pay to make ends meet. Over fifteen years in business I’ve worked in New York, Tokyo, London and Zurich for some of the biggest companies in the world and I can honestly say I’ve never met a business person who would think, when looked at like that, that they could reasonably ask the public to subsidise their profit margins while their staff struggle to survive.
The truth is, the living wage works for everybody: employee, tax-payer and employer alike. Independent research for the Living Wage Foundation has found that 80% of employers giving the wage and 75% of the staff receiving it feel it improves their work. As the Tories continually fail to understand when they attack ‘lazy Britain’ and endorse erosions of employee rights, better pay and conditions improve morale and productivity. Further, plenty of living wage employers felt it strengthens their brand by encouraging consumers to see them as an ethical firm.
My own company, GMC, pays all its staff a living wage and is applying to be on the official list of Living Wage firms. Financial companies, retail outlets and legal firms are joining a long list of councils, including my own Southwark borough council, and a growing number of universities.
