Employers must rise to the challenge of the new living wage campaign pay rates

The campaign is doing far more than the government to help workers on low incomes, says James Moore

People take part in the Scotland Demands a Pay Rise march and rally organised by the Scottish Trades Union Congress in Edinburgh earlier this month (PA)

The living wage campaign is facing what is arguably the greatest challenge of its 11-year history.

Accredited employers agree to pay their workers enough to be able to meet their everyday needs. Its rates are set by the Living Wage Foundation (LWF) by reference to that and nothing else, in contrast to what the government calls the national living wage. It takes into account the Low Pay Commission’s view of what the market will bear. Politics plays a role too.

As has become all too clear, the cost of meeting everyday needs has risen sharply. Some people have been left facing an impossible dilemma: heat or eat. As a result, the Foundation has today announced that its rates will rise to £10.90 an hour outside of London and £11.95 within the M25. The former represents a 10.1 per cent increase, while the latter is a little less in percentage terms, it is still significant.

Now it is over to the 11,000 employers who bear the campaign’s stamp of approval. Are they prepared to do the right thing by the 400,000 workers they employ? Can they afford to?

The hard truth is that there are some smaller businesses that won’t be able to. The government is belatedly offering to help them with soaring energy bills, but this is limited and it is only good for six months. Energy is far from the only pressure firms face and those in difficulties should not be pilloried for dropping out, particularly if their absence is only temporary.

Consider that a struggling small business that wants to do right by its employees – as many do – will in theory receive vastly less government support from the latter’s taxpayer-funded energy scheme than will, say, Amazon, a hugely profitable company whose workers are considering strike action over a derisory pay offer of an extra 35p an hour.

On the flipside, there are many employers that can and should pay the new rates, including Amazon (which won’t). This is where critics should concentrate their fire.

A number of big companies have been accredited for some time. Among them are Barclays, HSBC and Citi. Financial institutions have been told by prime minister Liz Truss that they will be able to indulge their top bankers with a bonus bonanza. It would ill behove them to abandon the people who clean up after the party at a time like this.

The fact is that now is the time that a campaign like this one really comes into its own. With living standards falling across the board, it should protect those at the bottom who most keenly feel the effects of the crisis.

The LWF points to research from the Cardiff Business School, which says that Living Wage workers have benefitted from more than £338m in extra wages since the start of this year alone.

It says that in London, a full-time worker on the new real Living Wage rate would earn an additional £4,777.50 a year compared to a worker on the government’s statutory minimum wage.

However, the influence over the labour market extends beyond the corps of accredited employers, which between them account for roughly one in every 10 British workers. Many more effectively shadow the campaign, by aligning their rates with its rates but without seeking accreditation.

Sometimes this is because that requires them to look after not just their own workers but also their contractors, which is why the rates will benefit the cleaners at the aforementioned banks, assuming they maintain their accreditation.

Some insist they must maintain the “flexibility” to set their own rates, a flimsy cover if that means their wages aren’t enough for their staff to live on. This was part of Sainsbury’s argument against a motion by dissident shareholders calling upon the company to seek accreditation.

The grocer ultimately headed off the revolt by aligning its rates with those of the campaign. It will be interesting to see whether the grocer continues to do so now these new rates have been published.

Work should pay. The fact that there is a growing recognition of that among shareholders – the Sainsbury’s motion was backed by august City institutions – is notable.

Partly that is because it pays them. Properly rewarding one’s workers results in better quality work, lower levels of absenteeism and reduced staff turnover. The latter is particularly important at a time when job vacancies are running ahead of the number of people who are unemployed and actively seeking work. Shareholders benefit from this.

The living wage campaign says that the number of accredited employers has more than doubled over the last two years, which is an impressive statistic when set against the economic difficulties Britain has been experiencing.

The new rates may serve to slow that progress. But the campaign tells me it expects the number of accredited employers to continue to grow.

If it is proved right, the living wage will have come of age. At an otherwise grim time, that is something to celebrate.